1

THE HONORABLE JANET HELSON

2 Hearing Date: February 10, 2016
Hearing Time: changed from 11:00 am to
3 3:30 pm
WITH ORAL ARGUMENT
4

8 IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR KING COUNTY
9

10 CCD BLACK DIAMOND PARTNERS LLC,

a Delaware Limited Liability Company, No.: 16-2-29091-4 KNT
11
Plaintiff, DEFENDANTS REPLY ON MOTION
12 FOR PRELIMINARY INJUNCTION
13 v.

14 CITY OF BLACK DIAMOND and BLACK

DIAMOND CITY COUNCIL, a Public
15
Agency, and ERIKA MORGAN, PAT
16 PEPPER AND BRIAN WEBER, Black
Diamond City Council Members,
17
Defendants.
18
I. ARGUMENT IN REPLY
19
A. First prong: The Councilmembers have a clear legal and
20 equitable right to a city-funded defense
21 1. The exclusion for willful and intentional acts conflicts
with state law.
22
The mayor improperly seeks to avoid the citys obligation to defend city officials sued
23
for acting within the scope of their official duties. She cites to an exclusion in BDMC 2.66.030
24
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 1 that conflicts with state law. RCW 4.96.041, the corresponding statute that governs the duty to

2 defend local officials, reads:

3 If the legislative authority of the local governmental entity, or the local

governmental entity using a procedure created by ordinance or resolution, finds
4
that the acts or omissions of the officer, were, or in good faith purported to
5 be, within the scope of his or her official duties, the request [to defend] shall
be granted.
6
RCW 4.96.041(2)(emphasis added). The duty to defend analysis is simple. If the alleged acts
7
are within the scope of the Councilmembers duties, then provision of a defense is mandatory.
8 If the acts are outside the scope of official duties, defense is not mandatory. An alleged
9 violation of the OPMA, because it necessarily involves alleged action of the governing body,
10 will always fall within the scope of official duties, and therefore, must be defended.
11 The language of BDMC 2.66.020.A is generally consistent with this statutory mandate.
12 But BDMC 2.66.030.A.1 purports to exclude [a]ny dishonest, fraudulent, criminal, willful,
13 intentional or malicious act or course of conduct of any official or employee. This language
14 would create a basis to deny coverage that conflicts with state law. Cities may not adopt
15 ordinances that conflict with the general laws of the state. Wa. Const. art. XI, section 11; State
16 v. Kirwin, 165 Wn.2d 818, 826 (If an ordinance conflicts with a statute, the ordinance is
17 invalid.).
18 Mayor Bensons declaration, Exhibit A, shows that those who voted against the
19 motions to defend on December 15, 2016 did so on the grounds of this invalid willful
20 conduct exclusion. If those motions are to be construed as the final legislative determination

21 of the council (as opposed to Resolution 16-1139), that determination must be reversed by the

22 court as conflicting with state law.

23

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 2. Even if the willful and intentional clause is valid, a
1 defense must be provided if there is any reasonable scenario
2 that could result in coverage.

3 Assuming arguendo that this exclusion is valid, Washington insurance law provides

4 helpful guidance in understanding its applicability: We have long held that the duty to defend
5 is different from and broader than the duty to indemnify. The duty to indemnify exists only
6
if the policy actually covers the insured's liability. The duty to defend is triggered if the
7
insurance policy conceivably covers allegations in the complaint. Am. Best Food, Inc. v. Alea
8
London Ltd., 168 Wn.2d 398, 404 (2010). (citations omitted).
9
[I]f there is any reasonable interpretation of the facts or the law that could
10 result in coverage, the insurer must defend. When the facts or the law
11 affecting coverage is disputed, the insurer may defend under a reservation of
rights until coverage is settled in a declaratory action. ... Once the duty to
12 defend attaches, insurers may not desert policyholders and allow them to incur
substantial legal costs while waiting for an indemnity determination.
13
Id., at 405 (citations omitted; emphasis added). This case has not been sufficiently developed to
14
allow the Court to know whether this exclusion applies (if valid). If the Councilmembers are
15

16 not deserted by the city, they will be able to mount a formidable defense, as they are entitled to

17 do. See the Councilmembers January 23, 2017 Answer.

18 In any case, [w]hile the duty to indemnify may depend upon resolution of factual
19
issues, there generally are no questions of fact for the duty to defend. United Services Auto.
20
Assn v. Speed, 179 Wn. App. 184, 194-195 (2014). The mayor, in lacing her brief with
21
innuendo about the Councilmembers conduct, is improperly making allusions to the merits of
22
the underlying OPMA claim. The Court should be guided by Washington insurance law and
23

24 not allow that.

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 3. Under the Olsen case, the Councilmembers were entitled
1 to vote to defend themselves.
2 The motions to disqualify the Councilmembers on December 15, 2016 were premised
3 upon an incorrect legal conclusion that the Councilmembers had a conflict of interest and were
4 therefore prohibited from voting on their own defense. But it is clear from In re Recall Petition
5 of Olsen, 154 Wn.2d 606, 116 P.3d 378 (2005), that the Councilmembers were allowed to vote
6 on motions to defend themselves. The Councilmembers briefed this case in their January 31,
7 2017 Response to Motion to Establish Counsel and incorporate those arguments here. It is

8 worth repeating, however, that Olsen also involved the vote of a majority of a governing body

9 to provide a defense for themselves against an OPMA lawsuit. The Olsen court held

10 unanimously that any benefit to Olsen resulted from the vote to indemnify herself and

11 Gilbert, a vote which is authorized by RCW 53.08.208 and not subject to the restrictions of

12 RCW 42.23.030. Id., at 613. Here, the Councilmembers should not have been disqualified

13 from voting on the motions to defend themselves. Sensing this injustice, the Councilmembers

14 cast their votes even though they were told they were disqualified. Declaration of Brian

15 Weber. Counting their votes now as they should have been counted then, the city council did

16 vote 3-2 to provide a defense to the Councilmembers both on December 15, 2016 and on

17 December 22, 2016.

18 4. The council rule on disqualification does not apply in

this context.
19
Council rule 8.5.2, which was cited purportedly to disqualify the Councilmembers,
20
applies in the context of a quasi-judicial land use hearing. When one compares the text of
21
section 8.5 (Declaration of Jeff Taraday, Ex. A) of the council rules to the Appearance of
22
Fairness Doctrine, chapter 42.36 RCW, it becomes apparent that section 8.5 is intended to
23
address challenges to participation under the Appearance of Fairness Doctrine. It does not
24
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 1 relate to votes to defend Councilmembers in lawsuits and should not have been used in that

2 context.

3 5. Any final action by the city council to refuse to defend

the Councilmembers is reviewable and should be overturned.
4
Final council action is reviewable by the court under BDMC 2.66.080, as well as under
5
the courts equitable powers. For the reasons stated above, the Court should rule that the
6
Councilmembers are entitled to a city-funded defense notwithstanding the motions made on
7
December 15, 2016.
8
6. Plaintiff has no standing to oppose this motion.
9
The duty to defend is an issue between the Councilmembers and the city. Plaintiff has
10
failed to assert standing (as a taxpayer or otherwise), and has no standing to oppose this
11
preliminary injunction.
12

13 B. Second prong:

14 This prong was not challenged.

15
C. Third prong: Failure to provide a defense for the
16 Councilmembers will result in actual and substantial injury.
17 The mayor attempts to draw a distinction between cases regarding the duty to defend

18 municipal officers and a duty to defend found in an insurance agreement. In reality, courts have

19 found that the two are reviewed in a substantially similar manner. See, e.g., Hassan v.

20 Fraccola, 851 F.2d 602, 604 (2d Cir. 1988) ("The court also noted that the State's role, in

21 reviewing the request to defend, is much like that of an insurer reviewing a complaint to

22 determine if a defense must be provided."). The mayor has provided no support for her

23 argument that insurance law does not apply or provide meaningful guidance in this context.

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 1 The mayor claims that the Councilmembers must demonstrate actual harm by showing

2 an inability to pay for their own defense, using some showing of financial documentation to

3 support the claim. In fact, courts have held that this showing is not required; in In

4 re WorldCom, Inc. Sec. Litig., 354 F. Supp. 2d 455, 46970 (S.D.N.Y. 2005), the Court

5 rejected the argument that the party seeking a preliminary injunction for defenses costs must

6 show an inability to retain counsel with his own funds. The Court held that the issue

7 surmounted whether an individual party does or does not have sufficient funds to pay

8 counsel. Id. at 470. The Councilmembers have satisfied the third prong of the

9 preliminary injunction test, where the loss of their present counsel would create actual

10 and substantial injury.

11
D. Equitable considerations:
12
The existence of Councilmembers cross-claim for defense costs adds little weight to
13
the mayors position when balancing the equities. Without a city-funded defense, the cross-
14
claim is only an illusory route to justice. The Councilmembers would not be able to provide a
15
meaningful defense on their own. Thus, they would have only a remote chance prevailing on
16
the cross-claim after the fact, not because of the nature of their conduct, but because the loss of
17
their counsel at this stage would result in unequal stances between the parties.
18

19 E. The Councilmembers should not be required to provide

security upon issuance of the injunction.
20
This Court may determine that no security is required in order to obtain preliminary
21
injunction. The amount of an injunction bond is within the trial court's discretion. Fisher v.
22
Parkview Properties, Inc., 71 Wn. App. 468, 479, 859 P.2d 77, 84 (1993), as amended on
23
denial of reconsideration (Nov. 22, 1993). Courts have held that dispensing with a
24
security requirement is warranted where requiring security would effectively deny access to
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 1 judicial review. Save Our Sonoran, Inc. v. Flowers, 408 F.3d 1113, 1126 (9th Cir. 2005)

2 (citation omitted). It should be noted that neither BDMC 2.66 or RCW 4.96.041 requires the

3 provision of security.

4 The mayor contradicts herself when asserting on page 9 that the Councilmembers

5 declarations are limited and conclusory and then arguing on page 12 that a reservation of

6 rights would not be sufficient security in light of their declarations. In fact, a reservation of

7 rights is meaningful even though the Councilmembers are unable to mount their own defense.

8 Defending litigation like this requires significant liquid resources to pay legal bills promptly.

9 Assuming arguendo, that the Councilmembers are found at the conclusion of the case to have

10 been unworthy of a city-funded defense, their ability to satisfy a debt that could theoretically

11 be owed under a reservation of rights would not require the same level of liquidity and could

12 be repaid over time if necessary. If any security is required at all, it should go no further than a

13 reservation of rights. That is, after all, the most the city code calls for.

14

15 DATED this 9th day of February, 2017 at Seattle, Washington.

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18 _____________________________
Jeff Taraday, WSBA #28182
19 Attorney for Defendants Black Diamond City
Council Members Morgan, Pepper and Weber
20
My signature above certifies this memorandum
21 contains 1745 words, in compliance with the
Local Civil Rules.
22

23

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 1

2 DECLARATION OF SERVICE

3 I certify that I served a true copy of the foregoing document on the following on February 9,
2017 by Court e-service:
4
Michele Earl-Hubbard
5 Allied Law Group LLC
P.O. Box 33744
6
Seattle, WA 98133
7 Email: michele@alliedlawgroup.com

8
Shannon Ragonesi
9 Keating Bucklin & McCormack, Inc., P.S.
800 Fifth Avenue, Suite 4141
10
Seattle, WA 98104-3175
11 Email: sragonesi@kbmlawyers.com

12 DATED this 9th day of February, 2017.

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14

15 _____________________________
Jeff Taraday, WSBA #28182
16 Attorney for Defendants Black Diamond City
Council Members Morgan, Pepper and Weber
17

18

19

20

21

22

23

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