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During negotiations between Williams Energy Marketing & Trading Co. and the state of California, a group of high-profile plaintiffs attorneys sat at the table, hoping to settle their suits, too. By the time the complicated deal was done, the attorneys did better than that: They emerged with what they hope will be the means to fuel the rest of their litigation against the industry giants accused of ripping off ratepayers. Under the deal, Williams has agreed to cooperate with the government and private attorneys’ investigations. The Tulsa, Okla.-based company also will set up a $15 million “war chest” to pay past and future fees and expenses for the private attorneys. Plaintiffs attorneys say the help will be valuable as they pursue other utilities defendants in a handful of civil actions still pending in the courts. If the Williams settlement is any indication, those suits could be worth hundreds of millions of dollars in damages. “It’s good for the litigants,” Barry Himmelstein of San Francisco’s Lieff Cabraser Heimann & Bernstein said of the settlement with Williams. Although he contends the $15 million was no “windfall,” Himmelstein expects the money will be enough to fund the rest of the litigation against utilities companies named alongside Williams. But while the plaintiffs attorneys are pleased with being included in the first major deal between the state and a utilities defendant, others inside and outside the case have a different take. “Funding future litigation is unusual,” said Robert Fellmeth, a public interest law professor at the University of San Diego School of Law and an expert on unfair competition. “You may put money into a settlement to police an injunction, but to put money in to fund litigation against other defendants is unusual.” An attorney for one of Williams’ co-defendants, Dynegy Inc., agreed: “If the fee award is for time not yet done, that is highly unusual,” said Douglas Tribble of Pillsbury Winthrop. Lawrence Schonbrun, a Berkeley solo who challenges attorney fees in class-action cases, believes fees should be scrutinized to make sure they don’t take away money that could go to the class. And he said the Williams settlement raises a larger topic. “I think this is a major issue about how litigation is structured between private attorneys and the public attorney general in pursuing litigation of this type,” Schonbrun said. So how did it come to pass that a government-negotiated deal gives juice to the private bar? None of the parties would discuss too many details of negotiations, including when each party came to the table. But consider some of the players’ strategies. Although the private plaintiffs filed their cases before Attorney General Bill Lockyer got involved, “there was no question at any point here that the AG was going to proceed and has very broad investigatory authority,” said Supervising Deputy Attorney General Ken Alex, who helped negotiate the deal. The AG’s office filed two civil actions against the utilities company. Alex said the office has filed about 70 lawsuits and other actions — mostly filings before regulatory boards — in connection with the state power crisis. As for Williams, several sources close to the case pointed out that the company wouldn’t want to just put to bed the AG’s cases, but would want a so-called global deal that included the private plaintiffs. Otherwise, the settlement would have little value. “While we have the power to usurp private actions, it’s our policy to try and not use that power. But if a defendant wants a global settlement, we’re not averse to that,” said Tom Dresslar, a spokesman for Lockyer. The AG’s office and Williams wanted to settle because the company isn’t doing very well financially, said Alex, the deputy AG. Now that its California litigation is resolved, Williams can attract long-term investment, said Kelly Swan, spokesman for the company. And what about the private plaintiffs? “We didn’t have to [join],” said Leonard Simon of Milberg Weiss Bershad Hynes & Lerach in San Diego. “We thought that it was advisable to try to get on the same page as the AG. It’s good for ratepayers.” Simon would not say whether the private plaintiffs had engaged in any settlement talks before Lockyer got involved. According to Alex, who helped negotiate the settlement on behalf of Lockyer, his office let the plaintiffs attorneys deal with Williams directly and did not help come up with the $15 million. Himmelstein said it’s normal for an early partial settlement in a complex case to include the creation of a war chest. He pointed to other large cases where war chests were created by a partial settlement, including In re Brand Name Prescription Drugs Antitrust Litigation, 94-897, in which some defendants settled before a trial in U.S. District Court for the Northern District of Illinois. The plaintiffs lawyers also cited precedent for a public agency negotiating a settlement that included a fund for future litigation. Francis Scarpulla, a San Francisco solo who is working with Lieff Cabraser in the utilities litigation, pointed to In re Petroleum Products Antitrust Litigation, MDL150. In that case, several states and private parties accused the oil industry of conspiring to fix gas prices between 1959 and 1981. As defendants settled out, funds were created to pay for future litigation, Scarpulla said. The money went to attorneys general in four states, as well as the private attorneys. Unlike the Williams case, though, the money could only be used for expenses incurred in suing the other defendants, not fees, Scarpulla added. Simon said attorneys wouldn’t be able to just tap the fund at will. Rather, they’ll perform work and then go back and ask the judge for reimbursement. If the fund is not exhausted when all the litigation is completed, the remainder will go to the class, private parties or a charity approved by the court, according to the settlement. Williams said it agreed to the fund for the same reason it agreed to the other parts of the settlement — because it’s good for the company. Continuing the case could have been even more expensive than the terms Williams agreed to, said Alex Goldberg, assistant general counsel for the company. “You really have to put yourself in the shoes of what’s going to happen two years down the road,” Goldberg said, adding that in such complicated litigation, the experts can be as expensive as some of the lawyers. The deal still has to be approved by a judge. Hearings are expected to begin early next year. The Williams settlement was announced in mid-November. It renegotiates the company’s long-term contracts to provide energy to California, and, while not requiring Williams to admit wrongdoing, it puts to rest the company’s portion of civil litigation filed by Lockyer and several private attorneys from San Francisco, San Diego and Los Angeles. The offices of Lockyer and Gov. Gray Davis pitched the deal as a victory because they say it will save consumers potentially hundreds of millions of dollars. Simon and Himmelstein serve as liaison counsel for the private plaintiffs’ portion of the complicated case. In several lawsuits, they, Lockyer and other plaintiffs allege that utilities generators and distributors engaged in antitrust practices and unfair competition. The Williams settlement affects six superior court lawsuits that have been brought together as Wholesale Electrical Antitrust Cases I and II, Judicial Council Coordination Proceeding Nos. 4204 and 4205. Williams, along with Reliant Energy, Dynegy Inc., PG&E and several others are named as defendants in the cases. The myriad plaintiffs include several San Diego water districts, Lt. Gov. Cruz Bustamante, the city and county of San Francisco and private parties hoping for class-action status. There is another group of utilities cases, 11 superior court actions coordinated as Natural Gas Antitrust Cases I, II, III and IV, Nos. 4221, 4224, 4226 and 4228. There have been no settlements in those cases. Not all the private attorneys agree that joining forces with the politicians was the best thing to do. “I’m hoping we can move it out of the political sphere and into the legal sphere, which will be a much more effective way to get a solution,” said Michael Aguirre of San Diego’s Aguirre & Meyer, another of the plaintiffs firms. He said California needs a “wartime” attorney general for the utilities debacle, that Lockyer “clearly could have been more aggressive.” Even though he’s happy about the cooperation clause, Aguirre said he hopes the settlement will not be a blueprint for other pending cases. For now, though, those cases will keep moving ahead, and it remains to be seen how valuable will be the advantage won by the plaintiffs side. If the private and government attorneys find what they’re looking for — evidence the utilities companies worked together to drive up the prices — it could prove key. “A cooperation clause in this case is extremely important,” Simon, of Milberg Weiss, said. “You hope that it will lead to the right evidence and save you a lot of time as you pursue litigation against other defendants.” Schonbrun asked whether that kind of enforcement shouldn’t be up to the attorney general, especially since the class includes practically anyone who paid a utility bill since Jan. 1, 1998, according to the settlement. “My concern is that the gravamen of this litigation was firms manipulating prices to gouge consumers, and for that reason, it’s especially important that the people purporting to be acting in the name of consumers not be . . . getting excessive fees of their own,” Schonbrun said. Alex admitted that having private attorneys do the work of the attorney general was an “odd system,” but he also defended them. “There are benefits to having outside parties do some of these cases,” Alex said. “And I certainly think, in the context of the settlement, that they did bring to bear something in this deal.”

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