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The city of Santa Monica, Calif., flush with a $312 million settlement from its fight with oil companies over allegedly contaminated water, is asking a court to undo a contingency fee agreement the city asserts could cost it $66 million in outside legal fees. In June 2000, Santa Monica officials introduced their pricey “dream team” of attorneys hired to help the city win what City Attorney Marsha Jones Moutrie described as Santa Monica’s “biggest case ever.” The city’s team sued seven major oil companies and 11 others, contending that they had contaminated much of the city’s drinking water with MTBE, methyl tertiary butyl ether, a gasoline additive that is a suspected carcinogen. Referring to the “daunting task,” Moutrie told reporters that “Santa Monica is a small city, which needs to take on corporate giants with unimaginable financial resources and political power. To prepare for that fight we have found the best possible legal assistance, three highly qualified law firms that have agreed to work together with the city.” The legal team included Frederick Baron from Dallas’ Baron & Budd; Duane Miller and Victor Sher of Sacramento, Calif.’s Sher, Miller & Sawyer (now Sher & Leff and Miller, Axline & Sawyer), which was known for representing municipalities, among them South Lake Tahoe, Calif., against oil companies over contamination of water supplies by MTBE; and Scott Summy, then of Dallas’ Cooper & Scully (today a partner at Baron & Budd), one of the first trial lawyers in the country to take oil companies successfully to trial over MTBE. The team did its job. The settlement announced two years later between the city and Shell Oil Co., ChevronTexaco Corp. and Exxon Mobil Corp. was a “milestone” that Moutrie said exceeded her expectations. Santa Monica Mayor Michael Feinstein offered his congratulations to the attorneys for avoiding litigation. Valued at $312.85 million, the settlement ensured that the oil companies would pay for all costs to construct, operate and maintain a water-treatment plant, and that the companies would pay all clean-up costs associated with restoring local drinking water supplies tainted with MTBE. There was a cash payout variously reported as $30 million and $92 million to cover associated costs. The victory was so complete that client and counsel alike began referring to the other’s “windfalls.” And then the honeymoon was over. “Our reward for recovering 100% of the cost of remediating?” said Duane Miller. “The city expressed its gratitude by suing us. For four years’ work, we haven’t seen one dime.” Miller now has a defense attorney, Marshall Grossman of Los Angeles’ Alschuler, Grossman, Kahan & Stein. ‘Unreasonably interpreted’ On April 6, the city, represented by Scott J. Spolin of Santa Monica’s Spolin, Silverman, Cohen & Bartlett, sued its dream team in Los Angeles Superior Court, seeking declaratory relief from $66 million that it says its former attorneys are billing because they “unreasonably interpreted their agreement with the city to calculate contingency fees and may have violated fiduciary duties by delaying settlement.” The suit names four firms and five individuals. It says the city was never given a chance to comment on the team’s fee-splitting agreement. The court is asked to set what is “reasonable compensation” for a case that “was settled shortly after the pleading phase and before substantial discovery,” and to consider that much of the work was done in-house. The action reminds the court that the high-profile attorneys were hired based largely on their trial expertise, which was never employed. The case was assigned to Judge David Minning. Miller and Baron replied that, from the outset, they’d taken the case on a contingency fee basis. “It was massive litigation involving millions of documents,” Miller said. “Delays? Nothing could be further from the truth.” It isn’t accurate to say the firms didn’t get the city’s consent on fee-splitting, but discussion of that is constrained by the attorney-client relationship, Miller continued. “That’s one of the wonderful things about being sued by clients-you can’t bash them.” The settlement is in an interest-bearing escrow account under the control of both sides, the lawyers said.

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