Lawyers hired by City Hall want to be paid for work on MtBE lawsuit
CITY HALL — A trial has been set in the battle over more than $60 million in legal fees attorneys claim they’re owed by City Hall.
But before lawyers face off in August of 2005, they’ll meet next month to decide what may be the critical issue in the case — whether City Hall should reimburse outside attorneys hired to work on the MtBE contamination case using a contingency formula.
Lawyers Fred Baron, Duane Miller and Vick Sher claim City Hall owes them more than $60 million for work they did helping to secure a water treatment plant and a multi-million dollar settlement from oil companies for Santa Monica. Those were the spoils procured in the MtBE case, launched after the city’s water supply was tainted by errant oil companies.
According to the lawyers’ contract, City Hall was to pay the lawyers 25 percent of the value of the settlement, up to $250 million. The attorneys were entitled to another 5 percent of the next $100 million of the settlement, and 10 percent of any portion of the settlement in excess of $350 million, attorneys said.
City Hall in 2000 sued 18 oil companies that allowed MtBE to seep into the groundwater in 1996. All but one of the oil companies has agreed to settle the lawsuits rather than go to court, paying City Hall more than $120 million. The major oil companies also agreed to pay for the design, construction and maintenance of a water treatment plant to run until the wells are again clean. That plant has not been valued.
At issue in the legal fee dispute is whether the outside lawyers nullified their contract by arranging a fee split among themselves and not disclosing the terms to City Hall. City officials claim the fee split canceled the contract. The lawyers cited California case law indicating they weren’t required to disclose the fee split until the case was completed.
City Attorney Marsha Moutrie countered that even if a judge rules against City Hall and determines the lawyers should be paid on a contingency basis, there still may be a legal issue that precludes the attorneys from charging exorbitant rates.
“There is some potential that a court could find that the fee they want is just unconscionable, because of the circumstances of the case, including the fact that the case did not progress far towards trial and that a good deal of the work was done in-house by the city,” said Moutrie, adding that the MtBE lawsuit was the largest in city history. Assistant City Attorney Joe Lawrence and Deputy City Attorney Carol Kurtz also worked on the case.
The size of the legal bill gave some officials sticker shock.
“What they’re asking for and what they believe they’re entitled to, it just staggers my imagination,” City Councilman Bob Holbrook said. “I’m a pharmacist, and it would be like paying me $100,000 an hour for my work. It just staggers my imagination.
“I couldn’t even calculate it,” Holbrook added. “It’s such an enormous figure per hour. It’s unimaginable. I guess you’d have to be an attorney to even think about it in those terms. They probably make more money, per minute, than a heavyweight champion does battling in the ring. You have to think of it in those terms.”
Baron maintained the “unconscionable” issue already had been addressed when the lawyers hashed out the contract.
“We’ve already done that,” he said. “(Moutrie) negotiated that unconscionable clause in the contract... We’re very disappointed that the city hired us on a contingency fee. We wanted to work for a reduced contingency fee, plus an hourly rate so we would not have to take any risk. The city refused.”
With the court proceedings pending, a judge has ordered City Hall to appraise the value of the water treatment plant.
“We have objected to that procedure occurring at this time, because we think it kind of puts the cart before the horse,” Moutrie said. “We think the liability issue in this case should be resolved first.”
Still, Moutrie said a January hearing on whether or not City Hall should pay the lawyers based on contingency will resolve what she views as the “threshold issue” in the case. While Moutrie claimed the contract was unclear, the outside attorneys maintained City Hall is simply trying to evade paying out on the large settlement.
Baron said he didn’t understand why City Hall was hesitant to settle the bill, adding the city would still profit by an estimated $30 to $40 million after having its water supply cleaned up. He added he was confident he and his partners would succeed in court.
“No lawyer ever wants to say, ‘You’re going to win this one,’ but I think we have the longer end of the stick,” added Baron, who said the lawyers will fight for legal fees if they win the case. “It’s very disappointing that we have to go through this. We sure would like to have avoided this.
“Having been hired in June of 2001, as of today we haven’t been paid anything at all. Not any of us. Not a penny.”
Originally published in the Santa Monica Daily Press print edition on December 10, 2004. Read the original PDF.