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Lawyers Try to Block Bustamante Energy Deal

Critics say proposed settlement of suit, which includes a university endowment, is too low.

November 21, 2005|Dan Morain | Times Staff Writer

SACRAMENTO — Natural gas companies seeking to settle a lawsuit filed by Lt. Gov. Cruz Bustamante in the wake of the energy crisis have offered to sweeten the deal by paying $200,000 to endow a university professorship in his name.

Bustamante's lawyers have agreed in principal to the deal, saying they would accept a settlement of $20 million -- though that is a fraction of the money, perhaps $1 billion or more, Bustamante hoped to recover when he filed the case on behalf of overcharged California consumers.

Bustamante's chief lawyer, Raymond Boucher of Beverly Hills, said it was he who suggested to gas company attorneys that the firms pay for the University of California professorship.

But Boucher said that he did not urge that the chair be named for Bustamante -- and that the lieutenant governor knew nothing about the suggestion.

It is unclear, however, if the deal will go forward.

Attorneys pressing separate litigation against some of the same natural gas companies in San Diego learned of the proposal when they received an apparently errant e-mail outlining the deal's terms.

Fearing that such a settlement could weaken their own suit, lawyers in the San Diego case obtained a court order blocking the settlement.

"We don't think it is enough," said attorney Barry Himmelstein, of San Francisco-based Lieff, Cabraser, Heimann & Bernstein, one of roughly 20 law firms suing the gas industry before San Diego County Superior Court Judge Ronald S. Prager.

Himmelstein and the other lawyers are scheduled to convene in Prager's courtroom Tuesday to urge that Bustamante's suit be merged into theirs -- a move that lawyers for Bustamante and the gas companies he is suing oppose.

The dispute has its roots in California's energy crisis of 2000 and 2001, and in Bustamante's apparent ambition for higher office. In November 2002, after winning his second term as lieutenant governor, Bustamante sued in Los Angeles County Superior Court, accusing 38 gas traders and others in the industry of jacking up the price of natural gas, which is used to fuel many of California's electrical power plants.

Bustamante was acting as a private citizen but vowed to use any recovery to benefit California consumers. He accused the companies of "shameless profiteering," and told The Times after filing the suit, and an earlier one he filed against electricity firms, that consumers could receive "billions of dollars" in refunds.

"They deliberately manipulated and misreported market information," the lieutenant governor said in a 2002 statement. "I'm going to do everything I can to get ratepayers as much of their money back as possible."

By filing the suit, Bustamante appeared to be taking a page from his predecessor, Gray Davis.

Then-Lt. Gov. Davis had sued the tobacco industry in 1997 as he prepared to run for governor. In so doing, Davis sought to embarrass his Republican rival, then-Atty. Gen. Dan Lungren, who had balked at suing tobacco companies. Lungren ended up joining the nationwide litigation, and California received $25 billion as part of the industry's $246-billion settlement with the states.

At the time he sued the gas companies, Bustamante was contemplating a 2006 run for governor. But the 2003 recall of Davis sped that timetable. Bustamante broke ranks with other top Democrats by running to replace Davis in the recall, fell short, and now plans to run next year for California insurance commissioner.

Meanwhile, after a series of legal setbacks, Bustamante's suit has become more narrow, and only four defendants remain: Reliant Energy Inc., Duke Energy Corp., Dynegy Inc. and Williams Cos.

Boucher believes the four defendants owe no more than $5 million apiece, including $50,000 each to endow the university chair.

"I don't think you can argue they are much higher that," Boucher said in an interview. "This case is a very small, narrow sliver."

But even if it is narrow, attorneys involved in the cases in San Diego and Los Angeles believe a settlement in the Bustamante case could have far-reaching implications, limiting the amounts other plaintiffs could collect in their lawsuits.

Attorneys for the energy companies would not discuss the matter. But Joel Kleinman, attorney for Duke Energy, said the settlement "would be, we had hoped, complete peace," according to a transcript of an Oct. 17 court hearing before Prager in San Diego.

In court papers opposing the settlement, Himmelstein denounced the proposal as a "sweetheart deal," pushed by what he labeled the "End-Run Defendants," an allusion to Enron Corp., the bankrupt Houston energy trader that became the most infamous company linked to the California energy crisis.

Himmelstein also alleged that the four energy companies sought to end the litigation by approaching the plaintiff with the weakest case, Bustamante.

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