City Overcomes Final Hurdle in Oil Suit Battle

By Blair Clarkson
Staff Writer

March 4 -- The cleanup of Santa Monica’s drinking water is set to begin after a lien placed by attorneys representing the City on the proceeds of a landmark $100-million settlement with multiple oil companies was lifted last month.

The lien was the final hurdle in a hard-fought, three-year legal battle with oil companies charged with contaminating Santa Monica’s water supplies with the gasoline additive MBTE, which leaked out of underground storage tanks into five of the City’s 11 wells.

The lien could have delayed or frozen payment of the settlement -- the largest in Santa Monica’s history -- and stalled negotiations with the oil companies over construction of a water treatment facility needed to remove the oil additive, which has been banned in California.

“The lien has been lifted,” said Assistant City Attorney Joseph Lawrence. “The cleanup is going forward.”

Lawrence added that the bulk of the settlement money is currently sitting in City accounts and officials have already conducted several meetings with oil company representatives to deal with construction and restoration issues.

“The City has received all money due under the various settlements except for $30 million that is due in the next couple days,” Lawrence said. “The City is working through a series of issues with attorneys on the payment of attorneys’ fees.”

In December, attorneys from the law firm Miller & Sawyer placed a lien on the settlement and requested that any checks paid by the oil companies be made out to them as well as the City, according to exclusive documents obtained by The Lookout.

“Please assure that these firm names (Miller & Sawyer, Baron & Budd, and Sher & Leff) appear on any checks issued in satisfaction of your clients’ settlement obligations,” wrote attorney Duane Miller in a letter to oil company representatives on December 23, 2003.

In his response letter, dated December 26, defense attorney Jon Anderson -- of Latham & Watkins LLP -- questioned the lien and cited language in the actual settlement agreement, which “says nothing about settlement checks being made payable jointly to the city and any law firm.”

Subsequently, attorney Curtis Sawyer claimed that the “customary method of payment” in these cases is by check payable to both the plaintiff and the attorneys of record.

“Firms previously involved in these MBTE actions have always utilized this form of payment,” he wrote on December 30.

City Attorney Marsha Moutrie rebuffed the efforts of Miller and Sawyer to impose a lien on the settlement and have their names added to the checks.

“The defendants’ responsibilities are fixed by the settlement agreement with the City,” she wrote in an email to Anderson and other oil company representatives. “The agreement, which has been fully executed and approved by the court, obligates the defendants to make payments to the City.”

Moutrie added that she was “mystified” by concerns expressed by Miller and Sawyer that their interests might be at risk or that the City might not compensate them accordingly.

“It is a matter of public record that the City is in very sound financial condition and enjoys an exceptional credit rating which reflects, among other things, an excellent and longstanding record of fulfilling financial obligations,” she wrote.

Sawyer declined to comment on the reasons for issuing and lifting the lien and refused to discuss the communications between his firm and the City.

Attorneys for the oil companies also had no comment on the lien.

“All I know is my client has paid the settlement and is out of the case,” said Anderson.

The City’s lawsuit, which implicated over a dozen oil companies including Shell, Mobil and Chevron, drew national attention and led to a ban on MTBE additives in California that took effect on January 1.

In November, the three major companies agreed in a landmark settlement to pay $92.5 million, as well as build and maintain a new water treatment facility. Of this amount, $30 million was slated for an escrow account to cover the City’s out-of-pocket costs and improve the quality and security of its water.

The main term of the settlement requires the oil companies to design, operate and maintain a water treatment facility and to fund its operation until the MTBE is removed from the water. The estimated running costs, uncapped, could prove to be anywhere in the region of $150 to $500 million, City officials have said.