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After spending years fighting over how much it has to pay plaintiffs who’ve won three cases against it, the San Francisco Housing Authority is headed to court next week to battle its outside counsel over bills. Sheppard, Mullin, Richter & Hampton signed on to help the agency out with a high-profile case in a 2001 engagement letter, signed by then-General Counsel Carl Williams. And the housing authority paid the firm’s bills, for a while. But now the two are locked in a $56,000 fee dispute, with the housing authority arguing that the signature from its general counsel wasn’t enough to seal their deal. Last year the housing authority began arguing the contract isn’t enforceable because it wasn’t ratified by the local seven-member commission that oversees the agency. So as Sheppard, Mullin tries to force the agency into arbitration, the housing authority is asking a San Francisco Superior Court judge to declare that the agreement is worthless and that the housing authority never agreed to arbitrate. Next week, Judge Ronald Quidachay will hear the agency’s stopgap request for a preliminary injunction to put the arbitration on hold until its broader request can be heard. Sheppard, Mullin penned the engagement letter when it began helping the housing authority defend a suit brought by the relatives of five people killed in a fire at a public housing complex. Since that trial ended with a $12 million jury verdict in 2001, the housing authority has claimed it doesn’t have enough money to pay the entire judgment. The plaintiff lawyers in that case, as well as two others, have since asked a state appeal court to force the agency to pay their judgments in full. Sheppard, Mullin didn’t have a problem collecting from the agency until last year. The housing authority paid a “substantial” amount of the firm’s $248,000 in bills for the first case, according to Sheppard, Mullin’s court filings. And when the firm later billed about $65,000 to help on a bad-faith case against the agency’s insurer that settled, the housing authority continued paying at first. According to Sheppard, Mullin, the firm received about $6,500, until the housing authority stopped paying its bills in July. The housing authority, represented by lawyers at Walsworth, Franklin, Bevins & McCall, is arguing now that a contract with a public entity must be “made in the prescribed mode” to be valid. The agency points to its procurement policy, which states that its commission must approve all contracts worth more than $25,000. While the policy says the executive director can enter into contracts worth less than $25,000, “at no time has the housing authority’s general counsel been delegated the authority to contractually bind” the agency, the housing authority argues in court papers. To back its position, it cites opinions such as Dynamic v. City of Long Beach, 159 Cal.App.2d 294, where courts found public entities weren’t liable for contracts where the i’s had not been dotted, nor the t’s crossed. In the 1958 Dynamic opinion, for example, the Second District Court of Appeal concluded that an oil company’s contract with the city of Long Beach wasn’t valid because — though the City Council had adopted a resolution spelling out the contract language — the document was never signed by the city manager as the Long Beach charter required. Sheppard, Mullin counters that, regardless of the housing authority’s “internal policy,” the agency should be bound by the acts of its general counsel, who could have either actual or ostensible authority. The firm says the housing authority never brought up any defect in the agreement until last year, and up until that time had accepted its work and paid several bills. “SFHA’s course of conduct supported [the firm's] belief it had entered into an enforceable contract,” Sheppard, Mullin argues in San Francisco Housing Authority v. Sheppard, Mullin, Richter & Hampton, 439382. Otis McGee, the Sheppard, Mullin partner who signed the engagement letter, said Wednesday that he’s at a loss as to why the housing authority began refusing to pay his firm’s bills. A spokesman and a lawyer for the housing authority could not be reached for comment Wednesday afternoon.

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