Arbitrators’ Fee Adds to Controversy

Another controversy erupted Friday over attorney payments in the state’s smog-fee refund case with disclosure that arbitrators have billed the state $132,479 for their services in setting the award.

The bill for the three arbitrators, headed by retired California Chief Justice Malcolm Lucas, will be paid entirely with public funds, not shared equally by the state and the victorious lawyers as an earlier agreement had required.

Invoices filed for Lucas and two other retired judges who served as arbitrators showed they charged an average $812.50 an hour. They spent more than six days on the case.

Gov. Gray Davis, who supported binding arbitration to settle a dispute over how much to pay private attorneys in the smog-fee refund case, on Wednesday had called on state Controller Kathleen Connell to delay paying out the $88.5-million award set by the arbitrators.

He called the award “excessive” and asked Atty. Gen. Bill Lockyer to try to get the amount reconsidered.

Davis spokesman Phil Trounstine on Friday said that the governor considers the arbitrators’ bill to be “clearly on the high side” but that the amount is dwarfed by the attorneys’ fees. He refused to say whether Davis would also urge Connell to hold up the payment of fees to the arbitrators.

Lucas refused to discuss his fee. “I have no idea what it is,” said Lucas, who is affiliated with an arbitration firm.

The controversy began last week after the panel of arbitrators awarded fees to private lawyers who had prevailed last year in getting the state’s smog fee struck down as unconstitutional. One law firm in the case, Milberg, Weiss, Bershan, Haynes & Lerach, is a major campaign contributor to Davis and other Democrats.

Rather than defend the smog fee, which was charged during the 1990s to people registering out-of-state cars, Davis and the Legislature agreed to refund $300 plus interest to owners of an estimated 1.7 million affected vehicles. The bill contained $665 million to reimburse the owners and pay for administration of the refund.

The legislation also contained a last-minute amendment backed by Davis that took the unusual step of submitting the disputed issue of attorney fees to binding arbitration.

But the arbitrators’ award appears to have set a record for a binding settlement voluntarily entered into by the state.

State Board of Equalization Chairman Dean Andal said he would seek to prevent payment of the arbitrators’ fees as part of a broader effort to overturn the award to the private lawyers.

“I’m determined to stop that $88.5 million from getting out of the state taxpayers’ hands and into the hands of the lawyers,” he said.

Andal called a special meeting of the board for Thursday to consider suing for recovery of the legal fees. The tax-collecting board was a defendant in the smog-fee refund case.

Andal said the board was advised by its attorney May 10 that the private lawyers and the attorney general’s office had agreed to split arbitrator fees equally between the plaintiffs and the state.

But on May 23, an amendment was inserted into the smog-fee refund bill that established binding arbitration to resolve the dispute over who would pay fees of the plaintiffs’ attorneys. It also required that their “fees, costs and expenses” must be paid from the funds earmarked to reimburse motorists who had paid the illegal fee.

“Who approved the amount of the arbitrators’ fees?” Andal asked. “I assume we don’t let the arbitrators themselves determine how much they get paid.”

Sandy Harrison, a spokesman for the state Department of Finance, said department officials will examine the arbitrators’ bills and send them to Connell for payment if they “are accurate and appropriate.” He said he knew of no issues that would prevent them from being paid.

Connell, a candidate for mayor of Los Angeles who had denounced the $88.5-million sum as an “outrage,” declined to comment Friday on the arbitrators’ bill.