CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Agenda Item 40 Thursday, April 13, 1:20 p.m. GOVERNING BOARD MEMBERS: Daniel O'Keefe, Kevin Powers, Vice Chair (by phone) Sam Accursio, Board Member Frederick Barber, Board Member Federico Fernandez, Board Member Mitchel Board Member James Moran, Board Member Melanie Peterson, Board Member Chairman IN ATTENDANCE: Peter Antonacci, Executive Director Brian Accardo, General Counsel Carlyn Kowalsky, District Attorney James Nutt, District Attorney GOVERNING BOARD SOUTH FLORIDA WATER MANAGEMENT DISTRICT SESSION 3301 Gun Club Road West Palm Beach, Florida 2017 1:40 p.m. Page 1 Florida Court Reporting 561?689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 2 1 BE IT REMEMBERED that the following 2 attorney/client session was held at 3301 Gun Club Road, 3 West Palm Beach, Florida, on Thursday, April 13, 2017, 4 beginning at 1:20 with attendees as hereinabove 5 noted, to wit: 6 a 7 CHAIR The Governing Board session 8 will now start with the attorney?client session. The 9 persons attending are Governing Board members present 10 and Kevin Powers by phone, Executive Director Antonacci 11 and District Attorneys Accardo, Kowalsky and Nutt. 12 MR. ACCARDO: So this attorney?client session 13 focuses on the Lake Point lawsuit. And I'm not here 14 seeking any additional authority, because we?re already 15 in this lawsuit. We were sued, we're defendants; you 16 'all know that. But I am here to get further direction, 17 get your opinion on litigation expenditures. 18 The last time we were all here together was 19 the fall of last year. And I reviewed that transcript 20 this morning, and I packed a lot of information into 21 that meeting, and several things have happened since 22 then. 23 Just to remind everybody, Lake Point's the 24 public?private partnership that kind of went awry on 25 the parcel of land that?s on the eastern shore of Lake Florida Court Reporting Electronically signed by Susan Kruger (30.1-01 3-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 3 1 Okeechobee, kind of on the border of Martin County and 2 Palm Beach County up along the And Jim?s going 3 to pass around just a conceptual drawing of what that 4 public?private partnership, where that has gone, and that?s, again, just to jog your memory. moi That was an agreement that the District 7 entered into in 2008 with Lake Point, and then, of course, there was the subsequent agreement between the 9 Distridt and Martin County. That's the Interlocal 10 Agreement where we basically I mean for shorthand, 11 we were middlemen. That agreement allowed Lake Point 12 to mine in Martin County, where they would not normally 13 have been allowed to mine. 14 The lawsuit was filed_right at the end of 15 2012, beginning of 2013, so we?ve been in this lawsuit 16 for a while. The party on the other side has done.a 17 lot of fighting so far in the case. You?ve read about 18 the public records case, which is related, although the 19 District wasn't a direct party. 20 They're well financed on the other side. The 21 Lake Point principals are billionaires, with a 22 And there's clearly Martin County politics and 23 interests in play that, you know, we?re not really 24 involved in, but the bottom line is we are defendants 25 in this lawsuit. Florida Court Reporting 561?689?0999 Electronically signed by Susan Kruger (3 01-013-329-91 61) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 4 1 So one thing I noted when I reread the 2 transcript from last time is I came in here and I said, 3 look, I've got good news, I've got bad news, and I?ve 4 got ugly news, and I went through that. Well, this 5 time I only have bad and ugly news. 6 The good news from last time is still the 7 only good news in the case, and that?s that we were 8 successful in defeating Lake Point?s claim that the 9 contract between ourselves and Lake Point allowed them 10 to sell water. They didn't use that claim v11 VICE CHAIR POWERS: Hey, Brian, can you 12 either move closer to the phone or move the phone 13 closer to you? I?m right on the edge of catching 14 everything you said. 15 MR. ACCARDO: Yes, sir, I?m really sorry. 16 Thank you. 17 So the good news from_last time Was the 18 District was successful on the water claim, and also 19 that the District was able to file counterclaims 20 against Lake Point. And if you recall, that was a big 21 deal, because, well, we had waited so long to do so and 22 we were very fortunate the judge let us get that in. 23 The bad news last time was about the costs, 24 and I'm going to talk more about that now. And the 25 ugly news concerned former staff at the District, Florida Court Reporting 561-689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFI DENT IAL Attorney Client Session Lake Point 04/13/2017 Page 5 1 executive leadership of the District, how they were. 2 furthering the Lake Point case. In that instance, they 3 were providing testimony in support of the water 4 project. Again, that claim failed, but their 5 participation with Lake Point still has remaining 6 repercussions. Jim will talk about that in a bit. 7 Okay, so last time we recognized that the 8 District had to retain outside counsel to defend this 9 claim. The Lake Point team is six, seven, eight 10 lawyers right now. We already know that there are 11 going to be additional lawyers brought in to try the 12 case for Lake Point. 13 Martin County, it was reported this week 14 Martin County has spent in excess of $3 million on 15 outside legal counsel. You can count their lawyers. 16 They're up past six as well. 17 And for our part, last time we talked about, 18 look, we were under a deadline, which we thought we 19 were going to trial within two months of that Governing 20 Board meeting, and we had brought in an outside firm; 21 that was the Hopping Green Sams firm. They 22 specialize; generally, they represent miners usually, 23 so it was very fortunate for us they were able to get 24 up to speed on the issues quickly to help represent our 25 interests. Florida Court Reporting 561?689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Pointy 04/13/2017 Page 6 1 We promised last time that we would file a 2 motion for summary judgment on the mining claims. 3 Again, the water claims, we did file a motion and we 4 were successful. We filed a motion for summary judgment on the mining claims. The Lake Point folks answered that motion. And we picked up from the judge during some of his other rulings that he was not likely to grant 9 our summary judgment motion, given that there were 10 factual issues for the jury. So we withdrew that ll summary judgment motion, because, well, we didn't think 12 we would win in front of that judge, and we knew the 13 judge was changing over. 14 I So we still have that in our back pocket, 15 - although Jim will tell you today that while we're going 16 to obviously do that, we're going to put forth our best 17 case, it's really likely that we?re going to be at 18 trial. And right new trial is scheduled for the end of 19 July, August at this point in time. So we're a few 20 months out. 21 There was recognition in this room last time 22 when we talked about the cost of defending this case 23 that there are going to be costs. And the recognition 24 was that if we do, in fact, go to trial, those costs 25 are going to increase dramatically. And that?s what's Florida Court Reporting 561?689eO999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 7 going to happen. That is absolutely what?s going to happen in this case. LUMP We talked last time about how we were db fortunate that Martin County had been defending this case so vigorously, particularly with regards to the mining claims. And they had spent over $300,000 on experts in the case, and really focusing on damages, because there's the issue of liability and there's also KOCO-JOWU1 the issue of how has Lake Point been damaged, lost 10 mining sales, et cetera. And Lake Point, of course, is 11 claiming that the lost mining sales are in excess of 12 $60 million, and so there's a lot of expert testimony 13 about that. 14 But we have not contributed to those expert 15 fees to date. We talked about how, the last time, how 16 we might have to start with that because we will be 17 exposed if Martin County settles this case and takes 18 their experts with them. So we?re going to have to 19' start incurring expenses on those experts to lock them 20 up as our experts. 21 And again, I think I just mentioned it, but 22 again, Martin County has just spent $300,000 on 23 experts, and again, we haven't spent much yet. So this 24 could be a case that exceeds over a million dollars. 25 It could be up to $2 million in expenses on behalf of Florida Court Reporting 561?689~0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFI DENT IAL Attorney Client Session Lake Point 04/13/2017 Page 8 1 the District defending it. It's just a well financed opposition, and they're determined, and there's not a LUN settlement here. FE). They're, from what we understand, again from the good work of Martin County?s efforts, they?re upside down on their property. And they're clearly politically motivated, and the effort and the amount (JO-me of the effort they put into the public records 9 trial, at which they were ultimately victorious, at 10 what cost? I don't know. A million dollars, but they 11 were victorious. 12 So that's the bad news. It continues to 13 escalate costs. I wanted you all to know that. 14 .CHAIR Brian, can you tell us where 15 we are on costs today and if we have a budget from our 16 outside counsel through the trial? 17 MR. ACCARDO: Okay. We're creeping up on 18 $500,000 to date, including the money that had been 19 spent for years now prior to my involvement. We think 20 it could double to try the case, and that's just that 21 outside counsel. That's not counting expert fees. 22 CHAIR That seems pretty high, 23 between now and a July trial, to spend another 500,000. 24 MR. ACCARDO: Okay. 25 CHAIR I think we should just really Florida Court Reporting 561?689?0999 Electronically signed by Susan Kruger (301-013-329-9161) 0cb904be-d290-4e2f?b7b1 -12c149b4b4b7 CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 9 1 try to manage that and ask for more detailed budgets 2 and really try to control them. Particularly if 3 they're billing at reduced rates, make sure that 4 they?re not overworking the file. I mean I don't know 5 what billable rates we're getting charged, but I 6 presume it's pretty attractive compared to 7 MR. ACCARDO: It is. We?re fortunate. The 8 partner rate, the senior partner rate is $325 an hour. 9 The associate rate is under $200 an hour. We feel like 10 they are competitive rates. Your point is well taken 11 though, to manage the litigation expenditures, and Jim 12 does a good job of that and has questioned and gone 13 back and forth with them on bills as recently as this 14 week. 15 CHAIR But I find the better the 16 best way to control litigation expense is to make them 17 work on those budgets beforehand. Once a bill goes out 18 and then you?re fighting over the bill, you've already 19 kind of lost the battle. So I think you need to really 20 push these guys hard, and if they give us a budget that 21 we don't approve, then we don't approve it. Especially 22 with, you know, the amount of time that we have between 23 now and trial, that?s real money. 24 MR. NUTT: At this juncture, this case has 25 gone in phases with respect to, I mean it's a burst of Florida Court Reporting 561?689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 10 1 resources and spending. When we first got involved in 2 it, we realized we were so under water in the case, we 3 were three months from trial, and it took a tremendous 4 amount of effort. 5 This case has been so it's kind of 6 ridiculous when you have counsel and the billionaire 7 clients who don't care about money. They can really 8 skate you, and they can work up all sorts of issues '9 that you either react to or you don't. 10 And that immediate period where we were 11 trying to get a counterclaim in, we were trying to 12 fight the water claim, we were trying to figure out how 13 they were tying us to the mining claims, since our 14 prior group, prior counsel didn't even believe that the 15 mining claim applied to us, it was a scramble; it was a 16 tremendously expensive period of about four months. 17 Well, it settled down, we quieted it down and 18 we recouped. And their expert came, and realizing that 19 they now had to convert over from the water claim on us 20 to the mining claim, they retooled their story. They 21 came in with a new expert update, and the expert would 22 be able to use these to show patterns. But they 23 morphed their case significantly in December. 24 And so in January we were looking at we were 25 expecting to go to trial, hoping the September~0ctober Florida Court Reporting 561?689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 11 1 timeframe. Two weeks ago the judge shortcut that and 2 said, no, I'm going to push you to trial earlier. 3 They're changing the story. There's a lot of 4 new witnesses that are coming on witness lists we just 5 received last week. Well, we've got witnesses, upwards 6 of 30 witnesses on each side. And when you look at 7 budgets and you start adding that up, it does run up 8 very quickly. 9 So I know to think of a number, and I don?t 10 know if you want to know, but I could go through some 11 of the story of what they're putting together. This is 12 going to be an extremely fast moving, shifting case. 13. It's going to take a significant lift of outside 14 counsel time, and as Brian has said, the experts' time. 15 CHAIR Well, I don't mean to suggest 16 we be so cheap that we don't spend the dollars that it 17 takes to properly defend the District and we save 18 $150,000 in attorneys' fees and expose ourselves to 19 potentially millions of dollars of damages. But I do 20 think a lot of times, particularly when you're working 21 with a firm that has agreed to a discounted rate and 22 then they just kill you on the number of hours that 23 they?re throwing in the file 24 MR. NUTT: Your point about budgets is well 25 taken, and we're working that up. But I also wanted to Florida Court Reporting 561-689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 12 1 give a realistic expectation that the budgets are going 2 to be high, and it?s going to be because there's a 3 tremendous this really is. And we've got a witness 4 problem. I was just going to kind of go we 5 MR. ACCARDO: Please don't go there. 6 MR. NUTT: Let me just go through quick the 7 story of what they're putting together, if I could, 8 just five minutes really. 9 Again, we mentioned this started out as a 10 water quality project 11 MR. ACCARDO: Kevin, can you hear? 12 MR. NUTT: Can you hear me, Kevin? 13 VICE CHAIR POWERS: Yes, I can hear you. 14 Thanks for asking. 15 MR. NUTT: This came in three parts. They 16 came in, and our theory of this case is basically bait 17 I and switch. They came in, they sold us on the water 18 quality project, and we donated.through the District so 19 that they would get the exemption and mine and make 20 money on the sales of mining. 21 They were hit in 2008, 2009 with the market .22 crash. It turns out the quality of the rock was not. 23 good enough for the dike. They changed that's when 24 the water project came about. Our employees were 25 considering it. They were working with them on Florida Court Reporting 561w689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 13 1 potentially morphing this into a water project. 2 What happened during that period of time is 3 we didn't enforce performance of the contract, so 4 deadlines were missed. We didn't provide things to 5 them that they needed to be able to do the water 6 project that we had agreed to do because our project 7 manager was down there saying: 1 don't know what the 8 project's going to be in a month from now. So 9 everybody was put on hold. 10 So you have basically almost two years of a 11 period of time where we were not performing, and this 12 is our risk in this case. We have witnesses who didn't 13 necessarily know why we weren't performing. It was 14 because we were entertaining a water project. 15 Then in 2013 Martin County got upset because 16 this project wasn?t moving, wasn't what they had agreed 17 to in their agreement, and they basically came out 18 and then there were articles that we were going to 19 stea1_their water and send it all to West Palm Beach. 20 And the political machinery just blew up. That's where 21 the public records issues arose. People Maggie 22 Hurchalla is a defendant in this case for interfering 23 with the project. I 24 We would not go up to Martin County and 25 support them. Essentially what happened is we turned Florida Court Reporting 561*689~0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 14 1 and we sent them a letter in 2013 and said no, you need 2 to perform. And they said, well, we can't because of 3 all the screw?up things that you didn't do. And they 4 filed litigation immediately. 5 When we got the litigation, for three 6 years they've been posturing and'setting this up. We 7 didn?t pay attention to the mining issues. We didn't, 8 you know, for whatever however you want to look back 9 and say it, the reality is neither staff nor the legal 10 office got them going, got this project back on track 11 during that period of time. 12 We've lost a lot of windows, and what's 13 happened, we lost a lot of witnesses. Our witnesses at 14 the time, one's in California, Melissa's, you know 15 people are hiding, whatever have you. So we have a lot 16 of gaps, and it's very hard to put together a case and 17 fill gaps and plug omissions. 18 And so like I said, there's over 70 witnesses 19 listed now on each side of the thing, and we're trying 20 to patchwork that together because of all the things 21 that we basically discovered in the last three months 22 through the work. And it's taken that. And that's 23 part of the reason the fees are up, is because we've 24 been reacting to things and learning things and trying 25 to devise, you know, basically our theories of the Florida Court Reporting 561?689?0999 Electronically signed by Susan Kruger (301-013-329?9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 15 case. So you've got that. And we've won the water issue. And they're coming out, they have Fishkind, who's an expert, a pretty well known expert in economics, testifies in all sorts of areas, not just mining, very good in front of a jury and tells his interesting tale of extremely complex analysis that 00 0" lb- U.) leads to $60 million. 9 We have our counterclaim, which deals with 10 more actions on the property that weren't authorized 11 and subordinated and things that they did that really 12 prevent them from performing. And so this is all going 13 to play out over probably a three week trialthe time of preparing for the jury trial and 15 even putting that on with a good team of trial lawyers, 16 you're looking at a lot of money. 17 MR. In Martin County's 18 withdrawal of the local development order, did they 19 cite any actions or inactions by the District as a 20 rationale 21 MR. NUTT: No. 22 MR. m? for their withdrawal? 23 MR. NUTT: No. No, they were focused on Lake 24' Point not doing what they're supposed to do. They 25 never Martin County, to date, has not turned on us Florida Court Reporting Electronically slgned by Susan Kruger (301 -O13-329-9161) 0cb904be-d290-4e2f?b7b1 ~12c149b4b4b7 CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 16 1 and said, oh, you're the reason for the problem. But 2 like I say, in about the last three or four months, 3 that potential has arisen, and we've got to guard 4 against that, because they issued MOBs and said we're 5 not going to let you mine anymore because it's not a 6 public project and you won't donate your property. 7 Lake Point said, well, I couldn't donate my property 8 because the District wouldn't help me get the permits 9 that are necessary, a precondition to donating the 10 property. And you get in these 3608. 11 So there's a very great concern that Martin 12 County will sit there and say, well, we did everything 13 right because they weren't performing, the M088 were 14 correct. The fact that this wasn't becoming a public _15 works project was correct. Martin County wasn't 16 getting the benefit. So we have to walk that line and 17 keep a relationship with Martin County. 18 MR. Well, I think, you know, the 19 politics have clearly changed in Martin County from 20 7 when this all started. 21 MR. NUTT: Yes. 22 MR. And I believe there's 23 probably a desire on the County's part to 24 MR. NUTT: Yesthis Florida Court Reporting Electronicafly signed by Susan Kruger (301-013-329-9161) - CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 17 and roll more exposure to the District, I think that will do it. MR. NUTT: And protecting against that is getting the story together and getting the witnesses together. And the other thing is working with Martin County to get out of it. Right now they can't just let Lake Point mine, even though they have, because they've 9 never enforced for five years they haven't 10 enforced basically nine years. 80 Lake Point's just 11 been mining along. 12 We're talking in mediation. We?re going to 13 go to a mediation in June about the possibility that don't think so. I think they'the day, I think they're out for 21 vengeance. They want this to be painful, they want it 22 to be hard, and they want to punish the governments 23 ?that wronged them. And it makes for an interesting 24 case. That was the ugly part. 25 MR. ACCARDO: That?s where we're at. We owed Florida Court Reporting 56l~689~0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 18 1 you an explanation. A lot has happened in the last 2 several months in particular. The case was on a bit of 3 a hiatus while those other two parties fought about 4 public records. That's over, so it's back, you know, 5 with us again. 6 CHAIR Any questions? 7 Attorney/client session is now concluded. 8 Let's get back to chambers. 9 (Whereupon, at 1:40 the proceedings 10 were concludedFlorida Court Reporting 561-689?0999 Electronically signed by Susan Kruger (301-013-329-9161) CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Page 19 I I A a THE STATE OF FLORIDA COUNTY OF PALM BEACH I, Susan S. Kruger, do hereby certify that 9 I was authorized to and did report the foregoing 10 proceedings at the time and place herein stated, and 11 that the foregoing pages comprise a true and correct 12 transcription of my stenotype notes taken during the 13 proceedings. 14 IN WITNESS WHEREOF, I have hereunto set my 15 hand this 5th day of May, 2017Kruger 21 22 23 24 25 Florida Court Reporting 56l~689?O999 Electronically signed by Susan Kruger (301-013-329-9161) CONFI DENT EAL Attorney Client Session Lake Point 04/13/2017 Florida Court Reporting 561?689?0999 CONFI DENT IAL Attorney Client Session Lake Point 04/13/2017 Florida Court Reporting 561?689?0999 CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Florida Court Reporting 561?689?0999 CONFI DENT IAL Attorney Client Session Lake Point 04/13/2017 Florida Court Reporting CONFIDENTIAL Attorney Client Session Lake Point 04/13/2017 Florida Court Reporting