Articles

• The City's case, from this side of the Looking Glass
• A more complete history of Steve Eugster's, Cherie Rodgers', and the City's challenges to the City's loan obligation
• Real and imagined fraud, and why the City's fraud claim against the Cowles was dismissed
• Value of Settlement Analysis

The City's case, from this side of the Looking Glass

The City's principal claims and defenses arising out of the financial failure of the River Park Square garage fell into three categories: First, it brought its bond attorney, Roy Koegen, into the case to defend his securities disclosure work for the City, failing which it had contribution, malpractice and contract claims against Prudential Securities, the Cowles, Koegen and all of the other participants in the garage financing. Second, it challenged the nature and enforceability of the City's loan obligation. Finally, it asserted fraud claims against the Cowles' companies.

The City's contribution, malpractice and contract claims arising from what appeared might be flawed securities disclosure were always key, but Camas consistently got them wrong. Camas' reporting of the City's claims against Roy Koegen and Perkins Coie were unrecognizable to me, and I'm the one who prepared the complaint! And Camas appeared virtually oblivious to the City's contribution claims until surprised by a City settlement designed to open the way for those claims --- even though the settlement was a logical extension of what the City had been saying in pleadings and public statements for several years.

For additional history on challenges to the City's loan obligation, see "A more complete history of Steve Eugster's, Cherie Rodgers', and the City's challenges to the City's loan obligation."

For accurate information on the obstacles to the City's fraud claim against the Cowles, see "Real and imagined fraud, and why the City's fraud claim against the Cowles was dismissed."

For the history of the City's defense and claims for contribution, malpractice and indemnity arising out of the bond plaintiffs' claim, read on.

The securities claims --- and the City's contribution claim --- were always key.

According to Tim Connor, John Powers chose me as his special counsel on River Park Square because he trusted my independence. I suppose that by challenging construction of the Lincoln Street Bridge on behalf of Friends of the Falls, I showed that I was not unwilling to be crosswise with the Cowles or other powerful downtown interests.

But to my knowledge, the mayor's decision was based in large part on my background. The early years of my practice were spent doing securities litigation for Dean Witter Reynolds in New York, where I was licensed as a stockbroker and spent several years doing almost nothing but securities litigation prior to moving to Spokane in 1985. I also had the opportunity while living in New York to attend NYU Law School, and earn my LL.M. in Taxation. As outside counsel for the KXLY Broadcast Group, I had reviewed and cleared Tom Grant's coverage of the River Park Square garage story in the Spring of 2000 and thereafter. As a result of this work and experience, I came to the assignment with the benefit of more knowledge than most about the problems with the garage financing, and experience with the type of claims and problems that the City likely faced.

Securities litigation would involve all of the key professionals and participants.

By the time I began to advise Mayor Powers, U.S. Bank, the trustee for the garage bonds, had already filed a proposed securities fraud claim against the City, alleging defects in the "preliminary official statement" used to sell the bonds. A preliminary official statement is, in bond-speak, the equivalent of a prospectus. It is required to fully and fairly disclose the material information needed to evaluate an investment, including the risks that a reasonable bondholder would consider important in deciding whether to buy the bonds.

Prudential Securities was the underwriter for the garage bonds, meaning the securities professional who would structure, buy and then sell the bonds. Prudential was required, as underwriter, to have a reasonable basis for belief in the truthfulness and completeness of the key representations made in the disclosure documents used in the bond offering. Under Exchange Act Regulation 15c2-12, it had a duty to review an official statement that the issuer --- in this case, the Spokane Downtown Foundation --- deemed "final" prior to sale of any bonds. This obligation was calculated to ensure that Prudential engaged in the due diligence needed to satisfy its "reasonable basis" obligation.

Although Prudential had this primary responsibility, other participants in the financing, like the City, could also be held liable if the risk disclosure was defective. The exposure of these additional parties would turn on the extent of their participation in the drafting process and their responsibility for any defective misrepresentations and omissions.

The City's unique position.

The looming securities fraud lawsuit would place the City in a unique position. Before bondholders were invited to finance the acquisition by the Spokane Downtown Foundation of a $26 million garage, the City had itself been invited in 1995 to acquire a substantially similar garage at a much lower price imposed by the City Council, and in 1996 to acquire the same garage, at the same price.

To make its decision, the City Council sought and was provided with substantial information. In addition to the now-infamous Walker Feasibility Analysis, the City hired two appraisers who questioned Walker's assumptions and pointed out that the "investment value" of $26 million being asked for the garage was far higher than fair market value. The Council had received a report from Laurent Poole, an economist for the Sabey Corporation, that was highly critical of Walker's feasibility analysis. The Council had also watched a slide presentation by Poole, who delivered a truly devastating critique of the Cowles construction estimates for the garage. (Camas uses the term "devastating" lightly, but I don't.) Members of the Council later heard from Jim Craven, Sabey's attorney, who repeated warnings that "the parking structure is overvalued," and "that nobody, under any circumstances, should be paying $26 million for it; whether it be the City directly or the Foundation." City Manager Pete Fortin had been sufficiently wary of Walker's projections that he asked Prudential to run scenarios under which cinema revenues projected by Walker were discounted by as much as 50%. The City Council was aware of this discounting of garage revenues, which was discussed in public meetings. After considering much of this information, the City Council elected not to issue City bonds to finance a purchase of the garage.

After the Spokane Downtown Foundation was established by the Cowles to be substituted as the issuer, much of this detail about risks considered by the City Council was not disclosed to potential investors by the POS or OS for the Foundation's bonds. To the extent that the bondholders could point to the City as the proverbial "reasonable investor" and the information that the Council considered as the proverbial "material information that an investor would consider important," questions and concerns that City officials and citizens raised and had answered in 1996 and 1997 would go a long way toward proving the bondholders' case.

The City was uniquely situated in another respect, though, because any claim against the City, as opposed to most other defendants, would require a particularly high showing of wrongdoing. Almost 20 years earlier, following the cancellation of Washington Public Power Supply System (WPPSS) nuclear power plants 4 and 5 and the resulting bond default, the Washington legislature amended the state securities act to provide that investors seeking to recover for misrepresentations must establish greater wrongdoing on the part of a municipality than would be required to recover from bond counsel or other participants. The objective was to shift liability away from municipalities and their taxpayers, and toward the sophisticated professionals that cities hire to protect them. As proponents of the legislation advocated at the time, "Public officials are not securities experts. If public officials seek out and act upon the best expert advice available, the officials and their constituents, should have a right to rely on that advice." The Washington Supreme Court affirmed the constitutionality of the distinction two years later when it was challenged by bond lawyers, holding that heightened legal exposure for professionals such as bond counsel could be justified on many grounds, including their expertise, on which the public has a right to rely; because they, like the underwriter, are among the last "links in the chain" in the sale of bonds and in a better position to correct misrepresentations or omissions; and to encourage greater diligence on their part.

Yet even though Washington law allocates responsibility for municipal bond fraud first and foremost to the professionals, the first complaint proposed by U.S. Bank, on file when I was hired by the City to advise mayor-elect Powers, named only the City as a defendant. This might have been calculated in part to bring added pressure to bear on the City to bail out the financing --- something the City might well have done, had the consultants, underwriter and other professionals not exposed the City to such huge financial exposure. But this and further delays in U.S. Bank's suit against Prudential and the other logical defendants turned out to be attributable to attorney conflict issues as well.

I recall an early conversation with Curt Hineline, an attorney with the law firm of Dorsey & Whitney, who represented U.S. Bank at the time I came on board. In December 2000, Mr. Hineline learned that I was advising mayor-elect Powers and wrote me a letter outlining the prospect of securities litigation. I called Mr. Hineline after receiving his letter and asked him when he would file his securities fraud case, and against whom. Amazingly, Hineline said that U.S. Bank intended, initially, to sue only the City.

I asked Hineline as politely as I could whether he wasn't concerned about his own exposure if he failed to name the underwriter and other financing professionals who would ordinarily be the principal defendants. He answered "I'm not saying I don't have standstill agreements," or words to that effect, implying that other defendants might have agreed to waive any statute of limitations defense if U.S. Bank would bring pressure to bear first on the City.

Hineline later withdrew as U.S. Bank's attorney, and documents later produced in discovery explained his reticence, and why U.S. Bank hadn't threatened all of the participants earlier: Dorsey & Whitney was representing Prudential Securities at the time in litigation over a $20 million bond fraud in Island County. Since Prudential was its client, Hineline's firm couldn't bring the appropriate securities fraud case against the usual defendants. Documents later produced by the plaintiffs revealed that at the time that Hineline and I spoke in December 2000, the bond funds were well aware of his firm's conflict and were working diligently to select new attorneys who could sue Prudential.

New lawyers were engaged, and the bond litigation was filed in April 2001. Named as defendants were, in order, Prudential, Walker Parking, Foster Pepper & Sheffelman (underwriter's counsel), the Spokane Downtown Foundation, Preston Gates & Ellis (representing the issuer, the Foundation), the four Cowles corporations, RWR Management, Inc. (property manager for the Cowles, headed by Bob Robideaux), the City of Spokane and the Parking Development Authority.

The City's response to the litigation contemplated the risk that the disclosure was defective.

The position of Roy Koegen, who had represented the City in reviewing and approving the securities disclosure for the garage bonds, was and remained that he had performed his work competently and that the POS and OS could be defended as full and fair. So the City, which would look to him and his firm to indemnify any liability on its part, asserted that defense and gave him the opportunity to try and prove it. But it otherwise hedged its position in responding to the lawsuit. Given the discrepancies between the City's due diligence when the garage was going to be City-financed, and the more limited disclosure in the POS and OS, the City's answer allowed for the possibility that Koegen was wrong and the City and other defendants would lose the bond plaintiffs' claims.

Through a "third party" complaint, the City brought Koegen and his firm into the lawsuit. Simply stated, it was an opportunity for Koegen to directly defend the work he had performed for the City. There was no question that the City had relied upon him for the adequacy of the securities disclosure. In his application for renewal of his contract as the City's bond attorney in 1999, Koegen pointed out that for the prior 21 years he had been "solely responsible" for preparing and reviewing City bond documents, protecting the City and its officials from liability by advising them on compliance with federal and state laws and regulations including due diligence requirements, and in preparing and reviewing official statements to ensure that the City fully complied with all appropriate federal securities laws.

The City also asserted contribution claims against the other defendants, contending that if there had been misrepresentations, liability should be borne by the professionals and other participants in the financing transaction. After all, appraisals by John Evans and Dan Barrett casting doubt on the Walker Parking projections and questioning fair market value were public records, and questions about the Walker projections and construction figures were aired in public meetings. All of this information and more (including the Coopers & Lybrand report that was obtained after the Council ruled out a direct City purchase of the garage) had been well known to Prudential Securities and to the other financing participants. Consistent with Washington law, the City contended that if these matters had been inadequately disclosed to investors, City taxpayers should not pay a price where the City had collected and passed along all of the material information.

The City's answer to the bondholders' complaint admitted a number of undeniable respects in which the garage financing was not as represented in the POS and OS. The bondholders later pointed to the City's admissions in a brief responding to other defendants' motions to dismiss their claims:

In ruling upon the motions, Plaintiffs respectfully suggest the Court should not only review Plaintiffs' Complaint in the Nuveen action, it should also review the Answer filed by the City. That review will confirm that the Defendants' assertions that the remarkably detailed Complaints before the Court are so "vague" that Defendants cannot be expected to answer is belied by the simple fact that one of the Defendants has, in fact, already answered; (2) many of Plaintiffs' factual allegations about who knew what, and when, have already been admitted by one of the participants to the fraudulent scheme . . ."

As the litigation proceeded, the City's position increasingly recognized the defendants' risk of liability.

As discovery proceeded, City pleadings continued to anticipate the prospect that the plaintiffs would prevail, and to preserve its contribution and indemnification options against the other defendants and Koegen.

By July 2003, the City had identified securities and ethics experts who would testify that Koegen's work on the financing breached the standard of care that he owed to the City. The City's securities expert was Kenneth Artin, who had served as chairman of the Securities Law and Disclosure Committee of the National Association of Bond Lawyers. Artin would testify, among other matters, that Koegen breached the standard of care by allowing City Manager Pete Fortin to sign what Prudential contended was a "warranty" of the Walker projections, without cautioning the City against providing the document or warning of its risk. Although Koegen insisted that the document was not a warranty, the federal court had been unwilling to dismiss Prudential's claim. The City's ethics expert was Peter Jarvis, one of the leading ethics specialists in the Pacific Northwest. Jarvis would testify, among other matters, that Koegen breached the standard of care when he failed to disclose to the full City Council the discovery, in the summer of 1999, that AMC Theaters had not believed that its patrons would have to pay to park in the garage and had served the Cowles with a notice of default under its lease. The notice of default provided a legal basis for refusing to close the garage purchase at what was now clearly recognized to be an inflated and unsustainable purchase price. Because the AMC problem was kept a secret from Council members critical of the public/private partnership, the garage purchase closed and the City missed the opportunity to avoid millions in financial loss and years of costly and disruptive litigation.

In the fall of 2003, the City even joined the bond plaintiffs in resisting efforts of some of the City's co-defendants to extricate themselves from the case, relying, for its standing, on its contribution claims. When the Foster Pepper and Preston Gates law firms argued that their involvement was too remote to be actionable and asked the federal court to dismiss claims against them, the City argued to the federal court:

. . . [T]he City's evidence will show that it gathered substantial information on the outlook for the River Park Square garage at a time when it was considering a purchase --- information the plaintiffs appear to concede would have been adequate investment information, had it been more fully disclosed. . . . [T]he City's collected information was made available to Foster, the principal draftsman of the POS and OS, and Preston whom the Foundation's board contends effectively controlled that issuer. But according to the plaintiffs, Foster's and Preston's characterization of the information made available by the City was so defective as to be materially misleading. Now, even though the gravamen of the plaintiffs' complaint is that the authors of the POS and OS distorted City information, Preston has suggested that it is the City --- not Preston or Foster --- who qualifies as a statutory "seller" under the [Washington State Securities Act]. . . . If a jury could find that the key to bond sales was a POS and OS that misleadingly turned what plaintiffs contend was an unsaleable investment into a saleable one, then the lawyers who wrote and controlled those documents are not entitled to dismissal on summary judgment.

By the end of 2003, discovery was completed and the deadline for dispositive motions arrived. The City had not been impressed by Koegen's and its co-defendants' defense of the risk disclosure. The bond plaintiffs had done a more convincing job of establishing a claim for liability against the defendants --- potentially including the City --- than Koegen had done demonstrating how he could defend the City from liability for disclosure he had reviewed and approved.

By the time lawyers for the parties began drafting the pretrial order in early 2004, the City's position had become so clearly different from that of the non-City defendants that everyone accepted the fact that City contentions would need to be set forth separately in the pretrial order. While the non-City defendants could share trial time and challenges to jurors for their common defense, the federal judge recognized, and no one disagreed, that the City would need separate time and separate juror challenges.

Early on, the City telegraphed its desire to settle with the bondholders.

During the several years that the City waited and watched for Koegen's defense of the risk disclosure, it pressed for mediation and settlement. John Powers telegraphed a clear desire that the defendants settle with bondholders as early as August 2001, in a commentary published in the Pacific Northwest Inlander, pointing out in the same commentary his and my objective to use the federal lawsuit to look to Walker, Prudential and other professionals for financial contributions in accordance with their relative responsibilities.

Mayor Powers also disclosed a need to honestly assess the future exposure presented by the City's garage loan obligation, and to report honestly to the public. In the early stages of the litigation, public relations and public pressure worked against financially responsible settlement, just as they had worked against the City in the original transaction. Settlement proposals entertained by City Council members in 2000 (prior to Powers' election), and a loan request made in the summer of 2001 by the Parking Development Authority showed that public relations and political pressure could be used to persuade many to "put the matter behind us" without any realistic acknowledgement of the magnitude of the loss the City would bear. Powers refused to sugarcoat the City's situation. In March 2002, I reported to the City Council at his request that based on updated operating results, and assuming the City must "loan" funds without prospect of repayment, the City projected over $43 million in losses.

Powers also advocated mediation. Initially, the City's co-defendants objected to mediating at all, and the court would not order mediation over the objection of a dozen parties. It was only after Powers brought in former Supreme Court Justice Richard Guy to build consensus with Council members and I lobbied other defense counsel that we reached the point in early June 2002 where I could report to the federal court that the parties agreed to a referral to mediation.

Dennis Hession and Al French were approved by their fellow Council members to serve with the mayor as mediation representatives. Mediation confidentiality protects the content of offers and other mediation communications, but does not prevent disclosure of actions taken by the City to prepare. Preparation by the City's mediation team included their review of substantial financial information and key pleadings. It included inviting lead bondholder attorney Gary Ceriani to present Powers, Hession and French with an overview of the bond plaintiffs' claims. The mediation team and I met with Nordstrom executives in Seattle. In addition to all of the preparation and these background sessions, Powers, Hession and French consistently placed a priority on mediation sessions that were held in October 2002, November 2002 and at various times through May 2003.

The need to finance a settlement was anticipated and evaluated by the City at the same time it was engaged in mediation. In October 2002, a Financial Services Agreement was entered into with Seattle Securities Northwest under which it would evaluate bond financing strategies for City settlement of the litigation under the direction of my law firm. The agreement also contemplated that Seattle Securities Northwest would underwrite any settlement bonds.

The inability to mediate a global settlement of the federal litigation prior to the original April 2004 trial date was disappointing. But the professionals and the Cowles had identified numerous legal theories by which they hoped to persuade the federal court to throw out or substantially reduce the plaintiffs' claims, and at the time of mediation sessions taking place in 2002 and 2003 almost none of those issues had been resolved. In a phenomenon that any trial lawyer will understand, co-defendants who hoped they might get out of the lawsuit without paying anything proved unwilling to make contributions to settlement acceptable to the plaintiffs or the City.

Despite the inability to secure a global settlement, the substantial investment of time and thought in the mediation process informed and set the table for the many settlements that were later reached.

Executing settlement and proceeding with the contribution, malpractice and indemnity claims.

In February and March 2004, the federal judge decided many of the summary judgment motions that had been filed by the parties. None of the defendants got out. Everyone faced trial.

At a City Council meeting on March 29, 2004, I briefed the Council on financing that Mayor West would request for a City settlement with the bondholders and possibly others, with the City thereafter pursuing its contribution claims. City officials and I would later speak colloquially of the City's having "stepped into the shoes of the bondholders," because it was a fair analogy and easy to understand. But the claims pursued by the City after the April 2004 settlement with the bond plaintiffs were in fact the City's own claims, all of which had been asserted at the outset of the litigation.

At the March 29, 2004 meeting, I explained the rationale for the City's long-standing contribution theory and its proposal to settle with the bondholders:

First of all, I have not supported or recommended to the Council in the past that it unilaterally volunteer to take out the plaintiffs' bonds, because it's been my recommendation that there are other defendants who share responsibility for the losses and we should be looking to them for a contribution to the cost. This type of settlement at this time would preserve those rights of contribution.

Secondly, we are now in a position to know what the plaintiffs' claims look like going to trial. There are important motions that have been resolved and the case is essentially concluded and ready to go to trial. This is something that didn't exist even a year ago, in terms of knowing which claims the plaintiffs would be able to take to trial against which defendants. We know that now; we can assess what we're getting from the plaintiffs in exchange for our settlement.

This proposal will allow the City to step up and take responsibility for a matter in which it's indicated its willingness to share in responsibility for a long time. I believe it will strengthen our position at the time of trial.

It will cap the bondholders' recovery at somewhat of a discount from what they could potentially recover at trial or that they would be entitled to be paid over the life of the bonds. It's not a substantial discount, but there is a discount in the proposal that we're discussing.

It gives us some control over our destiny in this litigation that we think is important. Among other things, it ensures for the City that other defendants will not be able to settle out around us with the plaintiffs on terms that we think represent less than their full and fair contribution to the financial failure of the garage.

We expect it to enable us to finance the City's contribution on terms that are more favorable than they would be if we waited for a trial outcome, because we think the credit markets --- the bond markets --- will look favorably at this approach by the City.

And finally, it gives us the flexibility to accommodate settlement proposals with other defendants if we get proposals from them that we think look reasonable enough that we can recommend them to you and that you are satisfied are reasonable enough that they should be accepted by the City of Spokane . . .

Mayor West agreed, during the May 17, 2004 interview by Camas that it has posted on its website:

Connor: April 13 Laurel Siddoway appeared before Judge Shea, and said, under questioning about what was taking place and why, we have come to the conclusion --- I'm paraphrasing what she said --- that the bondholders are going to prevail, and the city will have some liability, and that's why we're doing what we're doing. Do you agree with that?

West: Well, she is our lawyer. I'd stand behind her statements. I think everything's a percentage. You can't predict absolutes, particularly in lawsuits. You measure your percentage of risk, and you try to figure out how you can mitigate it. Even though we're attempting to become the plaintiffs in the case, we're still defendants. And we still have a liability as defendants.

Several defendants settled in April 2004 and avoided the contribution trial: Walker Parking contributed its insurance limits to settle, and Foster Pepper, which had been paid only $75,000 for its limited role, agreed to settle for $1.3 million. Documents produced in insurance bad faith litigation reveal that by mid-March 2004 Bob Robideaux's attorney was reporting to his insurers that Robideaux wanted to settle the claims against him either as part of a global settlement, if one was achieved, or as part of a partial settlement. Robideaux would press harder in early April to be included in a settlement being discussed by the City with others, but his insurer never would take responsibility for the claim until we successfully established its coverage obligation in insurance bad faith litigation.

In treating the City settlement as a change of position (despite the fact that the City's contribution claims were pursued, unchanged), Camas appears not to have figured out why, when the City was unable to reach a global settlement of its contribution claims before the bondholder trial, it was better to pay off the bonds and try the contribution claims thereafter. Its ignorance would be more understandable if the reasons had not been obvious to others and openly addressed in the federal court file.

The City's settlement agreement with the bond plaintiffs provided that U.S. Bank, on the basis of defaults in payment, would exercise its right under the Trust Indenture to accelerate the maturity of all of the outstanding bonds. The City would then pay an amount sufficient, after application of other funds available to the Trustee, to retire the bonds --- thereby acquiring title to the garage and terminating the loan and existing ground lease obligation. The structure responded to an agreement between the bond plaintiffs that required settlement with all of them, as a practical matter. But the structure and timing also substantially mitigated damages from its loan obligation and rating downgrade that the City was seeking to recover from some of the defendants. As Prudential has pointed out, in its briefing:

The City paid bondholders who had no claim in the lawsuit because it was necessary to accomplish its true goal --- extinguishing the Bonds --- in order to relieve itself from tens of millions of dollars of future liability under its pledge of parking meter revenues, and the partial or complete restoration of its credit rating.

. . . [T]he City received significant benefits for paying persons who did not have claims --- avoiding future liability on its pledge of parking meter revenues under the Ordinance, improving its standing in the bond market, minimizing future financing expenses, and accelerating its acquisition of the Parking Facility . . .

What makes the City's settlement in April 2004 interesting is the undeniable complexity of its situation, unique to it among all of the Defendants, and therefore, a compelling reason to settle all of the Plaintiffs' claims, not just its arguable share of Plaintiffs' damages, and its choice to retire the bonds. . . . The City would obtain little, if any, relief from a settlement of its possible share of the Plaintiffs' damages. The bonds would continue to exist and co-defendants would argue that they were entitled to a share of the bonds supported by the City's loan obligations under the ordinance which would continue. Litigation with the Developers in state court would likely continue. The obligation to pay ground lease would also continue as would the need and cost to operate and maintain the Garage. Additionally, as long as the bonds remained, there would be an impact on the City's creditworthiness and that would trigger additional costs for future bond issues. Lastly, there was the peril to the HUD moneys, recognized as vital to the City by the Council. It is understandable that faced with these complex and extremely costly issues, the City sought a global resolution of these myriad problems. The answer was retirement of all the bonds and that is the settlement it achieved --- not just the payment of bondholders who were parties to the lawsuit whose damages the City has pointed to. Viewed from the perspective of the City facing those problems, settlement by retirement of the bonds was a prudent solution. It also allowed for a strategy of attempting to collect contribution from the [non-settling defendants] thereby reducing the actual amount the City paid to resolve not merely the claims in the case but many of the related problems it faced separate and apart from the case.

After a further round of motion practice, with the City's co-defendants attempting again --- and unsuccessfully --- to extricate themselves from the litigation, everyone except key defendant Prudential settled the City's contribution claims. The City's settlement of the bond plaintiffs' claims, its own claims for contribution and its elimination of the loan pledge reduced its exposure by tens of millions of dollars, as demonstrated by a "before" and "after" comparison of the City's financial position.

The City's remaining claim against Prudential.

To the City's surprise, its claim against Prudential --- as underwriter, the party most responsible for the failed disclosure, and who was clearly able to pay --- was dismissed by the federal court in March 2005. The federal court's rationale was that City settlements had been so favorable as to make it whole. The federal court dismissed the City's claim against Prudential on the basis that the City had no further damages to recover.

The City disagreed. The City Council has provided strong support for an appeal, with a view to recovering as much as possible from that primarily-liable party. The City filed its final brief with the Ninth Circuit Court of Appeals in November 2006 and is awaiting notice of a hearing date or a decision.