THE PACIFIC LEGAL FOUNDATION VERSUS BCPUD
On the evening of November 10,1982. as a large crowd of local residents was
settling into place for a public hearing on the Bolinas water hookup moratorium,
a balding, bespectacled San Francisco detective named Ralph Fink unobtrusively
entered the Bolinas Community Public Utility Districts (“BCPUD”) meeting
hall, slipped unnoticed through the gathering, and, moments before the start
of the public hearing, quietly served the president of the governing board
with a summons and a 40 page, $33,000,000+ Federal civil complaint.
The lawsuit was organized and financed by the Pacific Legal Foundation ("PLF"),
a Sacramento-based non-profit group of attorneys with average annual income
from deductible contributions at 2.5 million dollars. Dedicated to the right
of business interests to seek short-term profits unimpeded by government
regulations, it has successfully opposed increased protection from agribusiness
pesticides for farm workers, wheel chair access to public transportation
and the rights of individuals to freely enjoy the California coastline.
Robert Best, one of the PLF’s lawyers involved in the suits against BCPUD,
was quoted in the California Lawyer in 1981 as saying "Once it enters a case,
PLF stays no matter how costly. We won’t back off. We go an eye for an eye
– it’s part of our reputation.”
The massive lawsuit, Lockary, et. al. vs. Kayfetz, et. al., alleging numerous
constitutional violations, deprivations of civil rights, monopolization,
attempts to monopolize and other antitrust violations, named as defendants
21 individuals, 2 government agencies and a private non-profit organization.
There were five plaintiffs, all of whom owned property within the boundaries
of the utility district. They asked for "extraordinary and equitable relief,
and for damages and declaratory relief."
What they wanted was an end to the moratorium on water connections and over
$33,000,000 in "damages". plus attorneys' fees, for their trouble. What they
each got nine years and four lawsuits later were $15,000 cash settlements
and no water hookups. The money was provided by the individual defendants'
insurance carriers for agreeing to dismissal of the case because it was cheaper
for them to pay these nominal amounts rather than incur the cost of going
to trial, regardless of the outcome. BCPUD did not contribute to the settlement.
In addition, the PLF was hit with $136,000 in sanctions for its behavior
in handling the case.
After 11 years and more than 1.6 million dollars in costs to BCPUD, all lawsuits
filed by the PLF ended in BCPUD’s favor and the state court concluded that
the moratorium was justified.
From the beginning, the defendants, as well as observers, understood the
political implications of the lawsuits. It was a volatile mix: A district
with an antiquated and undercapitalized rural water system, unable to guarantee
delivery to its existing customers; a backlog of 250 persons waiting in the
wings to apply for water service, and a likely barrage of new applications
if BCPUD lost in court. The future of the community hung in the balance
The most obvious consequence of the lawsuit has been a significant increase
in water rates to cover defense costs. Although painful, it could have been
worse. Any number of events, including going to trial, could have driven
BCPUD into bankruptcy. If, for example, formal demands had been made on
BCPUD to provide a separate defense for each of the present and former directors,
voluntarily filing for bankruptcy would have been a natural consideration
(although filing for bankruptcy would have left the lawsuit in the hands
of counsel other than BCPUD's). The complaint appears to have been designed
to generate and magnify potential conflicts among the individual defendants
and BCPUD and to have been designed to prompt demands upon BCPUD by individual
defendants for separate defense counsel paid for by BCPUD. BCPUD would have
been hard pressed to deal with such demands. The total bill for legal services
might easily have been doubled were it not for the early development of a
comprehensive strategy to control the course and nature of the litigation,
remarkable restraint on the part of individual defendants, and an oral agreement
for legal services which allowed BCPUD to make fixed installment payments
on a semi-annual basis, without interest.
In 1925, the Bolinas Public Utility District was incorporated "in accordance
with Section 24 of an act of the legislature of the State of California…”.
Before that time, some 60 homes and businesses, which comprised the historic
village of Bolinas, depended on a privately-owned water company for their
municipal supply. Among the first acts of the fledgling district was the
filing of an application with the Division of Water Rights of the Board of
Public Works of the State of California “to appropriate all water flowing
at any time in … Arroyo Honda [sic].” They proceeded to acquire the necessary
easements and to lay a 4.5 mile water line into town. Portions of that line
are in service today.
Around this same time, an ambitious Manhattan developer, Arthur Smadbeck,
hatched a scheme to turn several hundred acres of wind-swept grass land into
an ocean side enclave of 6,000 individual lots, each measuring 20 by 100
feet. He subdivided the property and entered into a promotional venture with
the now defunct San Francisco Call-Bulletin newspaper to sell the lots for
$69 each. At $9 down and payments of $6 a month there were plenty of takers.
The Bolinas Property Owners Association was created to manage Bolinas Beach,
as it was officially named, and they contracted with the new public utility
district for water until 1937, when they formed a separate district, Bolinas
Beach Public Utility District. They laid parallel lines to the Arroyo Hondo
and built a new catchment dam. The two districts coexisted until 1967, when
the Marin County Board of Supervisors consolidated them to form the BCPUD.
In the summer of 1967, the new board of directors, led by Fire Chief Jose
Silva, faced a bewildering array of problems: to say the existing transmission
and distribution pipelines were inadequate doesn’t fully convey the true
condition of the water system. Miles of pipe were above ground, exposed to
the elements, leaking at the fittings. Many more miles of pipe had been San
Francisco brewery boiler pipe in a previous life. It had an unusual outside
diameter, making it difficult to repair. Still more miles of pipe ran through
pasture land, where major leaks might go undetected for weeks. The unaccounted-for
water may have been as high as 45% of the water produced and there were only
3 or 4 small, leaky wooden tanks in which to store what was left.
On the other hand, it was only 1967. Arthur Smadbeck’s crazy-quilt dream
of summer beach cabins covering the empty fields had faded to a dim memory,
surreal in its evocation of a bygone day of unlimited opportunities and infinite
expansion. In the real world, Bolinas was isolated, and frequently foggy,
with no real local economy. From the 1930's to the late 1960's the Gridded
Mesa grew slowly. Land and housing prices were reasonable. Water meters ware
readily available. Early residents, comfortably ensconced in their substantial
homes on Wharf Road and Brighton and Terrace Avenues, sheltered from the
cutting winds, were incredulous that anybody would be foolish enough to want
to live up on the old Garzoli Ranch (today’s Gridded or Big Mesa).
The ink was barely dry on President Silva's signature at the bottom of BCPUD
Resolution No. 1 before that all began to change. A confluence of events
increased sharply the number of building permit applications in Bolinas.
BCPUD inherited from its predecessor a violated Cease and Desist Order issued
by the Pollution Control Board (forerunner of today’s Regional Water Quality
Control Board). The Order required that Bolinas Lagoon no longer be used
as the downtown sewer outfall. The effluent from the gravity collection system
built in 1908 would have to be treated. The BCPUD formed a Joint Powers Agreement
with Stinson Beach County Water District. The new authority would construct
a sewer system to collect waste water from all developed properties in Stinson
Beach and Bolinas, with a design capacity for 25,000 people. "Treatment"
would consist only of a bar screen, and disposal through a Pacific Ocean
outfall, a mere 250 feet offshore.
A lawsuit filed by local residents delayed this grandiose scheme long enough
for simultaneous recall elections to be held in Stinson Beach and Bolinas.
The recall election succeeded in part because of another event seemingly
unrelated to the sewer project - the 1970 oil spill off the coast of Bolinas.
Many new people came to Bolinas during this time as volunteers in the cleanup
effort. They liked what they saw and they stayed. Educated, activist, oriented
toward the counter-cultural, they understood the political process. They
gained a board majority in the election
Concerned about the lack of water storage capacity and the poor condition
of the system, alarmed by the 100+ building permits issued by the County
of Marin in the two previous years (and by the demands on the system that
such building activity would generate), the new board declared a Water Shortage
Emergency Condition and enacted a moratorium on new connections to the water
system. Despite complaints from frustrated property owners prevented from
building by the new moratorium, it survived unchallenged until 1976, when
the Bolinas Property Owners Association ("BPOA") filed suit [Bolinas Property
Owners Association vs. BCPUD] in Marin Superior Count to overturn the moratorium.
After 3 years of depositions, interrogatories and other trial preparations,
the BPOA was forced to dismiss its suit in BCPUD's favor, following reexamination
and reenactment of a moratorium on new hookups.
The 1970's was a decade of unprecedented activity for the BCPUD. In 1975,
BCPUD built a new sewage treatment facility, pump station and force main
to comply with the 12 year old Cease and Desist Order. The project took almost
3 years to complete, and, at 1.8 million dollars, is still the largest single
project undertaken by the BCPUD in its history. The treatment facility is
a model design which waste management professionals and others have visited
and studied for years. Soon after its completion, work began on several major
water projects, including construction of two earthen reservoirs with a combined
capacity of 56 acre feet; replacement of several large distribution mains;
construction of two new water treatment plants; construction of a second
steel storage tank, a potential doubling of the treated water storage capacity
to 860,000 gallons; replacement of the main Arroyo Hondo catchment dam and
its outlet line.
Not all the action was in the trenches. Dr. William Oswald, a University
of California at Berkeley engineering professor, completed a landmark study
on the potential water supply available to Bolinas which remains central
to the BCPUD's long range facilities planning. Dr. Peter Warshall completed
a survey and study of the onsite waste water disposal systems on the Bolinas
Mesa, including soils and drainage, which serves today as the foundation
for a new initiative to address Bolinas' septic problems. In 1977, following
lively public hearings, the Board of directors adopted Resolution No. 173,
upholding the moratorium. Active elections in 1977 and 1979 added to the
intensity. The Board majority stayed firmly pro-moratorium. 1977 was also
the year BCPUD initiated lengthy condemnation proceedings against the Trust
for Public Land to secure title to the site for the second of the two new
As the BCPUD looked to the new decade, problems remained with the water system,
despite the improvements of the 70s, Major sections of the distribution system
ware subject to frequent and repeated failure and seasonal high turbidity
showed the treatment facilities to be inadequate to meet State standards.
The State Department of Health Services began an investigation of the system,
as a part of the routine process of issuing its permit to purvey municipal
water. The investigation culminated in a 1982 report which recommended that
BCPUD's moratorium on new water connections be continued “until such time
as new water sources are developed and/or an adequate supply is demonstrated
to the Department of Health Services."
The November 1981 election was hotly contested, with full slates of both
pro and anti-moratorium candidates vying for the 3 majority seats on the
Board. The pro-moratorium candidates won by a 2-1 margin. No subsequent
election has generated such interest, and several have been completely uncontested.
This may be because the community tacitly continues to express agreement
with the victors in the landslide '81 election, or it maybe the chilling
effect of the blockbuster lawsuit.
On January 4, 1982, there was a devastating tropical storm with high winds
and 13 inches of rain in 48 hours. The resulting flood washed out the Arroyo
Hondo maintenance road in 16 places and completely destroyed the pipeline
transmission system. Thanks to the new reservoirs, the community enjoyed
uninterrupted service while nearby communities suffered much greater deprivation
but it took over 2 years and nearly $500,000 to complete repairs. As much
as the January, 1992 storm threatened to paralyze and bankrupt the BCPUD,
its effects were simple and its solution straightforward compared to the
legal deluge which would swamp Bolinas a few months later.
The Federal Case
Detective Fink carried serious weight with him that Wednesday night in November,
1982. The complaint, on behalf of property owners Matthew Lockary, Phyllis
Gilbert, Charles Gilbert, James Macey and Anton Holter, citing no less than
8 claims to relief, was 40 pages long and concluded by demanding a jury trial.
At his first opportunity, the federal judge, Spencer Williams, sent an unmistakable
message to the plaintiffs, and their law firm, the PLF, by dismissing the
complaint in its entirety. He gave leave to the plaintiffs to amend their
complaint. Expressly critical of the vagueness of the original filing, he
ordered that the amended complaint be more specific.
Specificity was about the only thing the PLF left out of the amended complaint.
It had ballooned to 60 pages, and the claims for relief jumped to 16. PLF
President Ronald Zumbrun, intimate of supreme court justices and big-time
politicians, publicly identified the Bolinas case as an important one for
the PLF, noting the substantial nature and burdens of the claims made, and
proudly observing that the combination should make for "interesting" proceedings.
Attorney Tom Thorner, who had successfully defended BCPUD against the BPOA
suit 7 years earlier, urged BCPUD to seek counsel thoroughly experienced
in defending public agencies against anti-trust and civil rights cases. Thorner
believed the PLF had deliberately structured the case to require many lawyers
and huge expenditures. He recommended the attorneys BCPUD ultimately hired.
Enter Orrick, Herrington and Sutcliffe, and a soft-spoken and scholarly attorney,
Richard Harris. The firm had made a reputation for successfully defending
government agencies in anti-trust actions. Harris, one of the rising stars
in the firm, was able to persuade key government leaders to consider laws
to limit the exposure of public agencies to harassment from individuals and
groups who seek in court what they fail to win at the ballot box (or through
other established governmental processes).
The PLF's complaint was an intimidating document. It cast a pall over the
community, damping enthusiasm for public service. Individuals were named
as defendants whose only connection was volunteer service on a community
planning council which helped the County of Marin comply with the Coastal
Act of 1976. The PLF and its clients threatened these individuals with economic
devastation, including loss of their property in a suit seeking over $33,000,000
in damages. The total compensation sought by the plaintiffs was ludicrous
but frightening. It was ludicrous because such an award would be more then
100 times the BCPUD's annual budget; it was frightening nonetheless in its
material implications for the BCPUD and the other defendants.
The complexity of the case and its immediate economic impacts were of the
greatest concern to the board of directors and to attorney Harris. Harris
recognized at once that the primary impact could come from a rapid escalation
of legal activity. At the first informal discovery meeting during the spring
of 1984, the PLF attorneys threatened to take roughly eighty days of depositions
of the defendants and other witnesses that year. The eighty-day estimate
was for the PLF examination only and excluded examination by other parties.
Additional time would obviously have been required for witness preparation
and the discovery disputes that inevitably would have arisen in connection
with the depositions. In practical terms, the additional burdens which just
the work associated with these threatened depositions would have imposed
on the defendants could easily have exceeded $1 million in 1984 alone. The
burdens on the other defendants were also a concern for BCPUD because each
of the present and former directors might have demanded that BCPUD provide
them with a defense, a potential additional burden on BCPUD -which might
have been triggered at any time. (After considerable behind the scenes activity,
including lawsuits against directors Paul Kayfetz and Jack McClellan by their
own insurance companies, the directors’ personal insurance carriers did provide
lawyers for all but three directors. The three, Jack McClellan, Dottie LeMieux
and Diana Farnsworth represented themselves for 6 months, until the San Francisco
firm of Howard, Nemerovski, Canady and Robertson agreed to represent them
pro bono. The BCPUD agreed to pay the firm’s out-of-pocket expenses which,
to date, have totaled $3,198.)
Harris argued from the outset that there was no hope for an easy victory.
He urged the BCPUD to pursue a course of action which promised minimal activity,
to avoid any tactic or legal response which night allow the PLF to further
escalate the legal effort. The strategy worked. After the initial threat
to depose everyone who had the slightest connection to the defendants, the
level of activity dropped to a somnolent hum for the better part of three
The major activity during this period was the filing of an additional lawsuit
in Marin County Superior Court. Wolfe vs. BCPUD. While purportedly separate
from Lockary, Wolfe was central to the PLF’s strategy, a strategy which backfired
badly. No other incident in the last 11 years of litigation better illustrates
the PLF’s abuse of the judicial process.
Wolfe vs. BCPUD began with an application by the PLF to examine BCPUD records.
The categories of documents sought were so vague and broad, the request so
voluminous, that virtually every document in the BCPUD’s possession was subject
to search. Although the request appeared to be a PLF effort to circumvent
the federal court’s control of the discovery process, BCPUD concluded that
providing the documents in response to the request was preferable given the
additional expense that would have been involved in going to court to resist
the request. Harris advised that certain records, such as customer accounts,
must be kept confidential. Ultimately, the BCPUD separated the confidential
records and permitted the PLF free access to all other records. In 3 weeks
the PLF copied over 10,000 documents.
Due to the complexity of the request, and the time needed by counsel to review
it, BCPUD used the full time allowed by law to comply. The PLF took the position
that BCPUD had violated the Public Records Act and, despite having obtained
every non-exempt document requested, filed a petition for a writ of mandate
in Mann County Superior Court. Judge Beverly Savitt denied the PLF’s petition
and awarded court and attorney’s costs to BCPUD. In her decision, Judge Savitt
found that the action was brought to harass defendant BCPUD, that it was
brought for an improper motive and that it was “clearly frivolous.” The PLF
filed a motion for a new trial. That motion was denied. Then they appealed.
The State Appeals Court affirmed Judge Savitt’s decision and upheld the award
of costs, awarding further costs for a frivolous appeal. This unsuccessful
foray cost the PLF $4,708 in BCPUD attorney and court fees, which they eventually
In 1985, the PLF apparently realized it had a serious procedural problem.
Here it was in Federal Court, seeking damages for alleged acts of taking
without compensation, when State Court would have been the more appropriate
forum in which to begin pursuing such a claim. However, no state court would
hear such a case if the plaintiffs were found not to have exhausted their
administrative remedy. The PLF was in Federal Court with its bloated and
vague complaint, when the plaintiffs had never formally demanded BCPUD render
a final decision on their applications for water service.
The PLF asked the Federal Court to abstain from ruling on Lockary until it
could go before the state court and seek an immediate end to the moratorium
through a peremptory writ of mandate. Abstention would have preserved the
federal case for reactivation if, for any reason, the PLF or the plaintiffs
were dissatisfied with whatever the state court litigation yielded. The Federal
Court encouraged the PLF to work out its procedural problems, but after lengthy
deliberation, simultaneously denied the PLF motion for abstention and granted
a summary judgment. The judge’s order went beyond what BCPUD had asked for
and ended the case without a trial (which was later appealed).
The State Case...
In the spring of 1986, BCPUD held administrative hearings to consider the
applications for water service filed by the plaintiffs. The PLF submitted
exhaustive documentation, over 1,000 pages, in support of the applications.
The BCPUD Board concluded the hearings by adopting BCPUD Resolution No. 282,
denying connections to Lockary, Gilbert and Macey, and adopting detailed
findings to support the denial. The way was now clear for the PLF to sue
BCPUD in State Court
Because the California Department of Health Services (“DOHS”) had required
BCPUD to continue the moratorium on new service connections as a condition
of its approval of BCPUD’s permit to purvey municipal water, the suit named
the DOHS, and its director, Kenneth Kizer, as co-defendants with BCPUD. The
PLF sought, again through a peremptory writ of mandate, an immediate end
to the moratorium and 500,000 dollars in damages. The lawsuit was filed in
Sacramento County Superior Court, a tactic designed to make defending it
very expensive. BCPUD asked for and received a change of venue to Alameda
County. After several preliminary legal skirmishes, Judge Richard Hodge was
assigned to preside.
Judge Hodge’s first action was to appoint an independent, court-selected
expert to investigate BCPUD’s water system to determine if there were indeed
a Water Shortage Emergency Condition. He appointed a former State Water Resources
Control Board Engineer, Walter Bourez, to conduct the investigation. Bourez
concluded his 20-page report by stating “I do not believe it would be advisable
to lift the moratorium on water hook-ups at this time.”
On November 22, 1991, Judge Hodge issued a 53-page decision. On page 14 he
stated “...the Court finds that there is a solid factual basis for declaring
a water shortage emergency and, thus, for imposing a moratorium which precludes
potential water users from tapping into the water supply which is both fragile
and limited. The Court cannot conclude that BCPUD acted in an arbitrary and
At the June, 1992 BCPUD meeting, the Board announced that the PLF had waived
its right to appeal. Judge Hodges decision became final.
Meanwhile, Back In Federal Court..
While the state case was pending, the PLF appealed The Federal Courts decision
granting BCPUD’s motion for summary judgment; BCPUD simultaneously moved
for sanctions against the PLF for its improper conduct. Judge Williams appointed
United States Magistrate Wayne D. Brazil as Special Master to investigate
the case and make a recommendation regarding sanctions. On September 8,1989,
Brazil concluded a detailed investigation, and, in a recommendation to the
trial court, stated “On the findings herein made, the court would be abdicating
an essential responsibility if it did not impose sanctions on PLF... The
principal purpose of these sanctions is deterrence. The fact that PLF...
has resorted to the courts so many times in a similar spirit makes the need
for deterrence especially acute. The fact that PLF has used this and similar
suits to raise millions of dollars that it uses to fund litigation means
that the usual costs incident to litigation of this length and size do not
wear as heavily on PLF, if at all as they do on many other litigants. In
fact, publicizing its participation in this case may have boosted PLF’s contributions.
The significance of this for these proceedings is two-fold: it shows the
unusual and extensive involvement of the law firm in the case. It also leads
the court to conclude that the size of the sanction must be substantial if
it is to have a meaningful deterrent effect”
Based on the Special Master’s recommendation, Judge Williams imposed $136,000
in sanctions on tie PLF. The PLF appealed. As part of BCPUD’s Statement Of
The Case in support of the trial court’s order, BCPUD asserted that “...These
sanctions arose out of litigation filed by the PLF in 1982 against BCPUD,
a small semi-rural district, and against numerous present and former directors
and private citizens who had participated in civic affairs. The complaint
included a plethora of purported antitrust and constitutional claims, which
the Court quickly recognized were supported by little more than overbroad,
legally conclusory allegations that fail[ed] to adequately identify their
legal or factual bases. The District Court directed that certain information
be provided in an amended complaint. Instead, the amended complaint expanded
the number of vague claims and added still more parties...After reviewing
the circumstances of this case, the Special Master concluded during the sanctions
proceedings, as did the District Court Judge, that this refusal to comply
with the Courts order had been in bad faith. It was but one of several specific
situations involving bad faith litigation conduct where the PLF had attempted
to contort what could have been a relatively straightforward case into a
massive, complex, conceptually dense, expensive litigation, and, along the
way, persisted in pursuing theories… “for which there was no credible factual
support.” The Ninth Circuit upheld the imposition of sanctions directly upon
the PLF but remanded the case to the trial court for recalculation of costs.
In acting on the PLF’s appeal of the summary judgment dismissal, The Ninth
Circuit Court of Appeals partially affirmed the Trial Courts order granting
summary judgment and partially reversed it. The court reversed the issues
addressed by Judge Williams which went beyond what BCPUD had asked for. It
took the position that there may have been triable issues of fact in the
federal case but did not rule on the merits of the case. By this action,
the Ninth Circuit essentially told the District Court Judge to let part of
the case proceed to trial. Under the pressure of the sanctions, the plaintiffs
began for the first time to talk seriously of settlement.
Accepting a settlement posed a problem for some members of the BCPUD’s board
who felt that anything less than complete vindication might lead to a misinterpretation.
However, the potential expense of trial on the remaining issues had prompted
some interest on the part of the insurance companies representing the individual
defendants. The court had ordered settlement conferences, and some settlements
were likely regardless of BCPUD’s position. BCPU D’s counsel was able to
structure a resolution that included numerous benefits for BCPUD, as well
as the other defendants, with no BCPUD contribution to the settlement. They
included (i) dismissal of all remaining federal issues (sparing BCPUD and
the uninsured individuals the expense of trial) (ii) elimination of a potential
for appeal of damage claims in the separate state litigation, (iii) restriction
of the state court litigation to two claims (thus eliminating the potential
for expansion of the state court litigation through addition of new theories
or new parties for the “doe” defendants sued by fictitious name). Because
of the substantial benefit to BCPUD the initial concerns were overcome. The
BCPUD Board of directors allowed the settlement to proceed. In June, 1991,
Judge Williams signed his order dismissing the 9 year old case in BCPUD’s
The Insurance Case...
Early in the litigation, when the law appeared to favor the BCPUD position
the board sought coverage from its general liability carrier, Insurance Company
of North America (INA). INA offered an inadequate settlement, which BCPUD
rejected. With that rejection, a number of legal battles with the giant insurer
began, none of which have been resolved in BCPUD’s favor. After the state
trial and appellate court upheld INA in its contention that claims arising
from a “failure to supply” were excluded from coverage in the policy in force
at the time of the original complaints filing in Federal Court, BCPUD asked
INA to provide copies of policies covering earlier policy years beginning
with the 1971 inception of the moratorium. INA resisted, forcing BCPUD to
obtain an order from the State Insurance Commissioner that INA provide the
policies. When INA finally complied, BCPUD discovered that earlier policies
did not contain the “failure to supply” exclusion. Meanwhile, PLF had amended
its complaints in the underlying federal and state court cases against BCPUD
to include additional claims unrelated to the water moratorium.
These developments encouraged BCPUD to bring a new coverage action against
INA in federal court. This time INA relied primarily on a contention that
coverage was unavailable because BCPUD’s enactment of the moratorium was
intentional rather than “accidental.” The District Court agreed and dismissed
BCPU D’s case. On appeal, the Ninth Circuit rendered a split decision. It
agreed with the District Court that INA did not have a duty to defend BCPUD
against the PLF suits, but it sent the case back to the District Court for
a determination whether INA’s delays in investigating and responding to BCPU
D’s claims and in providing copies of policies constituted bad faith.
Beginning eleven years ago, BCPUD was subjected to a massive legal assault
by the PLF to set legal precedent against the environmental movement. The
PLF strategy was to cripple BCPUD financially, forcing it to fold before
the case could be tried on its merits. Losing the suit would have been disastrous
to the community and would have had negative ramifications nationally as
a precedent threatening public resource management. The PLF strategy did
not succeed. BCPUD, through the extraordinary effort of its attorneys, directors
and staff, came through the initial onslaught, kept the legal activity under
control and won the case on each and every point of fact. It was a dear victory
for the community and for sensitive resource management. In spite of cost
containment efforts, it was a victory achieved at enormous expense to the
To date, BCPUD has paid out $821,493 for legal services in connection with
the various PLF-related lawsuits. Approximately $831,000 is still outstanding.
Assuming the remaining legal work needed to close the book on all PLF-generated
litigation is negligible, and that BCPUD continues to assess each of its
customers $240 per year for legal expenses, it will take another 6 years
to pay all accrued legal bills.
As shocking as these numbers are, the payoff period could have extended to
as much as 12 years if all defendants who were eligible to do so had tendered
their defense to BCPUD. If BCPUD had been forced to provide a defense for
the individual director defendants, the workload for the attorney would have
increased exponentially, and individual defendants’ insurance carriers would
not have participated in the eventual settlement of the federal case. Also,
had there not been a no-interest agreement negotiated with the attorneys,
the total legal costs could have doubled.
Finally, in evaluating the cost-effectiveness of the steps BCPUD has taken
over the years to fight these various suits, the deterrent effects of the
Federal and State decisions cannot be underestimated. Both Lockary in Federal
Court and Gilbert in State Court are landmark cases which have been decided
in favor of BCPUD.
The PLF case has been judged in large measure to have been an abuse of the
legal process for political ends. It is unfortunate, however, that the potential
recovery to BCPUD from these judgments will not significantly reduce our
legal expenditures. Such is the state of the American legal system at this