The Town of Los Gatos filed a lawsuit against the County of Santa Clara earlier this month, claiming fraud, breach of contract and negligence, and is seeking more than $5.5 million in damages.
At the heart of the case is a dispute about repairs along a 1,300-foot-long stretch of Shannon Road, a meandering 22-foot-wide route through the foothills of the Santa Cruz Mountains, and whether the county disguised deficiencies before Los Gatos annexed the area.
“Low density hillside residential areas are problematic because their low residential densities mean they generate too few public revenues to fund the services they require,” the Town’s attorneys, led by Michael Colantuono of Colantuono, Highsmith & Whatley, said in the complaint. “Eager to unload a particularly problematic stretch of Shannon Road in the hills adjacent to Los Gatos, County public works staff actively concealed from the Town that the road needed a multi-million-dollar repair.”
A spokesperson for Santa Clara County declined to comment.
According to the suit, filed in Santa Clara County Superior Court on March 4, the County of Santa Clara arranged for band-aid repairs that weren’t properly documented and passed these off to Los Gatos as legitimate fixes.
The work was so shoddy that it began “peeling” just months after Los Gatos had officially expanded its boundaries into the county’s old territory, yet county staff refused to come clean, per the complaint.
In a section of the lawsuit titled “Shannon Road: A Failed Unincorporated Road,” Los Gatos’ attorneys describe the area in question as between Santa Rosa Drive and Diduca Way, and rising from 570 to about 685 feet above sea level.
Los Gatos claims that by 2011 the county’s Roads and Airports Department already knew the outside shoulder was slipping down the hillside, and Khoa Vo, a civil engineer with its Engineering Division, was asked to investigate.
And by November 2015, Vo concluded the road “needs to be completely reconstructed” with a retaining wall, but, he added, “Unfortunately, there is no funding” and suggested the project be placed on the county’s capital projects list, the suit states.
Meanwhile, the county was hearing from its citizens, who reached out with warnings of their own, such as, “the shoulder area is continuing to deteriorate,” “it is not going to hold much longer,” and “please have this addressed per neighborhood concerns ASAP, before something terrible happens,” per the complaint.
After a storm, Herbert Naraval, a county engineer, raised the matter himself.
“Please evaluate Shannon Road between Diduca Way and Santa Rosa Drive for traffic safety,” he is quoted in the lawsuit as reporting, noting part of the outside lane “continues to slide” resulting in uneven pavement and cracks. “Crews have been paving more often to smooth out the surface.”
But by September 2017, Naraval was told all the Department could do was continue to resurface when cracks appeared, Los Gatos’ lawyers argue.
‘Annexation would create a significant obligation for deferred maintenance without any possibility for future development’
—Los Gatos Town staff letter from 2017
Back in 2001, the State made it easier for municipalities to take over, or “annex,” pockets of unincorporated land. But by 2015, Los Gatos still had no intention of gobbling up the 30 or so of these islands in the vicinity.
In a report, a state agency found extending service to annexation candidates in the hillsides would be “challenging” for the Town, “particularly with regard to road improvements and infrastructure needs such as retaining walls.”
That’s because when a municipality expands its borders, it assumes responsibility for road maintenance and repair.
On Oct. 13, 2017, after a land island that included the deteriorating stretch of Shannon Road came up for possible annexation, Los Gatos Public Works Director Matt Morley called out the county.
“Shannon Road is failing significantly within the County jurisdiction,” he wrote in an email to Harry Freitas, the director of the county’s Roads and Airports Department. “Annexation would create a significant obligation for deferred maintenance with no possibility for any future development. We understand the desire to reduce pockets through annexation. In this case, the Town does not have the resources to be able to accomplish the proposal.”
Freitas wrote back later that day, saying he’d been under the mistaken impression that Los Gatos wanted to take over that island.
“Seeing opportunity to unload this significant County liability, Mr. Freitas promised the Town the County would repair the Roadway, if the Town agreed to the annexation,” the lawsuit claims, adding he also knew of additional factors that would make a proper upgrade unlikely. “Mr. Freitas therefore concealed Shannon Road’s structural failure and the need to reconstruct it from Mr. Morley and the Town.”
And Freitas already knew, thanks to the work of Vo, his civil engineer, that a retaining wall was needed, yet he told Los Gatos squeezing some plastics into the ground under the road would be good enough, the suit claims.
In early 2018, Graniterock’s subcontractor Uretek, a polyurethane-based ground stabilization company out of Texas, began placing 4-5-foot pipes in the road and injecting a polymer solution inside, but within days “unsigned daily inspection reports evidenced concerns these injections were ineffective,” according to the complaint.
So, Vo directed Uretek to dig deeper and add more plastic to the terrain, but this just increased the strain on the road, Los Gatos’ lawyers claim.
By Feb. 7, 2018, Freitas was getting on Morley’s case about pushing Council to merge with that particular land island.
“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 pristine-looking route with a fresh coat of pavement.
County Senior Construction Inspector Steve Wilson signed off on the repair March 1, 2018, on the word of county engineer Naraval, but didn’t investigate it himself, the lawsuit states.
Within two months Wilson had become so concerned about the depth of Uretek’s injections he asked Vo to conduct a survey for “their own internal records,” per the suit.
By June 14, the suit claims, Wilson inspected the road himself and found significant cracking along the downhill lane and shoulder.
“Because of the annexation, Mr. Wilson’s findings were relayed to Mr. Jackson and Mr. Freitas—but the information was never disclosed to the Town or documented by a supplemental Final Notice of Inspection,” and the county instead directed Uretek and Graniterock to complete superficial repairs “to conceal deep cracking, settling and Uretek’s pipes protruding through pavement” the lawsuit states.
Los Gatos’ annexation of the land was certified in February 2018. Before the year was out, the road was already looking so bad, Town staff tried to get it repaired under warranty.
The County initially refused a meeting and to hand over repair designs, and while it did share information about the warranty policy, it conveniently forgot to mention that the actual work performed wasn’t covered, according to Los Gatos’ lawyers.
Los Gatos decided to hire geotechnical firm NCE and Cal Engineering & Geology to have a look, learning a $5.4 million retaining wall was necessary.
