Facts

Defendants Jimmy Gutierrez and Arturo Fierro were the city attorneys for the City of Coachella. Defendants were terminated. Sometime thereafter, the City sued for professional malpractice. Among other things, the City alleged that defendants negligently sought payment on letters of credit securing a large subdivision project.

PLAINTIFFS' CONTENTIONS:
The City contended Gutierrez and Fierro negligently oversaw substitution of project security required under the Subdivision Map Act, and failed to investigate the issuer of that security. The City further contended that Defendants negligently drafted demands on two letters of credit, which were valued at several million dollars, preventing the City from obtaining payment on the letters.

DEFENDANTS' CONTENTIONS:
Plaintiff City of Coachella alleged that defendants failed to draft demands on two letters of credits in such a way that they were enforceable to collect $3.9 million. Defendants maintained that the reason that the letters of credit were unenforceable is because the City Engineer Eldon Lee acted unilaterally and negligently without the approval of the City Counsel or defendants (as the outside city attorney) in allowing two tract maps for the development in question to be recorded without assurance that there were appropriate subdivision improvement agreements and corresponding security in place, as required by the Subdivision Map Act and the Municipal Code. Moreover, the City never suffered any damage. The purpose of the letters of credit was to ensure that the City had funding to complete public improvements related to the developments at issue. However, the parcels were never developed, and therefore there were no public improvements.

Result

The parties reached a settlement totaling $500,000.

Other Information

There was a separate legal malpractice suit by the City against defendant for the alleged mishandling of a code enforcement matter. Gutierrez cross-complained for $2.2 million in unearned fees. That case was dismissed after the City obtained a writ of mandate from the Court of Appeal holding Gutierrez's claim was untimely filed.