X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Lt. Gov. Cruz Bustamante isn’t about to let a bunch of out-of-state energy companies sashay into California and bilk consumers. Nope, he wants to make them pay a price. A small price. And it would apparently come with an endowed professorship in Bustamante’s name. If it all works out, energy companies can get a lot for their money � like immunity from a dozen or so class actions they’re facing that could cost billions to resolve. That’s the gist of a tentative settlement proposed this month by Bustamante’s attorney, Raymond Boucher, and lawyers for four natural gas companies he sued in Los Angeles Superior Court for overcharging California residents during the 2000-01 power crisis. The settlement proposal would create a Bustamante-named professorship and let the companies escape at least a dozen state and federal class actions for just $5 million apiece � a small sum compared with the $1 billion that federal regulators say one of the companies overcharged consumers. That has the plaintiff lawyers litigating other class actions against the energy companies in San Diego County Superior Court � so far with more favorable results than Bustamante’s suit � beside themselves. They say the lieutenant governor is colluding with defendants in a deal that lets them escape more far formidable litigation, while Bustamante gets to salvage a suit on the brink of collapse. “It’s a typical reverse auction,” said Barry Himmelstein, a partner at the plaintiff firm Lieff Cabraser Heimann & Bernstein and one of the lead lawyers in 11 suits against gas companies coordinated in San Diego. The reverse auction is a defense tactic to wipe out a group of competing class actions by entering a collusive settlement with the plaintiff who has the weakest claims � and is thus willing to settle for the lowest price. Boucher vehemently denies that the settlement was a reverse auction. “We were in, by far, the strongest bargaining position, and I think we remained there as the earliest to file a case,” he said, despite the fact that a series of pretrial decisions had whittled his suit down from a consumer class action against a flock of companies into a suit on behalf of a small number of gas derivative traders against four companies. Boucher and Jeffrey Shohet, a lawyer for one of the companies, Williams Energy, defended the proposal as fair, although they were hesitant to speak about it in detail because settlement talks are ongoing. “[The settlement] would not be inappropriate in our view,” said Shohet, a partner at DLA Piper Rudnick Gray Cary in San Diego. He and Boucher said the billion-dollar number was inflated, and Shohet said Himmelstein and the other class action lawyers � who last week persuaded a San Diego judge to delay approval of any settlement � were just upset that they weren’t the ones close to resolving the case. “They’re unhappy with us because they’re not part of the process,” Shohet said. “We’re working with that group to see if we can broaden those discussions and bring them into the tent.” Judging by court filings, the situation looks more like a big top, and the other plaintiff lawyers seem unlikely to enter it. Himmelstein said he was surprised by the settlement proposal, which he found out about earlier this month upon obtaining the document, which had not been publicly filed. The Bustamante suit, Himmelstein said, was seen as tangential to the other litigation, since its scope was so narrow and it had lost on pretrial motions where Himmelstein and the other class action lawyers had won. While none of those cases has reached a point where money has been publicly debated, it was widely speculated that the four companies involved in the settlement � Reliant Energy, the Williams Cos., Duke Energy and Dynegy � could face damages of nine figures or more. A 2003 report by Federal Energy Regulatory Commission staffers said Reliant alone had overcharged consumers by more than $1 billion � though subsequent FERC reports have called that number into question. In a strongly worded motion filed with San Diego Superior Court Judge Ronald Prager last week, Himmelstein � referring to the four companies as the “End-Run Defendants � wrote that they intentionally negotiated behind the backs of lawyers with stronger claims. The settlement proposal, Himmelstein pointed out, would greatly broaden Bustamante’s claim via a new complaint, turning it into a class action that would preclude the state cases, even though Boucher had repeatedly failed to persuade a judge to grant class status. A spokeswoman for Bustamante said he was traveling Tuesday and wasn’t available for comment by press time. Himmelstein wrote in the brief that the settlement proposal would also disinter and settle a case dismissed by a Nevada federal judge earlier this year to get rid of several pending federal claims. “To achieve global peace, they propose to temporarily revive yet another corpse,” he wrote. Michael Boni, a lawyer for the federal plaintiffs, did not return a phone call before press time. The question of how much money is at stake has been sensitive, Himmelstein said, because attorneys for both sides have not yet released their expert analyses. While Himmelstein said the Bustamante deal is a “low-ball” settlement, Boucher argues that there is no more than a total of $200 million at stake, and the four companies that agreed to the settlement would be paying for more than their total market share. The issue of how much money will be involved � and whether any version of the settlement moves forward � will in large part be up to Prager, who must decide whether to consolidate the case with the San Diego class actions. The issue of the professorship is equally up in the air � and apparently one of the few things that Boucher and the energy companies don’t see eye-to-eye on. “It was a way of compensating the plaintiff for his time and energy in pursuing the case,” Shohet said. Boucher had a different take. “One of the things that is essential is that they pay for a chair of alternative energy at a university, and that [Bustamante] have input into where it’s housed,” he said, adding that Bustamante does not yet know about the settlement and that the professorship would likely not be in his name. But the settlement proposal reads differently. It would require defendants to “contribute up to $50,000 each to support an endowed chair in the name of Lt. Gov. Bustamante at a California college or university of his choice.” Of course, plaintiffs’ choices are limited even there, according to the document. “Settling Defendants shall have reasonable approval rights of the field of study and purpose of the chair,” it reads. It’s the lack of clarity in the language, Boucher said, that’s made the whole thing such a mess. “I’m pissed off that it’s out there because it’s a rough draft,” he said.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.