LOS ANGELES (CN) – Los Angeles has dropped its civil lawsuit against a consulting firm the city blamed for botching the rollout of a utility billing system that resulted in a multimillion-dollar settlement with customers and an FBI probe into how the payout was handled.
In 2016, Superior Court Judge Elihu Berle approved a class action settlement involving customers of Los Angeles Department of Water and Power (LADWP), who said they were overcharged due to faulty meters in a system implemented by consulting firm Pricewaterhouse Coopers (PwC).
Los Angeles agreed to the $67.5 million settlement to customers and also sued PwC in state court, claiming the firm was responsible for the update to the aging billing system that resulted in the billing error.
Meanwhile, PwC claimed in court documents the lead plaintiff in the class action, Antwon Jones, was at one time represented by attorney Paul Paradis, who then went on to consult with the city of Los Angeles as a special counsel in litigation. The firm called the settlement a fraud, designed by Los Angeles and its legal team to resolve all other ongoing billing litigations under one broad “white knight complaint.”
This led the new attorneys representing the class to lobby for tossing the settlement, saying the class was owed at least $50 million more.
In July, agents from the Federal Bureau of Investigation raided LADWP headquarters and the city attorney’s offices as part of an investigation into the handling of the settlement. City Attorney Mike Feuer was deposed in court, where he testified he was unaware of the actions of Paradis and any other private counsel who handled the settlement.
In a joint filing late Thursday, Feuer’s office and counsel for the new class action, Brian Kabateck, said there was “substantial evidence of an improper relationship between former special counsel to the city, Paul Paradis and Paul Kiesel” and attorneys Michael Libman and Jack Landskroner.
After the alleged improper relationship was revealed Paradis and Kiesel stopped representing the city while Landskroner received $10 million and Libman received $1 million before they stopped representing the city, according to the joint statement.
Judge Berle assigned a special master to investigate the original settlement and Feuer and Kabateck want the money to be held until the investigation is over.
“These ethical and legal violations demand disgorgement,” the lawyers say in the joint statement. “Additionally, serious questions remain unanswered as to how the attorneys’ fees were distributed between the law firms’ equity shareholders, and whether Landskroner or Libman paid any type of fee to former special counsel.”
In a statement, city attorney spokesperson Rob Wilcox said, “As the first step toward returning to the ratepayers attorney fees paid to Jack Landskroner, former class counsel in the DWP billing cases, the city, in conjunction with current class counsel, took legal action to freeze those fees and compel Mr. Landskroner to establish what, if any, amounts he should be entitled to retain.”
Wilcox continued: “In 2015, the city alleged fraud against PwC in procuring the significant billing system contract from DWP, and, in 2018, withstood PwC’s attempt to dismiss the case through the summary judgment when the court agreed the case could move forward. 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 Paradis and [former LADWP general manager] David Wright.”
PwC’s lead counsel, Daniel Thomasch said the city has dismissed “the last remnants of its corrupt 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 dismissal is an acknowledgment that the LADWP billing episode was caused by its own incompetence, said Thomasch, adding PwC will seek sanctions against the city.