Angels’ Hell #7: ‘Good Faith’ Means Nothing to Anaheim Council Majority, or MOUs 101


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All right — if you don’t want to read the first three sections, the latter two of which are a bit fanciful, that’s fine.  Do read sections 4 and 5.

Angels Hell - Pringle and Moreno 7

1. The Anaheim City Council was Partly Right

Most of the stories that you’ve been reading today about what the Anaheim City Council did last night are wrong.  In fact, the Council’s complaints about some of those misrepresentations are technically valid.  However, the Council’s assertions about what it says it did on Tuesday night are as bad or worse as those representations — and much worse given that they’re the ones voting rather than just writing.

So, all of those stories saying that the Council “approved a new lease” with the Angels are wrong.

All of those stories saying that the Council “agreed to let the Angels change their name” are wrong.

All of those stories saying that the Council “gave Arte Moreno the land are … well, here I’m not going to use the word “wrong,” but rather, “premature.”  (It will almost surely happen due to what the Council did last night, but it hasn’t happened yet.)

Only those stories that say that Moreno has been given three more years to opt out of the current lease agreement  (which is still operative)– making it much easier for him to credibly threaten to move the team out of the city — are right.

Confused?  You may be — but you’re probably not as badly confused as the Council itself was.

You need to understand what a Memorandum of Understanding was — which they apparently didn’t.  And, if they really didn’t understand (as opposed to just faking it), they’d have a good reason to cite, because their attorney and hired advisors were telling them that an MOU doesn’t do what it does do.  (Chapter and verse on that point will await the transcripts.)

2. It’s Like Getting Married

(Warning: if you can’t stand the winsome examples I sometimes come up with here, just skip to section 4.)

Let me give an example that will give you the general outline of what’s going on: love and marriage.

  1. Two people meet.
  2. They are attracted to each other.
  3. They start dating.  (Note for younger readers: … or “hanging out.”  Or “hanging out and having sex.”  )
  4. They decide to get serious.
  5. They get engaged.
  6. They may or may not, after step 5 and somewhere before step 10, sign a “pre-nuptial agreement” (a “pre-nup”) providing for division of assets and such in the event of divorce.  (This is more romantic than it sounds.  Haha, just kidding.  No it isn’t.)
  7. They set a date for the wedding.
  8. They go to the County Clerk (or the whomever) and take out a marriage certificate.
  9. They do some or all of: book a hall, find an officiant, hire a band or DJ, hire a caterer, a wedding photographer/videograher, buy a gown (or gowns), rent a tux (or two), ask the wedding party to do likewise, send out invitations, book a honeymoon, etc.  (Or they just head down to the Old County Courthouse and get in line.)
  10. They get married.

Now it is WRONG, WRONG, WRONG to say that someone who has only reached the stage of being engaged, or even of having set a date and entered into contracts for wedding-related services has gotten married.  They haven’t.  They might, for example, still sign a pre-nup, if they haven’t.  They might postpone the date and change some of the arrangements.

But if these two individuals have entered into the process of preparing for the wedding, they have taken some steps that will cost them serious money if they change course.  If it turns out that a groom or bride had never really had any intention of going ahead with the wedding at all, they may be on the losing end of a powerful lawsuit by their spurned partner — because they lacked “good faith.”

If you wanted to be a real unromantic jerk about things, you might even put provisions for what would happen in the event of a bad-faith cancellation of a wedding — “I’m sorry, Jordan, but I never really loved you” – into a pre-nup itself.

Now again, if a couple has gone all of the way through step 7 or 8, has started to enter some of the contracts surrounding a wedding (step 9), and then signs a pre-nup, it is a mistake to say that they got married and can now collect survivor’s Social Security Benefits and share a health insurance plan and visit each other in emergency rooms and all of the rest of that romantic stuff.  That’s a mistake.

But do you know what a much bigger mistake is?

Telling people (and worse of all yourself), after you have gotten engaged and just before you sign a pre-nup with a good faith provision, that it doesn’t really mean much of anything, as if you’re just around step 3 or 4.

That’s really stupid — and that’s pretty much what the Council Majority told the public last night.

3. Let’s Have a Closer Look at That Pre-Nup

Certain provisions really matter in a contract, whether a pre-nup or a “Memorandum of Understanding,” and they are called “material.”  Let’s say that certain provisions in a pre-nup between a disgustingly stereotypical South County wealthy man and a nubile younger woman state the following:

  • they agree that they want children because the man wants an heir and that the woman has no reason to think that she is incapable of bearing children
  • they plan to live together in South County rather than near the woman’s family in Arkansas
  • they agree that she will quit her job as a fashion model society editor (I don’t even know what that is)
  • the man will provide the woman with a monthly spending allowance of no less than $15,500/month, starting providing the woman with a credit card with a $93,000 credit line six months before the wedding
  • the man will take out a life-insurance policy of no less than $10,000,000, payable to the woman
  • the wedding dinner will include a low-calorie option

(I apologize for the stereotypical nature of these depictions, but I want to evoke a culturally recognizable stereotypical situation.  I know that all of you watch sitcoms and rom-coms.  You know where this is going.)

Now, let’s say that as the expensive “Wedding of the Season” approaches, the woman informs the man, after having prematurely spent out her credit allotment, that she is not able to bear children, that she does not plan to live with him in South Orange County but demands that he move to her family’s ancestral estate (going back two generations) in Bald Knob (a real place, by the way), where they will share a domicile with her cousin Zeke Bob, to whom she is very close.

Or, let’s say instead that the man informs her at about this time that he is actually without means, that despite having quit her hard to get job she is going to have to be responsible for the credit debt that she has racked up, and that life insurance is out of the question, and that they will be moving to Hemet, where they will share a domicile with his cousin Zeke Bob, to whom he is very close.

Someone is going to lose a lawsuit.

Now let’s say, instead, that they disagreed about whether chicken, as opposed to fish, really qualified as a “low-calorie option.”  The man felt that fish (as an alternative to the main option of baby tiger meat) was a low-calorie option reflecting his family’s South County roots, and the woman said that she never conceived of “low-calorie option” as referring to anything other than chicken, her native state’s state bird.

Do we get a lawsuit?  No.  That provision is not likely material.  We also don’t likely get a lawsuit if the man gets only $9,000,000 of life insurance, or if the woman insists that they will spend at least two major holidays each year in Arkansas, etc.  Those deviate from the terms of the pre-nup, but probably not so much as to exhibit bad faith.

OK, now — let’s drive this example home.  The Council just signed something similar in many ways to a pre-nup, and the Angels in particular have declared — through, oddly, the City’s agent Charles Black that they want to start spending money in reliance of the expected completion of the contract right away, which creates “detrimental reliance” if the contract negotiations fizzle out because the City wants to make a substantial change to a material aspect of the agreement, indicating bad faith, and will give rise to big big damages and/or a judicial order that the City must honor the contract terms.

That’s all the City did on Tuesday night.  Nothing “major.”  Things can still change.  We can still push for fish rather than chicken on the wedding dinner menu.  And they really want to hear what the public prefers!

Now I’m going to rephrase and repeat that last couple of paragraphs for people who did skip to Section 4.

4. A Memorandum of Understanding Creates Justifiable Reliance in Completion of a Contract, Generally Reflecting Principles that It Contains, After Good-Faith Negotiations — FOR THE LOVE OF GOD, AND DON’T PRETEND THAT IT MEANS NEXT-TO-NOTHING, YOU IMBECILES!

(Again, for those of you poor souls who skipped the last two sections.)

The Council just signed something similar in many ways to a pre-nup — or, better, a Merger Agreement of a Joint Venture Agreement with the Angels and another one with Arte Moreno.   The Angels in particular have declared — through, oddly, the City’s agent Charles Black, but that’s another story — that they want to start spending money in reliance of the expected completion of the contract right away.  This  would likely create “detrimental reliance” if the contract negotiations fizzle out because the City wants to make a substantial change to a material aspect of the agreement, indicating bad faith, and will give rise to big big damages and/or a judicial order that the City must honor the contract terms.

That’s all the City did on Tuesday night.  Nothing “major.”  Things can still change.  We can still push for fish rather than chicken on the wedding dinner menu.  And they really want to hear what the public prefers!

If what the public prefers is to get rid of the enormous and offensive giveaway of land to Arte Moreno, though, the Council will probably find (as if it doesn’t already know) that it can’t backtrack on such a material point, because doing so would exhibit bad faith.

It would be as if one had entered into an agreement to marry someone, and then towards the completion of the preparation one decided “no, I don’t really want to get married, let’s make it an agreement to take a vacation together in Europe.”

You’re going to have real problems if you do that, because the requirement of good faith in negotiations — for which the MOU specifically calls — means that you can’t change things that go to the “heart” of the agreement (or, in other terms, that frustrate its main intended purpose.)  An agreement to jointly start a business with someone cannot, over the other party’s objection, become an agreement to jointly buy a pizza, without invoking the explicit and implicit provisions of law that accompany bargaining in bad faith.

The logic goes something like this: hey, the other side paid a lot of money to pursue this deal, hiring experts to do their own analysis, lawyers to represent their interests (or whatever Charles Black was doing), gave up some other opportunities based on the idea that you would bargain with them in good faith — and if you don’t bargain in good faith, you’re gonna pay for it!

Arte Moreno offered his signature on a contract in exchange for the City’s commitment to bargain in good faith towards the general ends — not every detail, but the general arrangement — envisioned in the Memorandum of Understanding.  That’s what he bought.  He painted the City into a corner where it either gives him the essentials of what he wants or has to pay him a substantial penalty.

The City can’t just say “nahhh, we changed our mind” and go skipping off into the daisies.  That’s “bad faith.”

So yes, the agreement with Moreno may be transformed (wisely) into the sort of “joint venture” that Mayor Tom Tait suggested, but the material part of the agreement is that Moreno makes a certain profit.  And the City just agreed that that was pretty much reasonable.  So if the city comes back and says “no, let’s have an agreement where we share that profit 50-50,” Moreno will be justified in coming back and saying “no, let’s have an agreement where you kiss my ass.”

The City’s only hope — well, there are other possible ways to derail this monstrosity, but I’m holding those back for now as a surprise  – of being able to construct a fair and reasonable final agreement with Moreno given this atrocious MOU is to be able to convince a court that they have been proceeding from the outset of signing the agreement, in good faith.

Pour yourself a stiff drink before reading the next section.

5. Council Majority: ‘We See No Need to Bargain in Good Faith Towards The Goals Expressed in this MOU’

Pop quiz:

What is the absolute stupidest thing that someone could do before signing a Memorandum of Understanding containing a binding commitment to bargain in good faith?

If you said “publicly announce that you have no intention of bargaining in good faith, congratulations!  You are smarter than every member of the City Council except for Mayor Tom Tait!

The transcription of the meeting is still on its way, but it’s going to contain example after example of at least Kris Murray and Lucille Kring from the Council majority saying things like this:

  • “This is just the beginning of our negotiations.”

No, you don’t have an MOU like this in front of you at the beginning of negotiations.  This is obvious to anyone with brain activity that this is already a result of extensive negotiations.  At the beginning of negotiations, you might have something like separate lists of desired objective, which only a complete idiot would dress up and have signed as a “Memorandum of Understanding” — a detailed “letter of intent.”

  •  ”Nothing here is set in stone.”

That’s completely true of the details.  It’s true, to a lesser extent, of some of the larger aspects, such as that Arte Moreno might be able to make gobs of money off of the Stadium Lot through a Joint Venture Agreement rather than through the Stupidest Lease Agreement of 2013.  But the basic advantage to him that is contemplated by the MOU?  The City’s responsibility is to pursue that in good faith.  It’s pretty close to “set in stone” — the City could still pry it out, so long as it doesn’t mind having a wall collapse on them.

The problem is that Kring and Murray and the others just approved an agreement requiring the City to bargain in good faith despite their having no apparent idea of what “bargaining in good faith” means.  Do they think, wrongly, that they’re just at the beginning of the process, and that a final contract with these terms is no more in keeping with this MOU than one in which Moreno leases the Angels to the City of Anaheim for $1/year?  No.  The MOU says what it says for a reason, and it says what it says with an effect.  One effect is to instruct the negotiators what the City wants to achieve.  Another is to bind the City to a process that honors the negotiators’ efforts based on those instructions.

All that Kring and Murray ended up doing from the dais is stating, in effect, that they have no idea what it is to bargain in good faith pursuant to a Memorandum of Understanding — and that means that they never should have passed it in the first place because they can still be held to the legal terms in the document.

But here, I’ll say something nice about the Councilwomen: this, to some extent, is not fully their fault.  They are supposed to have advisors — a City Attorney, a City Manager, and in this case a set of consultants led by Charles Black that are paid City staff — that should have started waving their hands and correcting the Council’s misconceptions as they started spouting nonsense.

But — Black apparently being a salesman for the deal, slamming down any notion that the City should do anything other than give Arte Moreno everything we wants — that’s not what they did.  What they did do, we’ll get to that in the days ahead.


About Greg Diamond

Worker's rights attorney now moving into "good governance" litigation. North Vice Chair of Democratic Party of Orange County and occasional candidate. Proud to be prolix. Unless otherwise specifically stated, his writings never speak for the Democratic Party at the local, county, state, national, or galactic level. He tries to either suppress or openly acknowledge his partisan, issue, ideological, and "good government" biases in most of his writing here. If you have a question about any particular writing, just ask him about it and (unless you are an pseudonymous troll) he will probably answer you at painful length. He lives in Brea but generally doesn't blog about it. A family member works as a campaign treasurer for Wendy Gabriella in AD-73; he doesn't directly profit from that relatively small compensation and it doesn't affect his coverage. He does advise some campaigns informally and without compensation, although in 2014 he may receive some compensation for campaign consulting and fundraising for the campaign of Jorge Lopez for Orange County Assessor.