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CA Pete's 881 Club Card Room Permit TerminationAGREEMENT FOR TERMINATION OF CARD ROOM PERMIT AT PETE'S 881 CLUB IN SAN RAFAEL This Agreement is entered into between the CITY OF SAN RAFAEL ("City"), Karen Marie Pellolio, Johnathan Pellolio and Natalie Pellolio. The Agreement shall be effective when signed by the duly authorized representative of the City ("effective date"). WHEREAS, the parties understand that on or about September 1952, A.P. (Pete) Pellolio and his wife Mayme Pellolio became owners of the bar and restaurant known as the 881 Club located at 881 Fourth Street in San Rafael, which later became known as Pete's 881 Club, and that some time thereafter the City Council of the City of San Rafael approved operation of a card room, known as Club San Rafael, at Pete's 881 Club pursuant to Chapter 10.36 of the San Rafael Municipal Code; and WHEREAS, in 1985 the City acknowledged that Robert (Randy) Pellolio, the son of A.P. (Pete) Pellolio and Mayme Pellolio, and husband of Karen Pellolio, should have been recognized as an applicant for a card room permit, along with his parents, because he was operating the business; and WHEREAS, A.M. (Pete) Pellolio and Mayme Pellolio incorporated their Pete's 881 Club business as Pete's 881 Club, Inc. in 1986; and WHEREAS, San Rafael Municipal Code Section 10.36.100 provides that card room permits are not transferable and that any attempted transfers render the permit invalid; and WHEREAS, incorporation of Pete's 881 Club, Inc., does not constitute a transfer within the meaning of San Rafael Municipal Code Section 10.36.100; and WHEREAS, in 2006 Robert (Randy) Pellolio and Karen Pellolio transferred their shares in Pete's 881 Club, Inc. to the Robert and Karen Pellolio Revocable Trust (the "Trust"); and WHEREAS, Karen Pellolio contends that the transfer into the Trust does not constitute a transfer within the meaning of San Rafael Municipal Code Section 10.36.100; and WHEREAS, Pete's 881 Club, including the card room, was relocated with the City's approval to its current location at 721 Lincoln Avenue in San Rafael (the "premises") in 1989, which was first leased, then purchased by Robert (Randy) and Karen Pellolio, who mortgaged their home in 2007 to purchase the premises; and WHEREAS, the relocation of the card room to the premises does not constitute a transfer within the meaning of San Rafael Municipal Code Section 10.36.100; and WHEREAS, San Rafael Municipal Code Section 10.36.045 provides that from and after September 1, 1968, the City Council will deny any applications for a card room permit in the City; and y -3 - 93LO WHEREAS, Robert (Randy) Pellolio died on August 17, 2013, his parents having predeceased him, and Karen Pellolio became sole trustee of the Trust; and WHEREAS, City asserts that the permit for operation of the card room applied only to Robert (Randy) Pellolio, and upon the death of Robert (Randy) Pellolio on August 17, 2013, that the card room permit terminated, and that a card room could no longer legally be operated at the Pete's 881 Club location at 721 Lincoln Avenue or any other location in the City of San Rafael, pursuant to San Rafael Municipal Code Section 10.36.100; and WHEREAS, Karen Pellolio, the widow of Robert (Randy) Pellolio, who had been married to him since 1979 and active in the business, asserts that she is entitled to continue operating the card room at Pete's 881 Club, because the City approved relocation of the card room to the premises, the business and permitted premises (since included in the Trust) were purchased with her money, she was an active partner with her late husband in the operation of the Pete's 881 Club during marriage, she is sole Trustee and beneficiary of the Trust, and her livelihood, including her ability to pay the mortgage for purchase of the permitted premises, which matures in 2045, depends upon the continued existence and lawful operation of a card room at Pete's 881 Club; and WHEREAS, the permit for the card room has not been located to assist in resolving the parties' dispute; and WHEREAS, the current shareholders of Pete's 881 Club, Inc., which now operate Pete's 881 Club at 721 Lincoln Avenue, are (1) the Robert and Karen Pellolio Revocable Trust, of which Karen Pellolio is the sole Trustee and beneficiary, and (2) Karen Pellolio, an individual; and WHEREAS, Linda Pellolio, the sister of decedent Robert (Randy) Pellolio, was a shareholder of Pete's 881 Club, Inc., but has since died, leaving her interest to Karen Pellolio, as an individual; and WHEREAS, the children of Karen and Randy Pellolio are Johnathan Pellolio and Natalie Pellolio; and WHEREAS, Karen Pellolio is the President of Pete's 881 Club, Inc., and she and her son, Johnathan Pellolio, are actively involved in the management of Pete's 881 Club, Inc.; and WHEREAS, Karen Pellolio, Johnathan Pellolio, and Natalie Pellolio represent that they do not know of any other person or entity, including Johnathan Pellolio, Natalie Pellolio, and Pete's 881 Club, Inc., who or which is, or may be asserting, or is or may be entitled to assert, a claim to the card room permit to which Karen Pellolio has asserted her claim; and WHEREAS, the City, Pete's 881 Club, Inc., Karen Pellolio, Johnathan Pellolio, and Natalie Pellolio desire to enter into this agreement, in settlement of their opposing positions, in order to avoid litigation over those positions, to avoid catastrophic financial consequences to Karen Pellolio, to allow for an orderly wind -down of the card room operations at Pete 881 Club, and to provide that no claim to the continued existence of the card room permit shall remain following the dates provided hereafter; 2 NOW THEREFORE, the City, on the one hand, and Pete's 881 Club, Inc., Karen Pellolio, Johnathan Pellolio, and Natalie Pellolio, on the other hand, agree as follows: 1. The foregoing recitals, including the representations made therein, are hereby incorporated into the terms of this Agreement. 2. The City agrees not to challenge the claim by Karen Pellolio that she is entitled to operate the card room at Pete's 881 Club in San Rafael, and to allow the card room to exist at that location until the dates provided hereafter, subject to compliance with all other applicable laws. 3. Pete's 881 Club, Inc., Karen Pellolio, Johnathan Pellolio and Natalie Pellolio agree that on the earlier of a) Karen Pellolio's death, b) the transfer of the Trust's ownership of Pete's 881 Club, Inc., c) the transfer of the premises, d) the transfer of, or any attempted transfer of Karen Pellolio's asserted interest in the card room permit, whether by creation of a corporation or trust, or by bequest, inheritance, or otherwise, or e) 20 years from the effective date of this agreement, the card room permit shall be deemed terminated and cease to exist, and all card room operations in the City under authority of such card room permit or otherwise, by Pete's 881 Club or any other entity, shall cease immediately. 4. In the event Karen Pellolio becomes incapacitated resulting in her permanent inability to serve as President of, or be actively involved in the management of the cardroom at Pete's 881 Club, Inc., the card room permit shall be deemed terminated and cease to exist no later than one-year after the occurrence of such permanent inability. The forgoing sentence notwithstanding, the one-year period, may be extended by the City Council for good cause at the request of the personal representative of Karen Pellolio, for example, to adequately provide for the needs of Karen Pellolio while incapacitated. In the event there is a dispute regarding Karen Pellolio's mental capacity to serve as President of, or be actively involved in the management of, the cardroom at Pete's 881 Club, Inc, as described above, the dispute will be resolved by the written opinion of at least two physicians in accordance with California Probate Code section 811. 5. The provisions of Paragraphs 3 and 4, above, are subordinate to any applicable provisions of California statutes and regulations, and guidance and precedential practices of the California Gambling Commission and the California Department of Justice, Bureau of Gambling Control, with regard to card room closure, including, without limitation, handling of patron -funded jackpots and employment matters, and card room operations at Pete's 881 Club, Inc. shall cease in accordance with such statutes, regulations, rules, guidance, and precedential practices. 6. The provisions of Paragraph 3 and 4, above, are also subordinate to the application of the San Rafael Municipal Code, including Chapter 10.36 CARD ROOMS, and the parties agree that the City continues to have the right to enforce any violation of City code, including but not limited to Chapter 10.36.110. 3 7. In the event such card room operations do not cease at the time required under Paragraphs 3 and 4, above, as may be qualified by Paragraph 6, above, the City may bring an action for declaratory and/or injunctive relief to enforce the immediate termination of such card room operations pursuant to the terms of this Agreement, in which action the City may recover its reasonable attorney's fees and costs. 8. Pete's 881 Club, Inc., Karen Pellolio, Johnathan Pellolio, and Natalie Pellolio certify, to the best of his/ her/ its knowledge, that neither Johnathan Pellolio, Natalie Pellolio, Pete's 881 Club, Inc., any shareholder thereof, nor any of Karen Pellolio's deceased husband Robert (Randy) Pellolio's other heirs or relatives, if any, or Karen Pellolio's own heirs or relatives, nor any other person or entity, is entitled to claim any interest in the card room permit to which Karen Pellolio has asserted a claim, and further agree to provide a written copy of this Agreement to all of Robert (Randy) Pellolio's heirs and relatives, if any, and to Karen Pellolio's known heirs and relatives, and to the Board of Directors and all shareholders of Pete's 881 Club, Inc. 9. In the event an action is filed by any person asserting an interest in the card room permit to which Karen Pellolio has asserted a claim, Pete's 881 Club, Inc., Karen Pellolio, Johnathan Pellolio, and Natalie Pellolio, jointly and severally, will indemnify the City against all attorneys' fees and costs incurred in defending against that action. 10. This Agreement may be modified in writing by the parties. WHEREFORE, the parties evidence their agreement by entering their signatures below. City of San Rafael q`V\q By. * N� 5� Jim chu City Ma a er Attest: Lindsay Lara, City Clerk as to Form: Pete's 881 Club, Inc. by: Karen Pellolio, President Approved as to form: 1 Marg to Mary Leoni Atto y for Pete's 881 Club, Inc. [Executor of the Estate of Linda Pellolio] F. Epstein, City Attorney - Karen Pellolio 4 7. In the event such card room operations do not cease at the time required under Paragraphs 3 and 4, above, as may be qualified by Paragraph 6, above, the City may bring an action for declaratory and/or injunctive relief to enforce the immediate termination of such card room operations pursuant to the terms of this Agreement, in which action the City may recover its reasonable attorney's fees and costs. 8. Pete's 881 Club, Inc., Karen Pellolio, Johnathan Pellolio, and Natalie Pellolio certify, to the best of his/ her/ its knowledge, that neither Johnathan Pellolio, Natalie Pellolio, Pete's 881 Club, Inc., any shareholder thereof, nor any of Karen Pellolio's deceased husband Robert (Randy) Pellolio's other heirs or relatives, if any, or Karen Pellolio's own heirs or relatives, nor any other person or entity, is entitled to claim any interest in the card room permit to which Karen Pellolio has asserted a claim, and further agree to provide a written copy of this Agreement to all of Robert (Randy) Pellolio's heirs and relatives, if any, and to Karen Pellolio's known heirs and relatives, and to the Board of Directors and all shareholders of Pete's 881 Club, Inc. 9. In the event an action is filed by any person asserting an interest in the card room permit to which Karen Pellolio has asserted a claim, Pete's 881 Club, Inc., Karen Pellolio, Johnathan Pellolio, and Natalie Pellolio, jointly and severally, will indemnify the City against all attorneys' fees and costs incurred in defending against that action. 10. This Agreement may be modi0ed in writing by the parties. WHEREFORE, the parties evidence their agreement by entering their signatures below. City of San Rafael By: Jim Schutz, City Manager Attest: Lindsay Lara, City Clerk Approved as to Form: Robert F. Epstein, City Attorney Pete's 881 Club, Inc. by: Karen Pellolio, President Approved as to form: Marguerite Mary Leoni Attorney for Pete's 881 Club, Inc. [Executor of the Estate of Linda Pellolio] Karen Pellolio Johnathan Pellolio If r Approved as to form: David M. Hellman Attorney for Karen Pellolio, Estate of Linda Pellolio, Johnathan Pellolio, and Natalie Pellolio Johnathan Pellolio Natalie Pellolio Approved as to form: aw(1144U David M. Hellman Attorney for Karen Pellolio, Estate of Linda Pellolio, Johnathan Pellolio, and Natalie Pellolio Attorney/Client Privilege CITY OF SAN RAFAEL City Attorney's Office INTERDEPARTMENTAL MEMORANDUM DATE: May 7, 2019 TO: Jim Shutz, City Manager FROM: Lauren Monson, Deputy City Attorney i" CC: Rob Epstein, City Attorney Lisa Goldfien, Assistant City Attorney RE: Pete's 881 Club As you know, the City Attorney's office has been working with Marguerite Leoni, the attorney for the owner of Pete's 881 Club and cardroom Karen Pellelio, to negotiate an ultimate sunset date of the card room permit and avoid legal action to shut down the card room portion of the club. Karen Pellelio's husband was the holder of the card room permit and upon his death she did not technically maintain a right to continue operation of the club. On February 4, 2019, I presented this potential legal action as well as a proposed settlement agreement between the City and Ms. Pellelio and her heirs to continue operation of the club for a date certain, with the card room permit to sunset in 20 years. Council approved the 20 -year sunset date outlined in the proposed settlement and asked for an effort to achieve the following additional assurances as part of the agreement: 1. A condition that ends the permit if Karen Pellolio is incapacitated in a way that she is no longer able to participate in the day to day running of the club; 2. Council discretion to terminate the permit at any time; and 3. Assurances that the permit can be terminated based on criminal activities, public nuisance, etc. In negotiation with Ms. Leoni, I was able to achieve these requests and now present the agreement to you for signature. The key terms of the agreement are as follows: • Paragraph 3 of the Agreement provides for the following conditions on the termination of the card room permit for Pete's 881 Club: a) Karen Pellolio's death, b) the transfer of the Trust's ownership of Pete's 881 Club, Inc., c) the transfer of the premises, d) the transfer of, or any attempted transfer of Karen Pellolio's asserted interest in the card room permit, whether by creation of a corporation or trust, or by bequest, inheritance, or otherwise, or e) 20 years from the effective date of this agreement. • Paragraph 4 of the Agreement provides for termination of the card room permit "In the event Karen Pellolio becomes incapacitated resulting in her permanent inability to serve as President of, or be actively involved in the management of the cardroom at Pete's 881 Club, Inc." and allows a one year window after incapacitation to wind down card room operations. • Paragraph 6 affirms the City's ability to enforce SRMC Chapter 10.36 -- CARD ROOMS, and the parties agree that the City continues to have the right to enforce any violation of City code, including but not limited to Chapter 10.36.110.1 • Paragraphs 8 & 9 ensures Karen Pellolio's heirs waive any claim to the card room permit and provides that they will indemnify the City against any cost to defend against any such claim. In all, I think we were able to achieve most of Council's goals. Please let me know if you have any questions. Otherwise, the Agreement is attached and prepared for your signature. 1 SRMC 10.36.110 provides: "Permits under this chapter may be suspended or revoked by the city council upon conviction for a violation of any of the provisions of this chapter or when in the opinion of the city council the continued operation of the place or establishment will be injurious to the public health, safety, welfare or morals of the people of the city of San Rafael." 01RAP 4) 1 2 yo Cary WITH P, CONTRACT ROUTING FORM INSTRUCTIONS: Use this cover sheet to circulate all contracts for review and approval in the order shown below. TO BE COMPLETED BY INITIATING DEPARTMENT PROJECT MANAGER: Contracting Department: City Attorney Project Manager: Rob Epstein Extension: 3080 Contractor Name: Agreement for Termination of Card Room Permit at Pete's 881 Club in San Rafael Contractor's Contact: Marguerite Leoni, Esq. (Counsel for Pete's 881 Club) Contact's Email: MLeoni@nmgovlaw.com ❑ FPPC: Check if Contractor/Consultant must file Form 700 Step RESPONSIBLE W DESCRIPTION COMPLETED REVIEWER DEPARTMENT DATE N/A Check/Initial 1 Project Manager a. Email PINS Introductory Notice to Contractor 1/31/2019 b. Email contract (in Word) and attachments to City Attorney c/o Laraine.Gittens@cityofsanrafael.org 2 City Attorney a. Review, revise, and comment on draft agreement 3/5/2019 and return to Project Manager N/A b. Confirm insurance requirements, create Job on PINS, send PINS insurance notice to contractor 3 Department Director Approval of final agreement form to send to Click or tap contractor to enter a Forward three (3) originals of final agreement to date. 4 Project Manager 3/6/2019 contractor for their signature When necessary, contractor -signed agreement ® N/A 5 Project Manager agendized for City Council approval * *City Council approval required for Professional Services Agreements and purchases of goods and services that exceed Or $75,000; and for Public Works Contracts that exceed $175,000 Click here to Date of City Council approval enter a date. PRINT CONTINUE ROUTING PROCESS WITH HARD COPY 6 Project Manager Forward signed original agreements to City 4/30/19 Attorney with printed copy of this routing form Review and approve hard copy of signed1��� 7 City Attorney agreement _ 8 City Attorney Review and approve insurance in PINS, and bonds F (for Public Works Contracts) 1 V t 9 City Manager/ Mayor Agreement executed by City Council authorized r official 10 City Clerk Attest signatures, retains original agreement and forwards copies to Project Manager I��