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W hen cracks started appearing in their driveways and swimming pools, residents of the Visa Royale and Peralta Point communities knew it meant trouble. Then came a letter from their homeowners’ association in May 1999, urging evacuation to avoid a landslide. The nearby Olive Hills Reservoir was leaking water, they learned, causing the hillside under their homes to slip. Ultimately, a judge ordered the reservoir to be drained and 14 families watched their homes razed. In June 2001, during the liability stage of a bifurcated trial, a unanimous jury found Anaheim solely responsible for the damage. Anaheim knew its reservoir was leaking up to 34 million gallons of water annually and did nothing to correct the situation, the jury decided. “It was leaking up to half its capacity every year since at least 1986,” alleged plaintiffs’ attorney Robert J. Wolfe of Los Angeles’ Engstrom, Lipscomb & Lack, who represented some of the homeowners whose houses were demolished. “We first pursued the developer on the theory that the hillside was inadequately designed, but then our investigation revealed that there had to be something else,” Wolfe said. The 14 homeowners agreed to settle with the developer for less than the value of their homes so that the developer would have adequate funds to fix the hillside and preserve the neighborhood, according to plaintiffs’ attorneys. Once Anaheim was found liable, the developer was then reimbursed $10.4 million. Two-track approach Joseph Ferrentino and Gregory Dillion of Newport Beach, Calif.-based Newmeyer & Dillion represented the developer, 396 Investment Co. (formerly Fieldstone Community). “We paid a company to take title to the 14 homes and they took all the risks,” said Ferrentino, referring to the third party that fixed the slope. Ferrentino said their approach to the lawsuit took two tracks: “One was to minimize the disaster and cap our client’s exposure. At the same time, investigate the reservoir and then purse Anaheim for the problem.”Judge John C. Woolley has yet to decide whether the plaintiffs are entitled to attorney fees or prejudgment interest. Woolley is also expected to deduct from the $17 million the money homeowners already received from the developer. Wolfe, the lead plaintiffs’ attorney, had asked the jury to sympathize with the homeowners and award $200,000 per person in emotional damages. The jury awarded $300,000 per person�a total of $7.4 million in emotional damages. “We put on every homeowner who related individual stories of what their homes had meant and what they went through,” Wolfe said. The key moment of the trial, according to Wolfe, came during cross-examination of the city’s argument that the homeowners were to blame for overwatering. According to Wolfe, it became apparent that the city had inflated its figures by 20%. “It just killed them,” he said.A spokesperson for Anaheim said the city will not decide whether to appeal until the trial has ended. The city was represented at trial by Los Angeles’ Nossaman, Guthner, Knox & Elliott. The firm did not respond to telephone calls.

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