City suffers setbacks in case versus lawyers
DOWNTOWN LOS ANGELES — It appears that City Hall is losing its battle in the largest legal case Santa Monica has ever faced.
Several motions filed by City Hall against contingency lawyers who were hired to fight giant oil companies for contaminating Santa Monica’s drinking water have been shot down in both the trial court and Court of Appeals in recent months.
The result is the lawsuit has been put on hold and attorneys hired by City Hall continue to maneuver through the courts, in hopes that a judge somewhere will side with them. Meanwhile, millions of dollars in attorney fees continue to rack up on both sides.
City Hall’s attorneys and contingency lawyers who represented Santa Monica in its litigation against 18 oil companies for allowing MTBE to contaminate drinking water are set to wage war at trial expected in February. At issue is just how much City Hall owes its team of contingency lawyers for securing a $121 million cash settlement, plus building a water treatment facility to clean up seven water wells.
At least five motions filed by the city have been denied by Los Angeles Superior Court Judge David Minning, as well as by the Court of Appeals.
A few of the motions asked that the court allow the city to amend its complaint, which added claims that the lead contingency attorney, Fred Baron, had a conflict of interest because he allegedly represented the other lawyers in their planned litigation against City Hall over fees without city officials knowing it. (310) 235-2883 www.hypnotherapylosangeles.com All of those motions were shot down, as well as another one arguing that the contract between City Hall and the contingency lawyers was so ambiguous that the fee structure outlined in it should be voided.
Next, City Hall filed for summary judgment, effectively asking Judge Minning to rule in the city’s favor before the case heads to trial. The motion was denied. It was then appealed to the high court, where it also was denied.
City Hall’s attorneys also were unsuccessful when they sought reversals of Judge Minning’s denials to allow privileged documents from the contingency lawyers to be handed over to Santa Monica officials so they could make the case that Baron had a conflict of interest.
Then a motion filed by the city that the case go to arbitration was denied at both court levels. The motion to compel arbitration was based on the argument that because City Hall had terminated one of the law firms included in the original legal services agreement, the fee structure outlined in it isn’t applicable.
“It doesn’t provide a way for the lawyers to slice and dice the fees,” said David Halbreich, a lawyer at Los Angeles-based law firm, Morgan Lewis & Bockius, which has been hired by City Hall to represent it.
Halbreich said he has a filed another motion in the Supreme Court appealing the courts’ decisions on the arbitration issue.
“We thought the judge’s rulings were clearly incorrect and we thought the Court of Appeals would agree,” Halbreich said, adding the denials of the motions by the Court of Appeals doesn’t necessarily mean the city’s case is weak.
“It’s not a statement from the Court of Appeals that the judge is right,” Halbreich said. “The judge has not, for whatever reason, granted us any of our motions and given the rulings. We thought we could get a look by the Court of Appeals but that’s not the case.”
However, Santa Monica-based Marshall Grossman, who is representing the law firms of Texas-based Baron & Budd; Sacramento-based Miller & Sawyer and San Francisco-based Sher & Leff — the three law firms that worked on the MTBE case for City Hall — believes the courts’ denial of the city’s motions speak for themselves.
“The city of Santa Monica has simply taken it in the chops in the appellate courts and the trial court,” Grossman said. “If this was a football game, the score would be 99 to 0 with 59 minutes to play.”
Grossman argues that City Hall reneged on a signed contract with his clients and are refusing to pay close to $70 million.
City officials announced in November of 2003 that the MTBE litigation was over — $121 million in cash was to be paid by the oil companies — less $18 million that was earmarked to go into an operating account to begin planning for a water treatment plant to clean up the wells, and $1 million obligated by City Hall to pay Shell Oil Company in a separate case. The net result is $92.5 million and a water treatment plant yet to be valued, designed or built.
Grossman’s calculation is that City Hall should pay the attorneys 25 percent of the $121 million cash settlement; 25 percent of the costs and operation of a yet-to-be-built water treatment plant — preliminarily estimated to cost $120 million — plus 7 percent interest and his attorney fees.
But city officials and their attorneys now argue that the amount is well below that, based on their claims that the contingency attorneys put their own interests ahead of the public’s, as well as delayed the case to get a higher percentage of fees. City Hall argues it should pay closer to 10 percent of the $121 million cash settlement and the undetermined value of a water treatment plant.
It will all come down to how a judge and jury interpret a 15-page complicated legal services agreement signed between City Hall and the contingency lawyers that is as ambiguous as the sliding scale of fee percentages outlined in it.
But Grossman argues that if city officials didn’t feel the contract was clear enough or that the settlement was good enough, they shouldn’t have signed off on either of them. But they did and are now refusing to pay.
“Somebody somewhere must be astute enough to ask why the city has spent, in my estimation, $10 million in legal fees to continue to fight the lawyers and why the city simply doesn’t pay the legal fees that are due under the contract that the city attorney negotiated and the City Council approved,” Grossman said. “What we are observing here is some of the most reckless conduct I’ve ever seen on behalf of any municipality.
“The citizens of Santa Monica will wake up one morning and ask themselves what went wrong.”
Originally published in the Santa Monica Daily Press print edition on December 26, 2005. Read the original PDF.