In the movie, the victims in the celebrated lawsuit won big. In reality, many are wondering where the money went — and they’re mad at their lawyers.
The Julia Roberts film “Erin Brockovich” is in its fourth week as one of the most popular movies in America. It’s billed as being based on a true story. But the film tells only half of it — and the half it doesn’t tell isn’t pretty.
The film is about a down-on-her-luck but defiant, twice-divorced, working-class mother of three. As a lowly clerk in a small, private law firm, she independently starts looking into a case involving pollution in the small town of Hinkley, Calif. In the movie, the foul-mouthed, full-cleavaged Brockovich travels to the town on her own initiative, investigates the case with the help of dogged smarts and a few low-cut dresses and persuades her employer to take on the case. When he joins forces with a big-time Los Angeles law firm, she defiantly resists. In time, her street smarts outbalance the incompetent, unfeeling lawyers at the downtown firm, and the residents come out with a $333 million award — and Brockovich herself gets a check for $2 million.
The truth is different. That’s not unusual for Hollywood, and doesn’t mean that the film — which has garnered favorable reviews — is bad. But many plaintiffs in the Hinkley case say the movie misrepresents what happened. Far from being the populist victory the movie depicts, the Hinkley lawsuit was a case study in how the rise of private arbitration, as an alternative to costly public trials, is creating a two-tiered legal system that not only favors litigants who can afford it over those who cannot, but is open to potential conflicts of interest and cronyism. The case never went to trial, because Pacific Gas & Electric, the utility accused of polluting Hinkley, and the plaintiffs’ lawyers agreed to private arbitration before a panel of for-hire judges, some of whom had socialized with the plaintiffs’ attorneys.
Many of the townspeople who sued complained their awards were smaller than they deserved. Some have even hired lawyers to get back excessive legal fees charged to children. They say the attorneys kept their awards for six months after the settlement money was delivered, and that they didn’t receive interest on it. They complain that there was little or no apparent logic behind the varying amounts of money individual plaintiffs received; some claim that the arbitrators never even looked at their medical records.
Some of these charges and complaints are the predictable result of the sudden, uneven disbursement of a lot of money into a small town. But evaluating these charges is difficult to do, because the arbitration process is shrouded in secrecy. The formula for disbursing the money has been kept secret, as has the entire transcript of the arbitration proceeding. Had the case gone to trial, the transcript and the disbursement would be a matter of public record.
After the settlement, the Hinkley plaintiffs’ attorneys took some of the arbitrators in the case on a steeply discounted Mediterranean luxury cruise. The fraternization between the private judges and the plaintiffs’ lawyers led California Supreme Court Chief Justice Ronald George to begin a study of the business of arbitration. And while Brockovich appears on “Oprah,” some townspeople are preparing for a new round of lawsuits — this time against their former lawyers, including Brockovich’s firm.
The following report is based on interviews with scores of residents of Hinkley, and more than two dozen judges and attorneys. Every effort was made to elicit comment from the powerful attorneys who represented the residents of the town. Two were ultimately interviewed; in both cases the conversations were short and explosive and terminated abruptly by the lawyers. What comments they did make in the case are included below. PG&E, as well, declined to comment.
“The movie is mostly lies,” said Carol Smith, one of the real-life plaintiffs. “I wish the truth would come out because a lot of us are upset. I understand the movie is going to make Erin and the attorneys out to be heroes. “But where’s the rest of our money?”
That question echoes from many of the 650 plaintiffs in the case that became Anderson vs. PG&E. The tale started in Hinkley, a town of about 3,500 in the Mojave Desert about 120 miles northeast of Los Angeles. Residents here are surrounded by methamphetamine labs and live next to two Marine bases, downstream from a huge naval weapons center, and 20 miles east of Edwards Air Force Base. Over the last 15 or 20 years, many of the residents have also drunk, bathed and swam in water polluted by a chemical called chromium 6. They suffer many physical ailments, including bloody noses, various intestinal ailments, bad backs, rotten teeth and tumors.
In 1952, PG&E built a pumping station on 20 acres near town as part of its enormous gas-transmission system. The station pumped natural gas through an artery of pipes stretching from the Texas Panhandle to the San Francisco Bay Area; the system served PG&E customers in much of the state’s Central Valley. The company used the chromium to prevent rust from corroding its water-cooling system. The chemical runoff was disposed of in unlined wastewater ponds. (After 1966, the utility lined its ponds.) In 1987, during what the company claims was a routine check, PG&E found that its chromium had leaked into the water supply. In December 1987 it reported its findings to the California Regional Water Quality Control Board, as required. The board ordered the utility to clean up the pollution.
In the early 1990s PG&E undertook a $12.5 million cleanup effort, approaching the owners of three farms and 10 houses in the area and offering to buy their properties. Roberta Walker was one of the people approached by PG&E, which offered to buy her house (valued at $25,000 at the time) for $60,000. She said she didn’t want to sell. When the utility asked her for a figure, she blurted out $250,000. A few weeks later, the company agreed. The quick acceptance made her suspicious. That’s when she started searching for a lawyer. Through a friend, she found Masry & Vititoe, a personal-injury firm in Westlake Village, northwest of Los Angeles. At the time, Erin Brockovich worked as a clerk at the firm. Ed Masry drove out to talk with Walker, and eventually brought Brockovich.
Other townspeople later heard about the visiting attorney and called Masry’s office. He soon placed an ad in the local newspaper, announcing a “town meeting” to collect clients to mount a lawsuit. Masry told the residents that he believed that PG&E’s chromium had poisoned the water, and that this was responsible for their ailments. He offered to represent them in a suit against the giant utility. Throughout 1992, he and Brockovich continued to drum up clients.
During this time, Brockovich, by her own account, went to UCLA’s library and found as many as 120 articles that said chromium 6 was carcinogenic. “In each and every article, it clearly depicts that people who have exposures have chronic nosebleeds, kidney problems and colon problems,” she said during an interview.
Other scientific studies, however, from contaminated spots in China, Scotland and the United States, have failed to find cancer-causing properties in waterborne chromium 6. A toxicologist at the U.S. Department of Health and Human Services, Sharon Wilbur, says that chromium 6 in water doesn’t harm humans. “It’s very unlikely that people could die from drinking chromium 6 in the water, even over time,” she said. Because the arbitration that eventually decided the case was closed to the public, it’s unclear what sort of proof plaintiffs attorneys offered to support their claims.
By the spring of 1993, Masry had collected 47 clients. The signed retainers specified that he would collect 40 percent of any award. Masry filed a suit, claiming PG&E had discharged toxic wastewater into the area. PG&E responded by saying the complaint didn’t state sufficient facts or other legal grounds to support its claims. But the case moved forward in San Bernardino County Superior Court.
At this point, Masry brought in some big guns: Thomas Girardi of Girardi & Keese in Los Angeles, and Walter Lack of Engstrom, Lipscomb & Lack in Century City. Lack’s firm specializes in insurance bad faith and toxic torts; Girardi is one of the state’s best-connected and most powerful attorneys. The Wilshire Boulevard attorneys had the resources to wage what became a 650-plaintiff case, and they, too, asked clients for 40 percent of any award, plus costs. The plaintiffs agreed. “It was ‘Either play our game or forget about it,'” said resident Nola Wetterman. The plaintiffs played.
Girardi and Lack were known for having sued a slew of companies on behalf of 624 present and former Lockheed aerospace workers. In that case Girardi argued that a number of alleged carcinogens found in materials used at Lockheed’s Burbank, Calif., plant had caused his mostly elderly clients to suffer from cancer, memory loss and other ailments. Girardi broke the suit into dozens of cases — each with ex-workers grouped by length of employment, type of ailments and other factors. In 1994, the groups started winning increasingly larger awards until the fifth case went before a Los Angeles Superior Court judge in August 1998. That’s when judge and jury awarded 38 former workers $785 million — more than $20 million each.
That jaw-dropping victory catapulted Girardi and Lack into the big leagues of California litigators. Less noticed has been the fate of those awards. As early as 1992, Lockheed had dropped out of the case and paid $33 million to the plaintiffs’ attorney as a settlement; in the following years, other companies had settled as well. In 1998, a few clients began protesting that they had not gotten their money, which prompted them to complain to the California State Bar. The Citizens Against Lawsuit Abuse (CALA) also asked then-Gov. Pete Wilson, Attorney General Dan Lungren and others to look into the matter, according to a press release CALA issued Sept. 2, 1998.
But CALA never received a response from the State Bar, said spokeswoman Robin Lossing. According to bar spokesman Bill Davis, all such matters are confidential until, and unless, disciplinary action is taken. At the time, the bar had suffered deep funding cuts and is now addressing a backlog of approximately 5,000 such complaints. In a newspaper article written at the time, Girardi contended that the money had been held up on appeal; the attorney did not respond to repeated requests to be interviewed.
Meanwhile, all of the Lockheed cases have been appealed; the first verdict for $1.7 million remained intact, while portions of two other verdicts were overturned. The fourth, containing the second-largest amount of $21 million, has been completely reversed. Legal observers think it’s quite possible that the fifth case — the one with the record-breaking $785 million award — will also be reversed. But when Girardi and Lack joined the PG&E case in 1994, the utility didn’t put up much of a fight. “We screwed up,” by not cleaning the area sooner, PG&E spokesman Gregg Pruett acknowledged in a local paper at the time.
The case started in open court in front of Judge LeRoy Simmons. But before too long, Simmons retired. (Ironically, in view of later events, he became a private arbitrator and landed a paying part in the movie playing his former self, a sitting judge.) On Aug. 5, 1994, Girardi wrote to the residents of Hinkley, explaining that it could be five more years before the case could be assigned a trial date in open court. So, on the advice of Girardi and the other attorneys, the residents agreed to voluntary arbitration. PG&E, wary of facing an unsympathetic jury and an attorney with a reputation as a skilled courtroom litigator, agreed as well.
Arbitration is billed as a cheap, quick and private way to resolve civil disputes. The practice gained momentum in the 1980s, when judges, bowing to pressure to alleviate overcrowded courtrooms, began encouraging litigants to resolve their disputes voluntarily. Since then, arbitration has snowballed into an unlicensed industry that’s conservatively estimated at $350 million in annual sales, according to a spokeswoman at the nonprofit American Arbitration Association.
Not everyone thinks it’s a good idea. In 1981 the late Rose Bird, then chief justice of the California Supreme Court, called private judging a “long step backward,” because it “allows those who can afford it to play by different rules” by permitting rich litigants to leapfrog past others who must wait their turn for a hearing. Eight years later, then-Chief Justice Malcolm Lucas appointed a study of the trend, which ultimately supported the practice but urged that arbitration files be kept in courthouses where the public and press could freely inspect them. That recommendation was never acted upon.
The trouble with civil arbitrations such as the Hinkley case is that public-welfare issues can in effect be decided secretly between corporations and high-powered plaintiffs’ attorneys who represent unsophisticated victims. In the wake of the PG&E litigation, for example, there is no public record of whether an enormous, publicly held utility did or did not poison a town. “We hear a lot of complaints about these cases,” said Gerald Uelman, professor of law at the University of Santa Clara. The for-profit arbitration business is booming, especially in California, he added. “It’s upsetting to the extent that it’s a resource used by institutional litigants.”
“This is a troubling trend, especially when it concerns the public domain of toxic tort cases,” said Erwin Chemerinksy, professor of legal ethics at the University of Southern California. “It means there’s decreased public awareness of what’s going on in the public domain.” One big reason for the boom is money. Public judges, who earn about $150,000 a year in the public courts, often retire early to become, in effect, rent-a-judges. By doing so they can earn between $100 and $500 an hour — easily doubling or tripling their salaries. Arbitration firms often have powerful attorneys or corporations as steady clients. They pay monthly retainer fees or get volume discounts. As a result, some for-profit justice firms have a vested interest in keeping their clients happy if they want the return business, which has been the topic of seminars sponsored by the California Judges Association.
“The public perception somehow exists that there is a two-track system,” said Chief Justice George during an interview. Another jurist, Appellate Court Justice Miriam Vogel, was quoted in the Los Angeles Times decrying “the growth of private judging particularly when financially strapped litigants are forced by public judges into accepting private judges, referees, arbitrators, or mediators who may charge large sums for their services.” She also criticized “the exponentially growing number of available retired judges, and a dramatic increase in hourly rates and total billings, leaving those who remain in the public system to address the problems inherent in the creation of a second, separate judicial system.”
In the PG&E arbitration, Girardi, Masry and Lack expected to settle the case against the utility for $400 million, according to a July 2, 1996, letter to their clients. The case was heard before a panel of retired judges in San Francisco and Los Angeles. The former judges who heard the case were all employed by an Irvine arbitration company called JAMS/Endispute — one of the biggest such firms in the West. JAMS boasts about 300 arbitrators, including some of the more prominent retired judges in California. But the firm has also seen some controversy in its 21-year existence. In 1993, the then-chairman of JAMS, John Trotter, hired Michael Greer, a former San Diego County Superior Court judge who at the time was being investigated for accepting gifts from lawyers in his courtroom. Trotter publicly defended the hire, calling the allegations against Greer “inconsequential and in some cases absurd.” But in March 1996, right before the PG&E settlement, the ex-judge pleaded guilty to accepting $75,000 to rule favorably in cases before him. Greer eventually testified against two judges in one of California’s biggest judicial scandals.
The rules that apply in open court often aren’t followed in private court. No laws prevent the hired judges from accepting gifts from attorneys. Another criticism is that the arbitrators and their clients and attorneys often work together regularly. “The same judges are often employed by one side or the other,” said Uelman.
As it turned out, Girardi had ties to at least three of the private judges in the PG&E case: Jack Tenner, John Trotter and Jack Goertzen. Had this occurred in public court, judicial rules would have forced the judges to recuse themselves from the case due to a conflict of interest. But no such ethical standards bind participants in private arbitration.
Tenner, a retired Los Angeles Superior Court judge, officiated at Girardi’s second wedding, in September 1993. This was confirmed by his wife, Kathy Risner. (The pair are currently in the midst of a divorce.) When John Trotter sat down over dinner one night to convince then-Superior Court Judge William Schoettler to retire from the bench and work for JAMS, his friend Girardi came along, say both Schoettler and his wife at the time, Nancy Morgan, who was present. Schoettler also says that Goertzen has been a friend of Girardi’s for many years. Goertzen says the relationship is only professional.
Trotter, through a secretary, refused to comment on the case, citing a confidentiality agreement. (Tenner did not return a call for comment.) Yet, as late as 1998, Tenner and Goertzen oversaw the controversial distribution of Girardi’s Lockheed awards; and at Girardi’s suggestion Goertzen arbitrated in one of Girardi’s large cases involving Exxon.
Girardi dispenses gifts as well. “Girardi is a very generous man and very kind,” said Ralph Drummond, a former judge in Monterey County Superior Court, who used to work for JAMS and now arbitrates disputes for Girardi. During the 1989 World Series, Girardi used his Gulfstream jet to fly Schoettler and Morgan to San Francisco for the games; at the time, Schoettler was a sitting judge in Los Angeles Superior Court. Schoettler stresses that such gifts never affected his judgment. “The key is if you have a significant case before you in court,” he said. He never heard a case from Girardi or Lack in his open courtroom, so his social relationship with them was not an issue, he said.
“I became aware that I should absolutely stay away from JAMS or its retired judges when it came to any dealing with Tom Girardi,” said Laurence Janssen, a partner in the Los Angeles office of Washington law firm Steptoe & Johnson. As the defense attorney in Girardi’s infamous Lockheed case, he wanted to keep his case in open court. “The common lore imparted to me was that it would be crazy to get in front of any JAMS arbitration with Girardi.”
In a short interview in which almost all his replies were shouted, attorney Lack would not comment on the arbitrators in the Hinkley case. When asked if Trotter, Tenner and Goertzen were the arbitrators in the case, he said, “You have your facts wrong.” He would not describe the case as arbitration. “It was a real case, a full trial, with rules of evidence and a court recorder,” he shouted when asked. When asked if Salon could view the transcript, he exclaimed, “It’s confidential!”
PG&E’s attorneys may have been wary of Girardi as well. Indeed, what happened next provides a rare glimpse into the sometimes cloak-and-dagger world of nine-figure lawsuits. During negotiations in June 1996, PG&E appeared to be stalling, Girardi told clients in the July 2 letter. Then, Girardi learned that PG&E’s outside counsel, Haight, Brown and Bonesteel of Santa Monica, had hired private investigators to snoop into his bank records and private affairs, as well as those of his clients. It’s against California law to obtain confidential private records. One of the firm’s operatives, who had just been fired, took the damning information to Girardi.
The investigator, Ben Ortiz, a retired LAPD officer, was suing his former employers at Haight, Brown and Bonesteel. Around the same time, another, unrelated, case against the firm alleged similar spying practices by Haight, Brown; it also detailed the Ortiz-Girardi snooping. Buried inside this second case, worthy of a John Grisham novel, are allegations of racketeering and collusion among judges and attorneys throughout Los Angeles County. David Sharp, the attorney in that latter case, alleges that Girardi and Lack used the Ortiz affair to pressure PG&E into making a large settlement — “part of which was used to curry favor with active and retired judges involved in that case and others,” according to Sharp. His suit is on appeal.
Ortiz and Sharp claimed that PG&E’s hired counsel routinely broke the law to gain inside information in order to win its cases. In the July 2 letter, Girardi told clients that he had confronted PG&E with the damning evidence: “This was certainly grounds for us to threaten separate litigation for invasion of privacy.”
PG&E fired its law firm and hired another. On June 12, 1996, PG&E settled the Hinkley case with Girardi for $333 million, and delivered the money a few weeks later. It was trumpeted as the largest settlement of its kind.
As the case unfolded, residents say, they began to feel increasingly removed from it. “We had no idea what was going on and weren’t allowed to watch,” said Lynn Tindell, a plaintiff. (The rules for viewing depend on how the lawyers and arbitrators structure each case, according to a spokeswoman at the American Arbitration Association, the State Bar and lawyers.)
Some plaintiffs attended the hearings, while others who called their lawyers’ offices to find out the location of the private trials were discouraged from attending. “They wouldn’t tell me,” said resident Ron Gonzales. When he found out, he said, the attorneys changed the venue. “I told them it was against the law to keep this stuff from me.” Plaintiffs relied on the attorneys’ letters for details of the case.
Since no law governs procedures in these closed-door cases, pretty much anything goes — even things that would not be allowed in court. There are no public records of the case. This is another troubling aspect of the system, said Chemerinsky. “In these kinds of cases, the court system has many protections — some of which are absent in arbitration.” Indeed, as the PG&E cases continued to be heard behind closed doors, the Hinkley victims felt left out of the process.
Still, many of them were delighted to hear of the settlement’s general terms, figuring that a third-of-a-billion dollars would benefit them to the tune of a half-a-million each, minus their attorney’s fees. But in August 1996 when they were informed of the amount of their award and the circumstances of their payment, many were shocked.
First, the plaintiffs were surprised when their attorneys told them they wouldn’t be getting their money for five months. Under California State Bar Rule 4-100, an attorney has to release his client’s money “promptly,” as soon as the client asks for it. Although many factors could delay the distribution of funds for a few weeks, none of the legal experts Salon interviewed understood the lengthy hold period.
A staff attorney for the California State Bar’s Professional Competency Unit, Randall Difuntorum, said that in 1997 the bar disciplined an attorney who had kept his client’s award for an unusually long time — six weeks — before releasing it. While cautioning that he did not know the full details of the complex Hinkley case, John Sprankling, a professor of legal ethics at McGeorge School of Law in Sacramento, commented, “I don’t understand the rationale for a six-month delay.”
Lack, in the interview, said, “There were 650 cases! That was record time!” But he would not explain how the process of disbursement worked.
In a separate but similarly contentious interview, Ed Masry, the attorney Brockovich worked for, would not explain the process either. “Why are you being stupid?” he said. “It was a complicated $333 million settlement. Are you an idiot?”
The Hinkley clients tried to get answers by calling Masry’s and Girardi’s offices, but suddenly, they couldn’t get through to anyone, not even Brockovich. “None of the attorneys would take our calls,” said Carol Smith. People needed their money to pay off debts; others wanted to buy new cars and appliances. The attorneys were besieged with over 100 phone calls from clients, lenders and creditors regarding the unreleased settlement awards. It got so bad that after Aug. 21, 1996, Lack’s office wrote letters to clients telling them, “There simply isn’t time to have these conversations.” Finally, on Jan. 2, 1997, nearly six months after PG&E had deposited the money, the attorneys mailed awards to their clients. It’s not clear where the interest the money earned went. Girardi’s office sent out a “global settlement statement” that seems to indicate that the accrued interest went into the money disbursed to residents of the town.
But some of the plaintiffs say their checks did not include interest; Tindell, Smith and others said the amount they received in January was the same amount as had been announced in August. Many of the residents had a hard time reconciling the small amount of their checks with the enormous legal fees. Arbitrated cases are supposed to be quicker and cheaper than court trials. In this case, Masry, Girardi and Lack took 40 percent, or $133 million. The residents, of course, had agreed to this. But then the clients were billed an extra $10 million for expenses, which weren’t detailed. “I wrote Girardi a letter, asking for a statement of his accounting of the case,” said Gonzales. But Girardi didn’t provide one. That left $196 million for the plaintiffs, or an average of about $300,000 per victim. The amounts varied. Dorothea Montoya received $60,000; Christine Mace got $50,000; Lynn Tindell $50,000; Tiffany Oliver got $60,000. All of these people were longtime residents who had suffered presumably documented medical problems. “It didn’t make sense why my husband, who’s had 17 tumors removed from his throat, got only $80,000,” said Smith.