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LA WATCHDOG - The Lineage fire in Boyle Heights on June 17 resulted in the destruction of a 500,000 square foot cold storage warehouse and 85 million pounds of frozen food. It also resulted in significant health and environment damage to the local community.
There will be commercial litigation involving Lineage, the operator of the warehouse; Altus Power, the operator of the rooftop solar arrays; Chill Build, a limited liability corporation that owns the facility; the warehouse customers who lost an estimated $250 million in products; numerous insurance companies; and all their lawyers. This litigation will try to determine who is at fault and who pays for the damages that could easily exceed an estimated $500 million, if not more.
This commercial litigation will be a brawl between batteries of lawyers, all of whom are paid by the hour, with no incentive to halt the gravy train. But ultimately, after years of posturing and litigation, there will be a resolution of the issue determined by an agreement among some or all of the parties, arbitration, or by a judicial or jury verdict.
The real rumble will be litigation initiated by the class action lawyers as they pursue claims on behalf of their aggrieved clients who have been recruited by these ambulance chasing attorneys. These lawyers work on a contingency basis where they receive a fee based on the amount of any judgment, usually in the 30-40% range.
In this case, the lawyers, their mouths watering, are viewing Lineage and Altus Power as big fat juicy targets. Lineage, a public company, has a market capitalization of over $10 billion and a healthy cash flow. Altus Power was recently purchased by a private equity investment firm for $2.2 billion.
Today, it appears that Lineage and its top executives are responding to the crisis. The company is working diligently to remove the 85 million pounds of rotting product. Efforts are being made to mitigate the health and environmental hazards, including working with the City and numerous other local organizations.
One alternative is to limit the fees of the class action lawyers so that the plaintiff and residents receive higher payouts. This could be done by limiting contingency fees to 25% (or less) of any judgment after the payment of all expenses. This arrangement is like the one proposed by Uber in its measure that qualified for the November ballot but was dropped because of an arrangement between Uber and the State’s politically powerful trial lawyers.
Another alternative would be to have a global settlement that would consolidate all the litigation into one class action that would limit the involvement of the billboard lawyers. This may include a global settlement that covers the estimated 85,000 residents of Boyle Heights as well as others in the surrounding neighborhoods.
The goal is to arrive at a timely settlement that mitigates the health and environmental damages as soon as possible, compensates the residents and local community for damages, reimburses the City for its expenses, and to limit the involvement of the unproductive ambulance chasers. This may require the courts, the City, and Sacramento to force a reasonable and timely settlement.
(Jack Humphreville writes the LA Watchdog column for CityWatch, where he covers city finances, utilities, and accountability at City Hall. He is President of the DWP Advocacy Committee, serves as the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and is a longtime Neighborhood Council Budget Advocate. With a sharp focus on fiscal responsibility and transparency, Jack brings an informed and independent voice to Los Angeles civic affairs. He can be reached at [email protected].)
