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Civil Litigation,
Ethics/Professional Responsibility

Mar. 22, 2019

Attorneys warned judge multiple times about problems with Los Angeles water billing settlement

Although it fully reimbursed ratepayers, what Timothy G. Blood saw was a jury-rigged settlement awash with errors.

Timothy G. Blood of Blood Hurst & O'Reardon LLP

Timothy G. Blood felt completely blindsided. It was June 2015, and the San Diego attorney with nearly 30 years of experience litigating mass actions found out about a settlement between a class of plaintiffs and the city of Los Angeles over incorrect water and power bills.

As the first attorney to have filed suit in the matter, this agreement was news to him.

But the case that settled, on behalf of lead plaintiff Antwon Jones, virtually copied Blood's complaint. Blood suspected the city was engaging in the reverse auction of a class action, in which the weakest in a series of cases is settled, while shutting out Blood and other attorneys from negotiations.

"I had a bad feeling about it," said Blood, co-founding partner of Blood, Hurst & O'Reardon LLP, who in the past has sued the Los Angeles Department of Water & Power. "Things weren't adding up," he said.

Blood right away called City Attorney Michael N. Feuer and Deputy City Attorney James P. Clark, believing they should be aware of what was going on, but Feuer's response caught him off guard, Blood recalled.

"He went from general niceties to exceedingly defensive as soon as I raised the issue of the settlement," remembers Blood.

Milstein, Jackson, Fairchild & Wade LLP Partner Gillian L. Wade

Feuer and Clark told Blood they couldn't disclose the contents of the settlement, citing a directive from the mediator, retired federal court judge Dickran Tevrizian, according to Blood. Jones v. City of Los Angeles, BC577267 (L.A. Super. Ct., filed April 1, 2015).

Then Blood wrote a letter to Feuer, outlining his concerns.

"First, you confirmed that the city and DWP have engaged in secret settlement discussion to resolve the pending litigation against the city and the DWP arising from the DWP's admitted overbilling of its customers -- conduct that is ongoing," wrote Blood.

A few months later Blood got a copy of the settlement. Although it fully reimbursed ratepayers, what Blood saw was a jury-rigged agreement awash with errors. But this settlement was silent on issues such as exactly how much ratepayers were owed, and it appeared to serve as a broad release of claims, including that of his clients, according to Blood.

The city attorney's office did not respond to a request for comment.

Blood was also vexed that Jones' counsel, an Ohio attorney named Jack Landskroner, was being paid millions of dollars for a case in which he performed no discovery. But there were more serious issues under the surface that Blood, the court and the public would yet learn.

This month Landskroner pleaded the Fifth Amendment against self-incrimination over 200 times regarding his involvement in the case, including when Los Angeles County Superior Court Judge Elihu M. Berle asked him if any of the $15 million in fees he received from the settlement were kicked back to the city's outside counsel. Questions are now surfacing about attorneys for the city colluding with opposing counsel, kickbacks, and inadequate class representation. Consumer attorneys Paul O. Paradis of Paradis Law Group PLLC in New York and Paul R. Kiesel of Kiesel Law LLP in Beverly Hills have been accused in court of colluding with Landskroner by installing Jones as Landskroner's client.

Los Angeles County Superior Court Judge Elihu M. Berle

Blood, along with the company that sold the billing software company to the city, Pricewaterhouse Coopers LLC, argue the city brought in Landskroner as a favorable opponent and padded the settlement with high attorney fees in exchange for the city's control in the Jones settlement. The city hoped to leverage that case in its lawsuit against the company, the attorneys argued. Both Kiesel and Paradis were to be paid 20 percent of any settlement or damages recovered in the lawsuit against the company. Los Angeles v. Pricewaterhouse Coopers LLP, BC574690 (L.A. Super Ct., filed March 6, 2015). Feuer announced his office was conducting an ethics investigation and Paradis and Kiesel withdrew as outside city counsel after inquiries from the Daily Journal. Kiesel denied being in an attorney-client relationship concurrently with the city and Jones, stating that special counsel was exploring a lawsuit against Pricewaterhouse Coopers.

Many of these issues, including secret settlements and reverse auctions, were raised to Berle nearly four years ago, according to interviews, court documents, and transcripts reviewed by the Daily Journal. In the end, Berle blessed the settlement as fair and adequate.

In a 2015 news release, Landskroner called the Jones settlement "historic."

"Thankfully, the LADWP took the overbilling problem seriously and understood both the legal and moral obligation to right this injustice and resolve this matter in the best interests of the ratepayers," Landskroner said in the release.

A settlement overture was filed by Landskroner one day after he filed a lawsuit, and just six days after becoming Jones' counsel. Then 87 days later, the notice of a settlement agreement was filed with the court. But the road to approval would take much longer. The settlement failed four preliminary hearings before it was granted approval by Berle on the fifth try a year and a half later.

According to court documents and hearing transcripts, Blood and fellow plaintiffs' attorneys repeatedly raised concerns to Berle about the settlement being a bad deal for consumers.

"And what it actually does is significantly cuts off the rights of class members," Blood told Berle in September 2015. Blood also told Berle complaints from ratepayers were still coming in.

Los Angeles City Attorney Michael N. Feuer

"And yet under this settlement agreement, the consumer's right to submit claims is gone," said Blood.

Blood continued to tell the court his clients were shut out of the settlement.

Paradis, the city's outside counsel who's accused of dual representation, told Berle that Blood had declined an offer to meet and confer.

"I repeatedly asked him, both verbally, on the telephone, and in writing as to whether he wanted to meet and discuss any of these issues and he refused," said Paradis, according to the transcript.

Blood responded by saying Paradis offered Blood the chance to meet with the city on the condition that he not file an opposition to the settlement.

"Now, only a fool, only a fool would take that kind of deal," Blood told Berle.

He told the court the city and Jones' counsel set up a meeting he believes would be an effort to pay him attorney fees in exchange for dropping his opposition to the settlement.

"For example, the city and Jones' counsel set up an afternoon mediation in which they attempted to discuss with me the payment of attorneys' fees, presumably so I would no longer seek to improve the settlement," Blood wrote in a brief.

"It is now crystal clear that this settlement is the product of an improper reverse auction where defendant pays Antwon Jones' counsel outrageous fees in exchange for control over every aspect of the settlement; a settlement in which claims for relief and relief amounts are to be determined by and known only to the defendant," said Blood.

Later that year, Kiesel vouched for the settlement, telling Berle in November "I'm at a little bit of a loss to understand why the city of L.A., in trying to give back 100 percent of money it wrongfully collected, is having a hard time getting there," according to the transcript.

"And the fight we're having here strikes me as being something I've never seen at a preliminary approval stage, though it's been helpful because it's helped refine the process that much more," said Kiesel, according to the transcript.

Other attorneys for the city said they viewed Blood and the other plaintiffs as "unreasonable."

Gillian L. Wade, a partner at Milstein, Jackson, Fairchild & Wade LLP, who also represents some non-Jones plaintiffs, disagreed. "We didn't even get to make a demand. All we were doing is trying to find out what was going on and why this billing fiasco occurred. It's never been transparent," Wade said in an interview Thursday. Bransford v. City of Los Angeles, BC565618 (L.A. Super., Ct., filed Dec. 4, 2014).

Other plaintiffs' counsel continued to lobby the court. David E. Bower, then of Faruqi & Faruqi LLP, pointed to a 7th Circuit Court of Appeals case that reversed and ultimately remanded a reverse auction settlement covering 17 million people. Reynolds v. Beneficial National and H&R Block, 288 F.3d 277 (7th Cir. April 23, 2002).

"We do not want to see that happen in this case. We don't want to go through this whole process. We are trying to stop this from happening now so that we can correct it before it gets to that level," Bower said in December 2015, according to transcripts.

Berle did not address those comments. Later in the hearing, he spoke about the settlement, saying the investigation and discovery resulted in a fair settlement.

"Class counsel notes that plaintiff conceded no weakness in the case and stood on that position. The settlement requires defendant to provide 100 percent recovery for every class member who was overbilled," said Berle.

Nearly a year later, the settlement was finally approved, but this time attorney fees rose from $13 million to $19 million, a 43 percent increase. Separate from that, Paradis was paid $1.8 million by the city. In his approval, Berle said, "Delays would result in long waits for customers to receive credits or refunds."

Berle never ruled on plaintiffs' issues regarding discovery, collusion or reverse auctions, according to Blood and Wade.

This week he opened up selection of lead counsel to the public, a position Blood and Wade are still seeking. Currently no one represents the Jones class after Landskroner sought to withdraw from the case.

It's still not known how much is owed to the Jones class and what other problems arose as a result of no discovery, according to Blood and Wade. All of this is in their eyes a failure of due process.

"It is certainly among the biggest scandals involving a class action lawsuit that I've ever heard of. What makes this so serious is this was not the action of one rogue lawyer. This was actually a conspiracy to defraud the court and defraud the class," Blood said in an interview this week.


Justin Kloczko

Daily Journal Staff Writer

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