Town sues Santa Clara County, alleging fraud, breach of contract

The town of Los Gatos has filed a lawsuit accusing Santa Clara County of covering up required repairs along Shannon Road during its annexation process.

In a lawsuit filed last month, Los Gatos is seeking $5.5 million in damages for fraud, breach of contract and negligence.

“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 multimillion-dollar repairs,” the lawsuit reads.

The problematic 1,300 foot stretch of road from Santa Rosa to Diduca Way was owned by the county before Los Gatos annexed it in 2018. It winds through the foothills of the Santa Cruz Mountains, climbing from 570 to 685 feet above sea level, and has a history of cracking pavement and other issues.

Once the stretch of road was annexed, the county transferred responsibility for repairs and maintenance to the town.

Los Gatos is arguing that the county made “undocumented, inadequate, `bandaid' repairs,” to the area instead of legitimate repairs in order to facilitate the annexation and hand off the road's problems to the town.

A Santa Clara County spokesperson denied a request for comment for this article.

Hillside, low-density roadways like Shannon Road often don't generate enough public revenue to pay for the services required to maintain them, the lawsuit states.

The roadway has suffered from settlement and cracking, which can make it unsafe to drive on. The county addressed those issues with asphalt patches, edge delineators and traffic signage, instead of reconstructing the road, according to the lawsuit.

Issues on Shannon Road arose in 2011, when the county Roads and Airports Department heard reports that the outside shoulder of the roadway was slipping down the hillside. Khoa Vo, a civil engineer with the county, was asked to investigate.

Vo determined in November 2015 that the road needed to be completely reconstructed with an embankment reinforcement,

like a retaining wall, the lawsuit states. Vo then reported the concerns to the county's traffic engineer, saying there was “no funding” available for the project.

For the next two years, concerned residents pushed for the county to repair the road.

“Please have this addressed per neighborhood concerns ASAP, before something terrible happens,” said one resident cited in the lawsuit.

After a storm worsened the road's condition in 2017, project engineer Herbert Naraval requested another safety evaluation. He was told all the department could do was continue to pave the road when cracks appeared and place warning signs to slow traffic.

Meanwhile, the county contacted Los Gatos town staff about annexing the land to Los Gatos. Thenparks and public works director Matt Morley responded to the county, expressing concerns over the required repairs to Shannon Road.

Harry Freitas, director of roads and airports, said the county would look into repairing the road prior to annexation.

“OK, now I get it. This is county initiated. I thought (Los Gatos) wanted the annexation. We can take a look at the road and see if we can fix it,” Freitas said in an email cited in the lawsuit.

The county authorized a repair project with Graniterock Construction that used polymer injections to stabilize the road, which the county performed just before the land was officially annexed to Los Gatos on January 16, 2018.

The repair involved placing 5-foot pipes in the road and filling them with a polymer solution, which the lawsuit alleges was ineffective, citing unsigned daily inspection reports Vo requested that Graniterock's subcontractor Uretek add more plastic deeper in the ground, which added strain to the road.

County senior construction inspector Steve Wilson signed off on the repairs without inspecting them in person in March 2018, but later visited the road in June 2018 and found significant cracking.

“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,” the lawsuit states, adding that the county directed the company to pave over the road “to conceal deep cracking, settling and Uretek's pipes protruding through pavement.”

Los Gatos staff noted peeling pavement nine months after the road was annexed, and asked the county for assistance in repairing it. The town was allegedly met with pushback and limited information as the road's condition continued to deteriorate.

The town hired geotechnical firm NCE and Cal Engineering & Geology to evaluate the road, who determined that a $5.4 million retaining wall was required to fix the damages.

Another separate stretch of Shannon Road has also been the subject of controversy. Town staff has been working since 2018 to add sidewalks, bike lanes and street parking roadway between Los Gatos Boulevard and Cherry Blossom Lane to make it safer for pedestrians and cyclists.

Some residents along that stretch were concerned that the proposed changes would detract from the small town, neighborhood feel of the area.