ELECTION 2008: What's Next for Latham in San Diego?

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November 11, 2008 4:24 PM

ELECTION 2008: What's Next for Latham in San Diego?

Posted by Ross Todd

CORRECTION: Our original post failed to mention the name of the firm that co-wrote the briefs in San Diego's 2006 appeal of the Roque De La Fuente case--Horvitz & Levy--and the lawyer who argued the appeal--partner Barry Levy. We regret the omissions.

As chronicled in in this month's issue of The American Lawyer, three Am Law 100 firms have run into trouble with soon-to-be-former San Diego City Attorney Mike Aguirre. Orrick, Herrington & Sutcliffe, Vinson & Elkins, and Willkie Farr & Gallagher all have wound up defending themselves against lawsuits brought by Aguirre in connection with their work sifting through the city's pension crisis. (Orrick and V&E have settled with the city; Willkie has so far refused.)

Meanwhile, Latham & Watkins, a firm that has defended the city of San Diego in multiple suits, has been able to forge a much more productive relationship with Aguirre and his office. Now, though, Latham's most-favored-firm status could be in jeopardy given Aguirre's election day loss to state court Judge Jan Goldsmith. Goldsmith has promised to reel in city spending on outside counsel, and though Latham can boast some headline-grabbing victories, it can also claim some of the city's highest billing rates.

Latham's work for San Diego began after the city suffered a big trial loss in 2001. A jury awarded developer Roque De La Fuente $94.5 million after a state court judge found that the city had breached a development agreement with him, effectively condemning his Border Business Park, and forcing the project into bankruptcy.

After that loss, Aguirre's predecessor, former city attorney Casey Gwinn, hired Latham's appellate team, led by partner Kristine Wilkes to handle the appeal. With post-judgment interest and attorneys fees inflating the city's liabilities to $150 million, Wilkes and company were able to whittle away at the award by first obtaining a one-third reversal in post-trial motions. In 2006, the California Court of Appeals reversed most of the trial judge's original ruling against the city and remanded De La Fuente's contract claims back to the trial court. Finally, this past June, a different state court judge dismissed all claims against the city--a remarkable turnaround considering the city had offered De La Fuente a $50 million settlement in the midst of the appeals process, according to Wilkes and Don McGrath, Aguirre's top deputy.

Latham followed up the trial reversal by winning attorneys fees from De La Fuente in the Border Business Park case and two related matters. Latham teamed up with insurance recovery specialist Harvey Levine of Levine, Steinberg, Miller & Huver to take on the city's insurers at the Insurance Company of the State of Pennsylvania, a subsidiary of AIG. The insurance company, which had delayed paying for the city's defense during the course of the De La Fuente suit, ultimately agreed to pay the city $5.5 million as part of a settlement in October. The insurer also agreed to cover 80 percent of all outside counsel fees and 100 percent of court costs going forward--no small sum considering that Latham and cocounsel racked up $7 million in fees and court costs from 2001 to the reversal judgment this summer.

Contacted after this fall's insurance victory, Wilkes called the city her favorite client. "It’s like being in government but with all the resources of being at Latham,” she says. "It makes it even better to know that we’ve helped the city to recover on the cost that they’re spending on our fees."

But with Goldsmith taking office and promising to cut spending on legal fees, what are Latham's prospects for future city work? Goldsmith, taking a post-election vacation in the Caribbean, could not be reached. A Latham spokesman said the firm wouldn't comment on how election results might affect client relationships. One potential complication: According to campaign finance filings, Wilkes had given $640 to Aguirre's re-election efforts as of October 18.

Asked about how the donations might affect her relationship with the incoming city attorney, Wilkes told the Am Law Daily she's been through this process with a government client before, noting that she was actually one of the top fundraisers for Aguirre's opponent in the 2004 municipal election.

Still, perhaps it's not too early to make a donation to city attorney-elect Goldsmith's re-election campaign.

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