Lawyers Try to Block Bustamante Energy Deal

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.

The settlement might have remained secret for longer, but for the apparently misdirected e-mails. One such e-mail from an energy company attorney said: “I have confirmed that each of Dynegy, Duke, Reliant and Williams is prepared to sign this agreement.”

Attached to the e-mail was a copy of the proposed settlement, called a memorandum of understanding.

“We got this MOU flying back and forth by e-mail because they copied it to someone they shouldn’t have copied to and we got it,” Himmelstein said in the Oct. 17 court proceeding, according to a transcript.

As he denounced the deal, Himmelstein repeatedly pointed to one aspect: “Defendants will 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. Settling defendants shall have reasonable approval rights of the field of study and purpose of the chair.”

Bustamante declined through an aide to discuss the deal.

In an interview, Boucher said the lieutenant governor was completely unaware of the details of the settlement, including the endowed chair, though aspects of the deal were reported last month in the Recorder, a paper that writes about the legal profession. Boucher added that the defense lawyers -- and not him -- called it the “Bustamante chair.”

“Cruz never knew about it,” Boucher said. “It never will be the ‘Bustamante’ chair.”

Boucher said that as part of the settlement, he wanted “some lasting legacy,” in the form of a university chair where the professor would focus on alternative energy. Although the settlement proposal is vague on where the professorship would be located, Boucher said expected it would be at a University of California campus.

“I want to make sure that the lieutenant governor has input into the California university where that chair would be housed and the subject matter, so it would not be something bogus,” Boucher said.

Bustamante, who went to Cal State Fresno, was an advocate of opening the UC Merced campus.

Noting that endowing a University of California chair costs far more than $200,000, Boucher said he envisioned other defendants kicking in more to ensure the chair would be fully funded.

Boucher said he intended to appear in San Diego Tuesday to argue against consolidating the Bustamante case with the suit by Himmelstein and the other plaintiffs’ lawyers.

“I just kind of feel like ‘leave me alone,’ ” Boucher said. “If the court decides to add us on, I’ll work closely with them -- and I’ll still fight for my chair.”