Lawyers Turn to Council to Collect Record Fees

By Jorge Casuso

April 12 -- The battle over the largest legal bill in Santa Monica history will be taken to the City Council Tuesday, when attorneys representing the firms that helped litigate a major lawsuit against multiple oil companies accused of contaminating the city’s water supplies try to collect tens of millions of dollars.

The move comes four months before the two parties -- which for more than a year have been wrangling over a legal bill that could top $75 million -- will take their dispute before a Superior Court judge.

The outside attorneys contend that under a Legal Services Agreement with the City, they are owed 25 percent -- or nearly $30 million -- of the landmark $121.5 million settlement the City won in November 2003.

In addition, they contend that under the agreement, Santa Monica owes them 25 percent of the cost of a state-of-the-art water treatment facility the City estimates will cost between $339 million and $537 million.

“The City has reneged on its part of the agreement after getting more than it dreamt it would get,” said Marshall B. Grossman, a name partner at the Santa Monica firm Alschuler Grossman Stein & Kahan LLP, which will represent the outside firms before the council.

“They received not only the guaranteed cleanup, but $121.5 million in cash, which is more than sufficient to take care of all legal fees,” said Grossman, whose firm issued a press release Friday announcing his appearance before the council.

“The attorneys fees is at no taxpayer expense at all,” he said. “The oil companies are paying it.”

City officials declined to comment on the specifics of the dispute, saying that a trial has been set in a lawsuit the City filed a year ago charging a dozen Texas and California firms and individual lawyers with “unreasonably” interpreting the agreement to boost their take.

“We intend to fully litigate the case in court, and a trial has been set for August,” said City Attorney Marsha Moutrie. “The City doesn’t litigate its cases in the press.”

The City’s lawsuit alleges that the defendants “made decisions and engaged in conduct” that caused delays they now contend increased attorneys’ fees by “many millions of dollars.”

The defendants also failed to notify the City of alternatives that could have saved many millions more, according to the suit.

“The litigation activity which occurred involved mainly procedural matters and settlement negotiations,” the suit stated. “Indeed, a significant portion of the work on the case was actually performed by attorneys employed in the City Attorney’s Office, not by Defendants.”

In the press release, Grossman said that under the agreement “negotiated by the City Attorney's Office and reviewed and approved by the council,” the City agreed to “a sliding scale contingency fee from 10 percent to 27 percent of the City's total recovery.

“After the settlement, the attorneys sought payment of their fees based on the City's total recovery,” the press statement said. “To date, however, the City has not paid the attorneys a dime in legal fees.”

City officials counter that the City is willing to pay “the reasonable value for legal services rendered” and that it offered to pay at least part of the legal fees before the dispute was resolved.

“The City will promptly process payment requests from your firms for services actually rendered,” Moutrie wrote in a letter to the lead attorneys obtained by The Lookout under the Freedom of Information Act. “Such submissions would be processed like any other billings for legal services.

“When the dispute is over, the City would deduct fees paid on such billings from any amounts we ultimately agree, or are ordered, to pay,” said the May 3, 2004 letter. “If it is ultimately determined that the City has overpaid, the law firms would be required to repay the City the amount of the overpayment.”

The attorneys hired by the City quickly responded in a letter dated the following day.

“The case that we prosecuted for the City was handled on contingent fee,” wrote Frederick M. Baron, a partner in the Texas firm Baron & Budd. “We did not keep hours and have never agreed to an hourly rate.

“Indeed, we would never have prosecuted he case for the City on an hourly basis,” Baron wrote in the letter. “Thus, we decline your offer.”

Under the Legal Services agreement, the firms would be paid a contingency fee that progressed from 10 percent to 20 percent to 25 percent, and, if trial occurred, to 27 percent, according to the City’s suit.

The total amount of the legal fees will not be known until the three major oil companies in the settlement -- Shell, Mobil and Chevron -- build a water treatment facility to remove the gasoline additive MTBE from the City’s water wells in West Los Angeles.

In its press release Friday, Alschuler Grossman said the lawyer now defending Santa Monica argued that the water treatment facility “might never be built and the oil companies could provide Santa Monica with replacement water.

“The replacement water scenario was rejected by Santa Monica during the original litigation because it would not restore the City's water independence,” Grossman said.

On Tuesday, Grossman will “ask the City Council to explain its appalling conduct,” according to the release, “and also explain how the City's conduct with its former attorneys has the potential to derail a new water treatment facility to be paid for by the oil companies.”

But City officials reject his contention.

“If Mr. Grossman’s press release is intended to suggest that the City is wavering in its cause of cleaning the aquifer, it’s incorrect,” Moutrie said.