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The latest settlement in litigation over California’s energy crisis includes tens of millions of dollars in attorney fees to be shared by a handful of politically savvy plaintiffs’ firms. Last week, California Attorney General Bill Lockyer’s office announced that Houston-based El Paso Corp. agreed to a settlement worth $1.625 billion in payouts and renegotiated long-term power contracts. The settlement, which ends regulatory action and private suits against the natural gas giant, is the biggest in connection with energy litigation. It includes up to $60 million for attorney fees and expenses to be shared among 11 plaintiffs’ firms, according to the AG’s office. Plaintiffs’ lawyers say they’ve invested thousands of hours in the case, which accused El Paso of manipulating the state’s energy supplies. Barry Himmelstein of San Francisco class action behemoth Lieff Cabraser Heimann & Bernstein said the case was “grueling” and the negotiations complicated and difficult. “You have a rare situation where just about everyone in the state is a class member,” Himmelstein said. “[You have] multiple government agencies from multiple states on multiple theories in multiple jurisdictions.” The agreement still has to be approved by a judge. For now, no one is talking about exactly how the money will be divvied up among the private lawyers. The $60 million figure is not set in stone, but the plaintiffs’ firms have agreed not to ask for any more than that. Besides Lieff Cabraser, private firms that will collect a share of the fees include Kiesel, Boucher & Larson of Beverly Hills, Calif., and Girardi & Keese; Engstrom, Lipscomb & Lack; and O’Donnell & Shaeffer, all of Los Angeles. Assuming San Diego Superior Court Judge J. Richard Haden goes along with the preliminary discussions among the parties, those firms, with the exception of Kiesel Boucher, would be designated lead counsel. Other attorneys who worked on the case will get money, too. In addition to the $60 million, other entities will share $24.2 million to cover legal fees: Lockyer’s office will get no more than $5 million, the Public Utilities Commission expects $2.5 million; Pacific Gas & Electric, $6 million; and Southern California Edison, $10.7 million, a spokesman for Lockyer said. The deal was negotiated several months ago and pitched last week as relief for ratepayers. California state officials touted it as another step in the ongoing effort to investigate and solve the Golden State’s power problems. It’s the first settlement in a group of consolidated actions known as the Natural Gas Antitrust Cases. Plaintiffs’ lawyers, mostly from Southern California and the San Francisco Bay Area, had sued after fluctuating energy supplies led to allegations of fraud and manipulation in California’s volatile power market. The Judicial Council coordinated their cases in San Diego. El Paso admits no wrongdoing in the deal. Lockyer’s office said the resolution will “help stabilize California’s future natural gas supplies.” Although it’s the biggest, the El Paso settlement is not the first agreement in connection with the state power crisis. Lockyer announced smaller settlements over regulatory actions with Calpine Energy Services and Constellation Power Source Inc. in April 2002 and with El Paso Electric Co. earlier this year. (The company is not affiliated with El Paso Corp.) Before last week’s deal with El Paso Corp., the largest settlement in connection with the power crisis was an agreement Lockyer announced in November with Williams Energy Marketing & Trading Co. In the Williams deal, $15 million was set aside to pay Lieff Cabraser and other private attorneys. As a bonus for the plaintiffs’ attorneys, the money wasn’t just for accrued costs but could also be used to pursue litigation against the other defendants who hadn’t yet settled. (The Williams settlement still has not been submitted for approval by a judge.) Himmelstein, the Lieff Cabraser partner, compared last week’s El Paso deal to the historic tobacco agreement. And just like in the tobacco litigation, politics is intertwined with energy. Not only are public and private lawyers working together to prosecute alleged wrongdoing, but also several of the players have political relationships outside the energy cases. For example, five of the 11 plaintiffs’ firms are listed as “major donors” by the secretary of state because they have given at least $10,000 annually in campaign contributions. Those are: Girardi & Keese, which gave $347,900 in the 2001-02 campaign cycle; Kiesel Boucher, $101,226; and Engstrom Lipscomb, $91,264, according to the secretary of state’s Web site. The money went to an array of mostly Democratic candidates and causes. Of the $540,390 given by those three firms, $128,000 went to Lockyer’s re-election fund. Comparable numbers were not available for the other two major donors, Lieff Cabraser and O’Donnell & Shaeffer, because they did not file electronic contribution statements. One of the firms, Kiesel Boucher, has also worked on behalf of politicians. It represents California Lt. Gov. Cruz Bustamante in the energy litigation — he filed an energy suit as a citizen — and has also done legal work for the state Senate. Name partner Raymond Boucher is vice president of the influential Consumer Attorneys of California. Paul Traina, a partner at Engstrom Lipscomb, cautioned against drawing too many conclusions from plaintiffs’ lawyers’ support of Lockyer and other politicians. For one thing, he said, there are many other interest groups “in the mix” contributing to campaigns, including defense lawyers and their corporate employers. “It seems to me that most of the politicians, at the end of the day, no matter who helps them, they’re going to have to do what’s right,” Traina said, adding that, though he does not personally give to politicians, “maybe I should.” The secretary of state also lists El Paso as a major donor but, like Lieff Cabraser, the company’s contribution records to all statewide candidates are not available because it did not file electronically. Records for Lockyer’s last campaign show that the gas company did not give him any money. Before El Paso, the Williams settlement was the largest deal to end energy litigation. But the two deals differ significantly. The electricity cases involving Williams consisted of a few suits against many defendants, so plaintiffs’ attorneys were glad to get the $15 million as well as an agreement that Williams would cooperate with investigators. By contrast, the natural gas group of cases that includes suits against El Paso has only one other major defendant, Sempra Energy. Even though there aren’t multiple parties to continue going after, Traina said he’s still pleased that the settlement requires El Paso officials to submit to depositions, which he thinks will help in the battle against Sempra. But another attorney, M. Brian McMahon, isn’t so sure El Paso will provide the smoking gun. McMahon, managing partner of a small Los Angeles firm representing the city of Long Beach, Calif., and other entities, said he has doubts about just how much El Paso would say to implicate other defendants. Traina said there were two main reasons why the plaintiffs were able to get such a good settlement. For one thing, he said, they had a strong case. The other thing, according to Traina and other plaintiffs’ attorneys, is that El Paso is having financial problems. “You have a willing defendant who wants to move on with their business,” Traina said. The trial with Sempra is scheduled for February, but Traina expects it will be delayed. Besides its size, Himmelstein said the settlement is also a coup because El Paso agreed to pay money up front, instead of annually over a 20-year period, as was initially discussed. “This is as good as it gets,” Himmelstein said.

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