LOS GATOS SETTLES FRAUD LAWSUIT AGAINST COUNTY FOR $1.5M

Town had filed $5.5M suit over Shannon Road

Drew Penner, Reporter

When, at a recent public meeting, Councilmember Rob Rennie commented that this year Los Gatos is having to clean up the messes left by the County of Santa Clara, he was referring, in part, to how its fraud lawsuit against Silicon Valley’s regional government panned out.

In a $5.5 million civil suit, the Town had accused the County of deceiving it about the quality of a stretch of Shannon Road when Los Gatos took over some previously unincorporated land.

On March 7, Council voted unanimously—as part of its consent calendar—to approve a settlement that didn’t quite go the way it had hoped.

It agreed to accept $1.5 million from the County, $50,000 from Graniterock and $15,000 from subcontractor Uretek, to settle the case.

“These funds will be used to make repairs to Shannon Road,” staff reported, referring to the section between Santa Rosa Drive and Diduca Way. “In exchange for these payments, the Town will ask the court to dismiss the Town’s lawsuit.”

A Santa Clara County Superior Court judge had been scheduled to hear arguments from the County and Graniterock on the matter in early May.

Keith Severson, Graniterock’s director of marketing and community involvement, said he was happy the case was coming to a conclusion.

“We’re aware of the settlement talks going on and we look forward to the resolution of the matter,” he said Monday.

The lawsuit highlighted the unintended consequences of a municipality expanding its boundaries.

And it provided a lens into the way the County pressured the Town to accept a deal that would leave it with millions of dollars of repair work on its plate.

For example, Harry Freitas, who was the director of the County’s Roads and Airports Department, wrote to Matt Morley, who was Los Gatos’ public works director, in February 2018, seeking to move the annexation process along.

“I need to understand how you plan to complete your end of our agreement to take the orphaned road,” Freitas wrote in an email, attaching photos showing a route that had been resurfaced.

Lawyers for the Town contended in the lawsuit that the County agreed to repair Shannon Road prior to Los Gatos taking responsibility for it, but only did a Band-aid fix.

Santa Clara County didn’t respond to a request for comment about the settlement.

Los Gatos had originally been told by a State agency that extending services in the hillsides would be “challenging” for the Town, “particularly with regard to road improvements and infrastructure needs such as retaining walls.”

A section on the Town’s website— touting the benefits of annexation— was drawn up, including the fact Los Gatos has “more resources to maintain roads,” meaning the new Los Gatos residents would see increased road maintenance over what Santa Clara County was offering.

On June 18, 2019, Council voted to absorb 24 unincorporated County pockets.