San Bernardino County's lawsuit against Upland and two transportation agencies in which the county seeks to recoup a portion of a $102 million legal settlement could force Upland into bankruptcy court, City Manager Stephen Dunn said.

Dunn said the city has spent roughly $6 million from its general fund over the past nine years to defend itself in the litigation - money the city desperately needed. As a result, the city's general fund reserves have dipped below $1 million in the last year, he said.

"Without a doubt, if we didn't have this case, if the court had let us out of it or if it got resolved early on, we would be pretty well financially," Dunn said.

The county filed its lawsuit against Upland, Caltrans and San Bernardino Associated Governments - the county's transportation planning agency also known as SanBAG - in November 2004 in an effort to show they were partly liable for damages Rancho Cucamonga developer Jeff Burum claimed the county flood-control district caused to his 434-acre residential and retail development in Upland.

In November 2006, the county settled with the developer's investor group, Colonies Partners LP, for $102 million. The settlement is now the focus of a broad conspiracy and bribery case in which prosecutors allege bribes were used to elicit the settlement in Colonies' favor.


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In March 2011, former Board of Supervisors Chairman Bill Postmus pleaded guilty to a conflict- of-interest charge and other felonies as part of a plea agreement. He admitted taking a bribe from Burum in exchange for his vote approving the settlement.

Burum denies any wrongdoing.

On Tuesday, San Diego Superior Court Judge Ronald Prager dismissed all of San Bernardino County's damages claims, citing Postmus' conviction, which he said was a clear violation of a state conflict-of-interest statute that forbids public officials from having a financial interest in contracts they make in their official capacity.

Prager based his decision on Postmus' confession, the former supervisor's subsequent grand jury testimony, and the county's own admission in a news release after Postmus' conviction that he broke the law when he voted to approve the settlement.

Prager did not go easy on the county in open court, calling the settlement "unconscionable, unlawful and sordid" and "the worst of the worst." He questioned the county's continued push to collect from the defendants on a legal settlement he said was voided in 2011 with Postmus' guilty plea.

"It just seems to me fundamentally wrong that we're going to perpetuate this case," Prager said during proceedings.

Dunn is sure the county will appeal Prager's decision, a move he believes might drive the city into bankruptcy court.

They county is "millions of dollars into the case, and they just simply can't walk away. We wish they would," Dunn said.

The county, which has spent $26 million on the litigation thus far, maintains the damages it says the defendants are liable for would continue to exist even if the suit was illegal and rendered void.

In motions with the court, the county questioned the credibility of Postmus' guilty plea and alleged he did so for tactical reasons, despite the county's prior admission that Postmus broke the law.

"Postmus' plea is only as credible as the declarant himself. It is also fully susceptible to contradiction by other evidence," according to one of the county's court motions.

If the county were to appeal and was successful, it would put the case back on track for trial, which could mean legal cost upwards of $300,000 a month for Upland, Dunn said.

And by the time bonds issued by the county to pay the Colonies settlement reach maturity in 2037, the county's debt will be roughly $185 million. That, plus any attorneys' fees the county would likely demand from the defendants should the county be successful in its litigation, would pose a grave hardship on Upland, Dunn said.

"If Upland gets stuck with a portion of that, then that liability will most likely lead to bankruptcy," Dunn said. "The city doesn't really have the ability to pay that right now without depleting services, which is always an option, so it would be devastating to us."

At least one county supervisor is opposed to the litigation: Janice Rutherford. The chairwoman of the Board of Supervisors believes taxpayer funds could be put to more productive use.

"I continue to have deep concerns over the propriety of the $102 million settlement, and many of those concerns are echoed in Judge Prager's decision," Rutherford said Friday. "That's been my feeling for several years now."

The board spent a combined total of eight hours this past week in closed session and will resume those discussions at 2 p.m. Tuesday.

Rutherford said the talks have been civil and involved, which is why it is taking so long.

"We have a team of folks who are engaged, civil, and very interested in digging into details, and that's why it's taking so long," Rutherford said. "Everybody's doing their homework. Everybody's participating in the conversation. We're just hashing it out."

The board's newest members - Robert Lovingood and James Ramos - declined to comment.

Rutherford said Upland's concerns about the lawsuit are a "fair consideration" for the county.

"I think what the taxpayers are calling for is to stop throwing good money after bad," Rutherford said.


Reach Joe via email, call him at 909-386-3874, or find him on Twitter @SBCountyNow.
Reach Sandra via email, call her at 909-483-8555, or find her on Twitter @UplandNow.