Preview
1 Jason E. Fellner - 245364
JFellner@mpbf.com
2 Stephanie Yee - 320861
SYee@mpbf.com
3
MURPHY, PEARSON, BRADLEY & FEENEY
88 Kearny Street, 10th Floor ELECTRONICALLY
4
San Francisco, CA
Telephone:
94108-5530
(415) 788-1900
F I L E D
5 Superior Court of California,
Facsimile: (415) 393-8087 County of San Francisco
6 06/15/2020
Attorneys for Defendant: Clerk of the Court
7 MELVIN LEE BY: BOWMAN LIU
Deputy Clerk
8 David J. Millstein - 87878 Willie L. Brown, Jr. - 29656
dmillstein@millstein-law.com wlb@williebrowninc.com
9 Gerald Richelson - 267705 The Law Office of Willie L. Brown, Jr.
grichelson@millstein-law.com 100 The Embarcadero, Penthouse
10 Owais Bari - 321954 San Francisco, California 94105
obari@millstein-law.com Telephone: (415) 777-0310
11 Millstein & Associates Facsimile: (415) 512-9277
100 The Embarcadero, Penthouse
12 San Francisco, California 94105
Telephone: (415) 348-0348
13
Facsimile: (415) 348-0336
14
Attorneys for Defendants:
15 TERESA WONG; VAN NESS CARE CENTER, INC.; SAN FRANCISCO CARE
CENTER, L.P.; and MEL LEE MANAGEMENT, INC.
16
SUPERIOR COURT OF THE STATE OF CALIFORNIA
17
COUNTY OF SAN FRANCISCO
18
Unlimited Jurisdiction
19
20 CITY AND COUNTY OF SAN FRANCISO, Case No.: CGC-18-565184
a Municipal Corporation; and the PEOPLE
21 OF THE STATE OF CALIFORNIA, by and CROSS-COMPLAINANTS VAN NESS
through Dennis J. Herrera, City Attorney for CARE CENTER, INC.; SAN
22 the City and County of San Francisco, FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-
23 Plaintiff, COMPLAINT
24 v.
25 MELVIN LEE, an individual, TERESA
WONG, an individual, VAN NESS CARE
26
CENTER, INC., SAN FRANCISCO CARE
CENTER, L.P., MEL LEE MANAGEMENT,
27
INC., and DOE ONE through DOE FIFTY,
28
inclusive,
Action Filed: March 23, 2018
Defendants. Trial Date: November 9, 2020
1
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
1
VAN NESS CARE CENTER, INC., SAN
2 FRANCISCO CARE CENTER, L.P., and
DOE ONE through DOE FIFTY, inclusive,
3
4
Cross-Complainants,
5
v.
6
CITY AND COUNTY OF SAN FRANCISO,
7 a Municipal Corporation, by and through
Dennis J. Herrera, City Attorney for the City
8 and County of San Francisco, and ROE ONE
through ROE TWENTY, inclusive,
9
Cross-Defendant.
10
11
12
TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD:
13
COMES NOW Defendants/Cross-Complainants, VAN NESS CARE CENTER, INC.;
14
SAN FRANCISCO CARE CENTER, L.P.; (hereinafter collectively "Cross-Complainants") for
15
causes of action against Cross-Defendant CITY AND COUNTY OF SAN FRANCISCO
16
(hereinafter “Cross-Defendant”), complains and alleges as follows:
17
INTRODUCTION
18
1. Cross-Complainants file this Cross-Complaint due to San Francisco
19
Redevelopment Agency and CITY AND COUNTY OF SAN FRANCISCO’s breach of the
20
Disposition and Development Agreement and for other claims set forth herein.
21
2. Plaintiffs CITY AND COUNTY OF SAN FRANCISCO and PEOPLE OF THE
22
23
STATE OF CALIFORNIA have filed a Complaint against Cross-Complainants in the above-
24 entitled action. Cross-Complainants have denied and continue to generally deny all material
25 allegations in the Complaint on file herein. Both the Complaint and Cross-Complainants’
26 Amended Answer to the Complaint are incorporated by reference as though fully set forth herein.
27 The allegations of the Complaint are denied and are not hereby adopted by Cross-Complainants as
28 true, but are incorporated only for information about the allegations.
PARTIES
3. At all times herein mentioned, Defendant/Cross-Complainant, San Francisco Care
2
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
1 Center, L.P. (“SFCC”), is and at all times a California corporation with a principal place of
2 business in the County of San Francisco, California.
3
4. At all times herein mentioned, Defendant/Cross-Complainant, VAN NESS CARE
4
CENTER, INC. (“VNCC”), is and was at all times a California corporation with a principal place
5
of business in the County of San Francisco, California.
6
5. At all times herein mentioned, Plaintiff/Cross-Defendant, CITY AND COUNTY
7
OF SAN FRANCISO (“CCSF”), is and was at all times a municipal corporation with a principal
8
place of business in the County of San Francisco, California.
9
6. Cross-Complainants do not know the true names and capacities of other Cross-
10
Defendants who are or may be responsible or who have in some way contributed to the harms and
11
damages as complained of and set forth herein. Cross-Complainants therefore sues these Cross-
12
Defendants as ROES 1-20 and will amend to state their true names and capacity at such time as
13
14
they become known.
15 FACTUAL ALLEGATIONS
16 7. Cross-Complainant VNCC and the San Francisco Redevelopment Agency entered
17 into a written contract entitled Disposition and Development Agreement (“DDA”) on or about
18 September 12, 2000.
19 8. The DDA provided for the development of a senior care center located at 1033-
20 1035 Van Ness Avenue, San Francisco, CA 94109, also known as the Avenue.
21 9. Cross-Complainant SFCC was assigned Cross-Complainant VNCC’s rights, title,
22
and interest in the DDA on or about April 30, 2002.
23
10. Defendant Melvin Lee was at no time a party to the DDA, but a third party
24
beneficiary to the DDA.
25
11. Defendant Teresa Wong was at no time a party to the DDA, but a third party
26
beneficiary to the DDA.
27
12. Defendant Mel Lee Management, Inc. was at no time a party to the DDA.
28
13. The DDA was amended a series of times, and finally for a fifth time on or about
June 20, 2006. This amendment included a replacement of Exhibit A of the DDA, titled
Declaration of Affordability Restrictions (“DAR”).
3
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
1 14. The San Francisco Redevelopment Agency was dissolved by state law in 2012,
2 unbeknownst to Cross-Complainants at the time, and CCSF became its successor agency. The San
3
Francisco Mayor’s Office of Housing and Community Development (“MOHCD”) was appointed
4
to succeed the San Francisco Redevelopment Agency under CCSF. MOHCD, as a branch of
5
CCSF, was the successor and assign to the San Francisco Redevelopment Agency under the DDA,
6
and assumed liability for the San Francisco Redevelopment Agency’s actions.
7
15. The DDA’s purpose and goals are to be in accordance with the California
8
Redevelopment Law and the Western Addition Redevelopment Plan, per the DDA itself.
9
16. The spirit of the DDA is a joint venture between Cross-Defendant and Cross-
10
Complainants VNCC/SFCC to attempt if practical to develop regular and affordable senior care
11
and housing in an area of San Francisco that required rehabilitation. The DDA provides for the
12
parties to work in conjunction with each other to accomplish the goals of the DDA – namely the
13
14
creation of a living and care facility for seniors.
15 17. Cross-Defendant was to play an active role of the creation of the Avenue beyond
16 the mere sale of the land to Cross-Complainants VNCC/SFCC. In furtherance of its own goals to
17 improve the city of San Francisco and the goals of the DDA, California Redevelopment Law, and
18 Western Addition Redevelopment Plan, Cross-Defendant was to provide monitoring, guidance,
19 support, and referrals to Cross-Complainants VNCC/SFCC and the Avenue. However, Cross-
20 Defendant failed to act accordingly.
21 18. Both the San Francisco Redevelopment Agency and the successor MOHCD failed
22
to fulfill both their affirmative obligations and their duty of good faith and fair dealing to Cross-
23
Complainants VNCC/SFCC under the DDA, which has caused Cross-Complainants economic
24
damages in an amount to be proved at trial.
25
FIRST CAUSE OF ACTION
26
(For Breach of Contract Against Cross-Defendant and ROES 1 – 20)
27
19. Cross- Cross-Complainants incorporate by reference the allegations of paragraphs
28
1 through 21 of the Cross-Complaint as though fully set forth herein.
20. Cross-Complainants did all, or substantially all, of the significant things that the
DDA required it to do, unless Cross-Complainants were excused from any obligation.
4
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
1 21. Cross-Defendant failed to meet its obligations under the DDA and DAR in
2 numerous ways, including, but not limited to:
3
a. Failed to assist qualified tenants and certificate holders in finding housing,
4
which is decent, safe, sanitary, and within their financial means in
5
reasonably convenient locations and otherwise suitable to their needs;
6
b. Failing to refer certificate holders to the Avenue, as provided for under
7
§9.04(A) of the DDA;
8
c. Failing to meet and confer in “good faith” with VNCC /SFCC to find
9
solutions to resolve operational issues and financial problems of the
10
Avenue.
11
d. Failing to provide and/or pre-approve necessary documents to prepare
12
income certifications, as provided for under §9.03(g) of the DDA and §1.8
13
14
of the DAR.
15 e. Failing to monitor annual compliance of the Avenue, as provided for under
16 §15 of the DAR.
17 22. Cross-Complainants were harmed by Cross-Defendant’s failure to meet its
18 obligations and Cross-Defendant’s breach of contract was a substantial factor in causing Cross-
19 Complainants’ harm.
20
SECOND CAUSE OF ACTION
21
(For Breach of Implied Covenant of Good Faith and Fair Dealing Against Cross-Defendant and
22
ROES 1 – 20)
23
24
23. Cross-Complainants incorporate by reference the allegations of paragraphs 1
25 through 25 of the Cross-Complaint as though fully set forth herein.
26 24. Cross-Complainants incorporate by reference the allegations of paragraph 24, and
27 this cause of action is pleaded in the alternative to the other causes of action pleaded herein.
28 25. Cross-Complainants did all, or substantially all, of the significant things that the
DDA required it to do, unless Cross-Complainants were excused from any obligation.
26. Cross-Defendant unfairly interfered with Cross-Complainants’ right to receive the
5
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
1 benefits of the contract under the DDA and DAR in numerous ways, including, but not limited to:
2 a. Failing to inform Certificate Holders of the availability of Residential Care
3
Units at the Avenue, as provided for under § 9.04(A)
4
b. Failing to provide necessary documents to prepare quarterly reports, as
5
provided for under §1.8 of the DAR;
6
c. Failing to provide directions on effective management, as provided for
7
under §15.3 of the DAR.
8
27. Cross-Complainants were harmed by Cross-Defendant’s conduct, including failure
9
to meet its obligations and breach of contract, and was a substantial factor in causing Cross-
10
Complainants’ harm.
11
THIRD CAUSE OF ACTION
12
(For Reformation Against Cross-Defendant and ROES 1 – 20)
13
14
28. Cross-Complainants incorporate by reference the allegations of paragraphs 1
15 through 30 of the Cross-Complaint as though fully set forth herein.
16 29. Cross-Complainants and Cross-Defendants executed the DDA under the
17 fundamental assumption that there would be high demand for market rate and below- market rate
18 assisted living services for the duration of the DDA. The Parties also assumed that the Avenue
19 would generate enough market rate revenue to subsidize the cost of providing below market units
20 for 50 years. Further, Parties assumed that the venture would be financially feasible and market
21 conditions would remain such as to perform the contract for the duration of the contract.
22
30. Within the first year of the operation the Cross-Defendants lost significant market
23
rate revenue due to unanticipated increase in labor and operational costs. The Avenue achieved an
24
occupancy of 32 %. Cross-Complainants informed the Cross-Defendant that the Avenue could not
25
modify the agreement unless the monthly rent set in DDA 1 for Affordable Residential Care Units
26
was increased to reflect the increase in labor and material costs. Cross-Defendant was informed
27
that the Avenue faced significant competition from Coventry Place and other newly opened
28
1
§ 9.03 DDA & § 1.0 DAR
6
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
1 facilities at that time.
2 31. Pursuant to negotiations, Cross-Complainants and Cross-Defendants signed the
3
Fifth Amended DDA revising the monthly rent set for Affordable Residential Care Units. The
4
Fifth Amended DDA was executed by the Parties with the belief that the monthly rates set for the
5
below market rate units would attract significant low-income seniors and any differential in cost
6
would be subsidized by the Avenue from its market rate revenue. Parties entered into the Fifth
7
Amended DDA on the fundamental assumption that there would be high demand for both market
8
rate and below-market rate units at the Avenue through the duration of the contract.
9
32. From 2005 to present, the Avenue never reached more than 60 percent of
10
occupancy of its units (market and below-market units) despite the Avenue’s reasonable efforts to
11
market and seek referrals. In the course of performance of the contract, Cross—Complainants
12
have suffered significant losses. Cross-Complainants and Cross-Defendants were mutually
13
14
mistaken or Cross-Complainants were mistaken and Cross-Defendants knew or should have
15 known that Cross Complainants were mistaken as to changes in the elderly care market and
16 continuum of long-term care in San Francisco, from the date of execution of the First DDA to the
17 future. Cross-Complainants and Cross-Defendants were mistaken as to financially viability of the
18 Affordability Restrictions as stated in § 9.03 of DDA and § 1 of the DAR for the duration of the
19 contract as well the existence of optimum market conditions to perform these onerous terms.
20 Cross-Complainants mistakenly assumed that the Cross-Defendant would not take any actions that
21 would alter the market conditions and negatively affect the financial feasibility of the contract.
22
Cross-Complainants do not bear the risk of these mistakes.
23
33. Cross-Defendant took actions that culled demand for assisted living at the Avenue
24
including but not restricted to duplication of assisted living services leading to saturation in market,
25
provision of cheaper alternates to assisted living services and lack of subsidization despite
26
increasing cost of labor and provision of services.
27
34. Cross-Complainants were not negligent in the negotiation or the performance of the
28
contract.
35. Cross-Complainants would have never agreed to enter into the DDA had they been
aware of the market conditions, Cross-Defendants’ actions and lack of demand for market rate &
7
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
1 below market rate units. The mistakes highlighted in previous paragraphs have a material effect,
2 Cross-Complainants would lose revenue and be forced to close the facility. Thus, enforcement of
3
this contract is unconscionable.
4
PRAYER FOR RELIEF
5
WHEREAS, CROSS-COMPLAINANTS pray for judgment against CROSS-
6
DEFENDANT as follows:
7
1. For reformation of the Disposition and Development Agreement.
8
2. For costs of suit, including reasonable attorneys’ fees and costs incurred herein;
9
3. For pre-judgment interest and post-judgment interest; and
10
4. For such other and further relief as the court deems just and proper.
11
12
DATED: June 9, 2020 MILLSTEIN & ASSOCIATES
13
14
15
By:______________________________
16 David J. Millstein, Esq.
Gerald Richelson, Esq.
17
Owais Bari, Esq.
18 Attorneys for Defendants
TERESA WONG; VAN NESS CARE
19 CENTER, INC.; SAN FRANCISCO CARE
CENTER, L.P.; and MEL LEE
20
MANAGEMENT, INC.
21
22 DATED: June 9, 2020 MURPHY, PEARSON, BRADLEY & FEENEY
23
24
25 By:_________________________________
Jason E. Fellner, Esq.
26 Stephanie Yee, Esq.
27
Attorneys for DEFENDANT
28 MELVIN LEE
8
CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.;
SECOND AMENDED CROSS-COMPLAINT
Preview
1 Jason E. Fellner - 245364 JFellner@mpbf.com 2 Stephanie Yee - 320861 SYee@mpbf.com 3 MURPHY, PEARSON, BRADLEY & FEENEY 88 Kearny Street, 10th Floor ELECTRONICALLY 4 San Francisco, CA Telephone: 94108-5530 (415) 788-1900 F I L E D 5 Superior Court of California, Facsimile: (415) 393-8087 County of San Francisco 6 06/15/2020 Attorneys for Defendant: Clerk of the Court 7 MELVIN LEE BY: BOWMAN LIU Deputy Clerk 8 David J. Millstein - 87878 Willie L. Brown, Jr. - 29656 dmillstein@millstein-law.com wlb@williebrowninc.com 9 Gerald Richelson - 267705 The Law Office of Willie L. Brown, Jr. grichelson@millstein-law.com 100 The Embarcadero, Penthouse 10 Owais Bari - 321954 San Francisco, California 94105 obari@millstein-law.com Telephone: (415) 777-0310 11 Millstein & Associates Facsimile: (415) 512-9277 100 The Embarcadero, Penthouse 12 San Francisco, California 94105 Telephone: (415) 348-0348 13 Facsimile: (415) 348-0336 14 Attorneys for Defendants: 15 TERESA WONG; VAN NESS CARE CENTER, INC.; SAN FRANCISCO CARE CENTER, L.P.; and MEL LEE MANAGEMENT, INC. 16 SUPERIOR COURT OF THE STATE OF CALIFORNIA 17 COUNTY OF SAN FRANCISCO 18 Unlimited Jurisdiction 19 20 CITY AND COUNTY OF SAN FRANCISO, Case No.: CGC-18-565184 a Municipal Corporation; and the PEOPLE 21 OF THE STATE OF CALIFORNIA, by and CROSS-COMPLAINANTS VAN NESS through Dennis J. Herrera, City Attorney for CARE CENTER, INC.; SAN 22 the City and County of San Francisco, FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS- 23 Plaintiff, COMPLAINT 24 v. 25 MELVIN LEE, an individual, TERESA WONG, an individual, VAN NESS CARE 26 CENTER, INC., SAN FRANCISCO CARE CENTER, L.P., MEL LEE MANAGEMENT, 27 INC., and DOE ONE through DOE FIFTY, 28 inclusive, Action Filed: March 23, 2018 Defendants. Trial Date: November 9, 2020 1 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT 1 VAN NESS CARE CENTER, INC., SAN 2 FRANCISCO CARE CENTER, L.P., and DOE ONE through DOE FIFTY, inclusive, 3 4 Cross-Complainants, 5 v. 6 CITY AND COUNTY OF SAN FRANCISO, 7 a Municipal Corporation, by and through Dennis J. Herrera, City Attorney for the City 8 and County of San Francisco, and ROE ONE through ROE TWENTY, inclusive, 9 Cross-Defendant. 10 11 12 TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD: 13 COMES NOW Defendants/Cross-Complainants, VAN NESS CARE CENTER, INC.; 14 SAN FRANCISCO CARE CENTER, L.P.; (hereinafter collectively "Cross-Complainants") for 15 causes of action against Cross-Defendant CITY AND COUNTY OF SAN FRANCISCO 16 (hereinafter “Cross-Defendant”), complains and alleges as follows: 17 INTRODUCTION 18 1. Cross-Complainants file this Cross-Complaint due to San Francisco 19 Redevelopment Agency and CITY AND COUNTY OF SAN FRANCISCO’s breach of the 20 Disposition and Development Agreement and for other claims set forth herein. 21 2. Plaintiffs CITY AND COUNTY OF SAN FRANCISCO and PEOPLE OF THE 22 23 STATE OF CALIFORNIA have filed a Complaint against Cross-Complainants in the above- 24 entitled action. Cross-Complainants have denied and continue to generally deny all material 25 allegations in the Complaint on file herein. Both the Complaint and Cross-Complainants’ 26 Amended Answer to the Complaint are incorporated by reference as though fully set forth herein. 27 The allegations of the Complaint are denied and are not hereby adopted by Cross-Complainants as 28 true, but are incorporated only for information about the allegations. PARTIES 3. At all times herein mentioned, Defendant/Cross-Complainant, San Francisco Care 2 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT 1 Center, L.P. (“SFCC”), is and at all times a California corporation with a principal place of 2 business in the County of San Francisco, California. 3 4. At all times herein mentioned, Defendant/Cross-Complainant, VAN NESS CARE 4 CENTER, INC. (“VNCC”), is and was at all times a California corporation with a principal place 5 of business in the County of San Francisco, California. 6 5. At all times herein mentioned, Plaintiff/Cross-Defendant, CITY AND COUNTY 7 OF SAN FRANCISO (“CCSF”), is and was at all times a municipal corporation with a principal 8 place of business in the County of San Francisco, California. 9 6. Cross-Complainants do not know the true names and capacities of other Cross- 10 Defendants who are or may be responsible or who have in some way contributed to the harms and 11 damages as complained of and set forth herein. Cross-Complainants therefore sues these Cross- 12 Defendants as ROES 1-20 and will amend to state their true names and capacity at such time as 13 14 they become known. 15 FACTUAL ALLEGATIONS 16 7. Cross-Complainant VNCC and the San Francisco Redevelopment Agency entered 17 into a written contract entitled Disposition and Development Agreement (“DDA”) on or about 18 September 12, 2000. 19 8. The DDA provided for the development of a senior care center located at 1033- 20 1035 Van Ness Avenue, San Francisco, CA 94109, also known as the Avenue. 21 9. Cross-Complainant SFCC was assigned Cross-Complainant VNCC’s rights, title, 22 and interest in the DDA on or about April 30, 2002. 23 10. Defendant Melvin Lee was at no time a party to the DDA, but a third party 24 beneficiary to the DDA. 25 11. Defendant Teresa Wong was at no time a party to the DDA, but a third party 26 beneficiary to the DDA. 27 12. Defendant Mel Lee Management, Inc. was at no time a party to the DDA. 28 13. The DDA was amended a series of times, and finally for a fifth time on or about June 20, 2006. This amendment included a replacement of Exhibit A of the DDA, titled Declaration of Affordability Restrictions (“DAR”). 3 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT 1 14. The San Francisco Redevelopment Agency was dissolved by state law in 2012, 2 unbeknownst to Cross-Complainants at the time, and CCSF became its successor agency. The San 3 Francisco Mayor’s Office of Housing and Community Development (“MOHCD”) was appointed 4 to succeed the San Francisco Redevelopment Agency under CCSF. MOHCD, as a branch of 5 CCSF, was the successor and assign to the San Francisco Redevelopment Agency under the DDA, 6 and assumed liability for the San Francisco Redevelopment Agency’s actions. 7 15. The DDA’s purpose and goals are to be in accordance with the California 8 Redevelopment Law and the Western Addition Redevelopment Plan, per the DDA itself. 9 16. The spirit of the DDA is a joint venture between Cross-Defendant and Cross- 10 Complainants VNCC/SFCC to attempt if practical to develop regular and affordable senior care 11 and housing in an area of San Francisco that required rehabilitation. The DDA provides for the 12 parties to work in conjunction with each other to accomplish the goals of the DDA – namely the 13 14 creation of a living and care facility for seniors. 15 17. Cross-Defendant was to play an active role of the creation of the Avenue beyond 16 the mere sale of the land to Cross-Complainants VNCC/SFCC. In furtherance of its own goals to 17 improve the city of San Francisco and the goals of the DDA, California Redevelopment Law, and 18 Western Addition Redevelopment Plan, Cross-Defendant was to provide monitoring, guidance, 19 support, and referrals to Cross-Complainants VNCC/SFCC and the Avenue. However, Cross- 20 Defendant failed to act accordingly. 21 18. Both the San Francisco Redevelopment Agency and the successor MOHCD failed 22 to fulfill both their affirmative obligations and their duty of good faith and fair dealing to Cross- 23 Complainants VNCC/SFCC under the DDA, which has caused Cross-Complainants economic 24 damages in an amount to be proved at trial. 25 FIRST CAUSE OF ACTION 26 (For Breach of Contract Against Cross-Defendant and ROES 1 – 20) 27 19. Cross- Cross-Complainants incorporate by reference the allegations of paragraphs 28 1 through 21 of the Cross-Complaint as though fully set forth herein. 20. Cross-Complainants did all, or substantially all, of the significant things that the DDA required it to do, unless Cross-Complainants were excused from any obligation. 4 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT 1 21. Cross-Defendant failed to meet its obligations under the DDA and DAR in 2 numerous ways, including, but not limited to: 3 a. Failed to assist qualified tenants and certificate holders in finding housing, 4 which is decent, safe, sanitary, and within their financial means in 5 reasonably convenient locations and otherwise suitable to their needs; 6 b. Failing to refer certificate holders to the Avenue, as provided for under 7 §9.04(A) of the DDA; 8 c. Failing to meet and confer in “good faith” with VNCC /SFCC to find 9 solutions to resolve operational issues and financial problems of the 10 Avenue. 11 d. Failing to provide and/or pre-approve necessary documents to prepare 12 income certifications, as provided for under §9.03(g) of the DDA and §1.8 13 14 of the DAR. 15 e. Failing to monitor annual compliance of the Avenue, as provided for under 16 §15 of the DAR. 17 22. Cross-Complainants were harmed by Cross-Defendant’s failure to meet its 18 obligations and Cross-Defendant’s breach of contract was a substantial factor in causing Cross- 19 Complainants’ harm. 20 SECOND CAUSE OF ACTION 21 (For Breach of Implied Covenant of Good Faith and Fair Dealing Against Cross-Defendant and 22 ROES 1 – 20) 23 24 23. Cross-Complainants incorporate by reference the allegations of paragraphs 1 25 through 25 of the Cross-Complaint as though fully set forth herein. 26 24. Cross-Complainants incorporate by reference the allegations of paragraph 24, and 27 this cause of action is pleaded in the alternative to the other causes of action pleaded herein. 28 25. Cross-Complainants did all, or substantially all, of the significant things that the DDA required it to do, unless Cross-Complainants were excused from any obligation. 26. Cross-Defendant unfairly interfered with Cross-Complainants’ right to receive the 5 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT 1 benefits of the contract under the DDA and DAR in numerous ways, including, but not limited to: 2 a. Failing to inform Certificate Holders of the availability of Residential Care 3 Units at the Avenue, as provided for under § 9.04(A) 4 b. Failing to provide necessary documents to prepare quarterly reports, as 5 provided for under §1.8 of the DAR; 6 c. Failing to provide directions on effective management, as provided for 7 under §15.3 of the DAR. 8 27. Cross-Complainants were harmed by Cross-Defendant’s conduct, including failure 9 to meet its obligations and breach of contract, and was a substantial factor in causing Cross- 10 Complainants’ harm. 11 THIRD CAUSE OF ACTION 12 (For Reformation Against Cross-Defendant and ROES 1 – 20) 13 14 28. Cross-Complainants incorporate by reference the allegations of paragraphs 1 15 through 30 of the Cross-Complaint as though fully set forth herein. 16 29. Cross-Complainants and Cross-Defendants executed the DDA under the 17 fundamental assumption that there would be high demand for market rate and below- market rate 18 assisted living services for the duration of the DDA. The Parties also assumed that the Avenue 19 would generate enough market rate revenue to subsidize the cost of providing below market units 20 for 50 years. Further, Parties assumed that the venture would be financially feasible and market 21 conditions would remain such as to perform the contract for the duration of the contract. 22 30. Within the first year of the operation the Cross-Defendants lost significant market 23 rate revenue due to unanticipated increase in labor and operational costs. The Avenue achieved an 24 occupancy of 32 %. Cross-Complainants informed the Cross-Defendant that the Avenue could not 25 modify the agreement unless the monthly rent set in DDA 1 for Affordable Residential Care Units 26 was increased to reflect the increase in labor and material costs. Cross-Defendant was informed 27 that the Avenue faced significant competition from Coventry Place and other newly opened 28 1 § 9.03 DDA & § 1.0 DAR 6 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT 1 facilities at that time. 2 31. Pursuant to negotiations, Cross-Complainants and Cross-Defendants signed the 3 Fifth Amended DDA revising the monthly rent set for Affordable Residential Care Units. The 4 Fifth Amended DDA was executed by the Parties with the belief that the monthly rates set for the 5 below market rate units would attract significant low-income seniors and any differential in cost 6 would be subsidized by the Avenue from its market rate revenue. Parties entered into the Fifth 7 Amended DDA on the fundamental assumption that there would be high demand for both market 8 rate and below-market rate units at the Avenue through the duration of the contract. 9 32. From 2005 to present, the Avenue never reached more than 60 percent of 10 occupancy of its units (market and below-market units) despite the Avenue’s reasonable efforts to 11 market and seek referrals. In the course of performance of the contract, Cross—Complainants 12 have suffered significant losses. Cross-Complainants and Cross-Defendants were mutually 13 14 mistaken or Cross-Complainants were mistaken and Cross-Defendants knew or should have 15 known that Cross Complainants were mistaken as to changes in the elderly care market and 16 continuum of long-term care in San Francisco, from the date of execution of the First DDA to the 17 future. Cross-Complainants and Cross-Defendants were mistaken as to financially viability of the 18 Affordability Restrictions as stated in § 9.03 of DDA and § 1 of the DAR for the duration of the 19 contract as well the existence of optimum market conditions to perform these onerous terms. 20 Cross-Complainants mistakenly assumed that the Cross-Defendant would not take any actions that 21 would alter the market conditions and negatively affect the financial feasibility of the contract. 22 Cross-Complainants do not bear the risk of these mistakes. 23 33. Cross-Defendant took actions that culled demand for assisted living at the Avenue 24 including but not restricted to duplication of assisted living services leading to saturation in market, 25 provision of cheaper alternates to assisted living services and lack of subsidization despite 26 increasing cost of labor and provision of services. 27 34. Cross-Complainants were not negligent in the negotiation or the performance of the 28 contract. 35. Cross-Complainants would have never agreed to enter into the DDA had they been aware of the market conditions, Cross-Defendants’ actions and lack of demand for market rate & 7 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT 1 below market rate units. The mistakes highlighted in previous paragraphs have a material effect, 2 Cross-Complainants would lose revenue and be forced to close the facility. Thus, enforcement of 3 this contract is unconscionable. 4 PRAYER FOR RELIEF 5 WHEREAS, CROSS-COMPLAINANTS pray for judgment against CROSS- 6 DEFENDANT as follows: 7 1. For reformation of the Disposition and Development Agreement. 8 2. For costs of suit, including reasonable attorneys’ fees and costs incurred herein; 9 3. For pre-judgment interest and post-judgment interest; and 10 4. For such other and further relief as the court deems just and proper. 11 12 DATED: June 9, 2020 MILLSTEIN & ASSOCIATES 13 14 15 By:______________________________ 16 David J. Millstein, Esq. Gerald Richelson, Esq. 17 Owais Bari, Esq. 18 Attorneys for Defendants TERESA WONG; VAN NESS CARE 19 CENTER, INC.; SAN FRANCISCO CARE CENTER, L.P.; and MEL LEE 20 MANAGEMENT, INC. 21 22 DATED: June 9, 2020 MURPHY, PEARSON, BRADLEY & FEENEY 23 24 25 By:_________________________________ Jason E. Fellner, Esq. 26 Stephanie Yee, Esq. 27 Attorneys for DEFENDANT 28 MELVIN LEE 8 CROSS-COMPLAINANTS VAN NESS CARE CENTER, INC.; SAN FRANCSICO CARE CENTER, L.P.; SECOND AMENDED CROSS-COMPLAINT