High Court Lets Stand Rejection of Lawyers’ Smog Fees

In a victory for the Davis administration, the state Supreme Court on Tuesday let stand an appellate court ruling that struck down $88.5 million in attorney fees for lawyers who successfully attacked an unconstitutional smog “impact” fee on out-of-state vehicles.

The award, which amounted to more than $8,000 a hour, was set by a private arbitration panel on orders of Gov. Gray Davis. It was the biggest of its kind in California history.

But the size of the fees touched off angry protests from public officials and citizens alike. They complained that the sum, which would be paid from public funds, was astronomically too high.

Plaintiff lawyers in the case said Tuesday the issue will go to a new arbitration panel, which will determine the appropriate level of compensation for the attorneys, including members of the San Diego law firm of Milberg Weiss Berhad Hynes and Lerach, which led the assault.

Under the district court’s ruling, said attorney Bill Dato of Milberg Weiss, maximum compensation for the lawyers will be $18.1 million, plus accumulated interest from July 1998, which would bring the total to about $24 million.

“We are going to move forward from here. The court of appeal has set forth the ground rules and we will proceed on that basis,” Dato said.

A spokesman for the governor said officials were pleased at the refusal of the high court to review the case.

He suggested that the final level of compensation for the attorneys still may be an unresolved issue.

The smog fee law, adopted in 1991 by Gov. Pete Wilson and the Legislature, imposed a $300 impact fee on out-of-state cars registered in California. Although advanced as a fee to fight smog, virtually none of it went for anti-smog programs. Instead, it was spent to help balance the state budget.

But four motorists who moved to California and paid the fee sued. In 1999, Superior Court Judge Joe S. Gray of Sacramento ruled the fee unconstitutional.

The judge awarded $321 million in refunds to those motorists who had shelled out the fee during the previous three years.

But attorneys, led by Milberg Weiss, appealed. They argued that the fees should be refunded to all motorists, going back to 1992, a contention supported by Davis.

At the same time, Davis successfully sponsored legislation that earmarked about $650 million in refunds and interest to motorists hit by the illegal smog fee.

Included in the legislation was a requirement that lawyers be paid an unspecified but “appropriate” amount for their work. The issue then was turned over to the arbitration panel, which devised the $88.5-million award.

But controversy erupted when the panel, meeting in secret, set the amount. Davis asked the group to reconsider. It refused and Davis sued.

One justice of the 3rd District Court of Appeal, Richard M. Sims III, blistered the award as “completely in outer space [and] totally over the top.”

He said the fact that lawyers had even sought fees of that “absurd magnitude from the taxpayers is a testament to the unreal world of greed in which some attorneys practice law in this day and age.”