LA drops water billing suit, seeks return of attorney fees

Taking steps to end a controversy that has plagued his office for months, Los Angeles City Attorney Michael N. Feuer on Thursday dropped the city's lawsuit over a faulty billing system implemented by Pricewaterhouse Coopers LLC for the Department of Water and Power.

Simultaneously, Feuer sued to claw back $11.7 million in fees paid to attorneys in related litigation. He also persuaded Brian Kabateck, the new class counsel for ratepayers who sued the city over the faulty billing system, to join him in the fight for the return of the legal fees.

PwC's defense counsel said Thursday night the case is not over as they intend to pursue monetary sanctions against the city for the way it conducted the litigation.

"[R]ecent developments greatly impair the city's ability to proceed with its lawsuit against PwC," Feuer's spokesman, Rob Wilcox, said in a statement. "With the city's claims set for trial early next year, DWP's ability to prove damages has been severely undermined by the unavailability of key witnesses who have invoked their Fifth Amendment right against self-incrimination, including [former special counsel] Paul Paradis and [former Department of Water and Power Director] David Wright."

The stunning turn of events, after months of court hearings and depositions that featured witnesses refusing to testify, follows the city's hiring of Eric M. George of Browne Ross George LLP, the lawyer Feuer brought in to clean up the mess after it was discovered earlier this year.

The PwC lawsuit was a major priority for Feuer, who had hoped to repair the reputation of the Department of Water and Power that was mired in controversy before he took office. His decision to drop the fraud suit comes after multiple city resignations and public inquiries into the litigation, including an FBI probe. Los Angeles v. Pricewaterhouse Coopers LLP, BC574690 (L.A. Super Ct., filed March 6, 2015).

Responding in an emailed statement, Daniel Thomasch, who led the Gibson Dunn and Crutcher team defending PwC, wrote, "Today the city dismissed the last remnants of its case against PwC, abandoning its meritless allegations in anticipation of PWC's request to have the court dismiss the complaint and award PwC monetary sanctions for the city's misconduct. The city's surrender is an acknowledgement that the Los Angeles Department of Water and Power's highly publicized billing debacle was caused by its own incompetence and mismanagement.".

Thomasch continued, "Notwithstanding the city's dismissal of its claims, this case is not over. PwC intends to pursue monetary sanctions against the city for its litigation misconduct, which reached the highest levels of the city attorney's office."

Feuer testified under oath that the conduct of private counsel was unknown to him and he launched an investigation into the matter. Superior Court Judge Elihu Berle also appointed a special master to investigate.

In its motion seeking the return of fees paid to former class counsel Jack Landskroner of Ohio, the city said evidence existed that Landskroner and his local counsel, Michael Libman, colluded with Paradis and Paul R. Kiesel to file a sham lawsuit against the city.

"Neither Landskroner nor Libman disclosed in their application for attorney fees that they worked with Paul Paradis or Paul Kiesel while they concurrently represented the city as special counsel to file a ratepayer class action on behalf of [Antwon] Jones against the city," according to the joint motion filed by George and Kabateck.

Paradis and Kiesel both withdrew from representing the city shortly after the alleged collusion became public. Landskroner, who withdrew from the case amid allegations of a conflict, received $10 million, while Libman received $1.6 million, according to the motion.

The city's motion asks that the disgorged fees be held until the conclusion of the special master's investigation.

"These facts demonstrate a stark abuse of California law, which mandates a presumption of fairness, including 'arms-length bargaining,' in class action cases," the joint motion reads.

The filing also states that questions remain unanswered about how fees were distributed and if any were paid to Kiesel or Paradis. Kiesel has said he was not paid.

Asked by a judge earlier this year about paying any kickbacks in the case, Landskroner pleaded the Fifth Amendment against self-incrimination.

The city's move to dismiss the case is another turn in the litigation that seemed to wrap up quietly a few years ago, when the city announced in 2015 a settlement of the ratepayer lawsuit. In turn, Feuer's office hoped to recover costs from Pricewaterhouse Coopers, which was hired to implement the billing system.

Final approval of the $67 million settlement stalled in court for two years while attorney fees rose from $13 million to $19 million. Landskroner reaped the lion's share of the fees without conducting any discovery. Jones v. City of Los Angeles, BC577267 (L.A. Super. Ct., filed April 1, 2015).

This year it emerged that Landskroner's lawsuit against the city was drafted by his opposing counsel, Paradis, who was hired by the city to represent its interests in the billing litigation.

In July, the FBI executed a search warrant at the city attorney's office and Department of Water and Power looking for evidence of fraud in connection with the litigation.