TJPA: Ruling limits taxpayer liability in Millennium Tower legal costs fight: re MSD 9-24-18

San Francisco - The Transbay Joint Powers Authority (TJPA) announced Monday that a court ruling last week may require the TJPA to pay in the future just a fraction of the legal costs sought by Mission Street Development (MSD), the developer of the sinking and tilting Millennium Tower. 

On September 20, 2018, San Francisco Superior Court Judge Curtis Karnow rejected MSD’s request that the Court require the TJPA to defend MSD in six lawsuits. Those lawsuits have been brought against MSD for the excessive settlement and tilt of the Tower, including numerous fraud claims asserted by Millennium Tower residents against MSD. 

The ruling did not examine or determine who caused the excessive settlement and tilt of the Millennium Tower, which will not be determined until trial in June 2019. The ruling dealt only with the narrow issue of whether the TJPA has a duty to defend MSD (e.g., MSD’s reasonable attorneys’ fees) based solely on what has been alleged by plaintiffs in the various complaints. Any suggestion that the ruling opens the possibility that the TJPA must pay the plaintiffs’ alleged damages due to the excessive settlement and tilt of the Tower is incorrect and a misreading of the Court’s order. 

MSD argued that the TJPA was required under an indemnity clause in a 2008 easement agreement to defend MSD in all six cases against all claims, including fraud claims that unit holders filed against MSD for failing to disclose the excessive settlement and tilt prior to the sale of units. 

The Court rejected that argument and held that the TJPA only has a duty to defend MSD against two claims in one case filed by the Homeowners Association for the Tower. 

MSD’s claim for defense costs arose from an easement agreement granting rights to the TJPA to use a portion of the Millennium Tower property for the construction of the Salesforce Transit Center, on condition that the TJPA agree to the indemnity clause requiring the TJPA to pay MSD’s defense costs if MSD was sued for the TJPA’s work. 

The Court made clear that “it is not a reasonable reading” of the indemnity clause in the easement agreement “to hold that TJPA agreed to defend and indemnify MSD from MSD’s own fault in committing, e.g., fraud and failing to disclose facts to the plaintiffs,” as MSD had argued. 

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