Los Osos Community Services District’s law firm resigns

Firm that helped block waste treatment plant from the center of town cites conflict of interest

Sona Patel

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The law firm that helped a group of Los Osos residents block construction of a sewer in the middle of town and later represented the town’s services district as general counsel has resigned, citing a potential conflict of interest linked to a lawsuit filed against the district.

In a June 4 letter to board members, attorney Julie Hayward Biggs of Los Angeles law firm Burke, Williams & Sorenson wrote that “certain issues related to the pending litigation filed by Taxpayers Watch have put us in an untenable legal position.”

Taxpayers Watch, a citizens group, filed suit in January 2006, alleging that district board members improperly spent about $488,000 to settle five lawsuits.

Biggs declined to comment Tuesday about the resignation.

Services district General Manager John Schempf said the law firm did not provide additional details of the resignation.

“It wasn’t that (Biggs) didn’t get paid or was mad at anyone,” Schempf said. “I got the inkling that there were legal reasons for it.”

The district has been paying its legal fees since it filed for Chapter 9 bankruptcy. But Burke, Williams & Sorenson still has two claims for previous fees owed to it.

The firm is among the largest creditors in the bankruptcy. The district owes the firm about $422,000 in legal fees unrelated to the settlement. And, the firm has a nearly $212,000 claim for the remainder of the $488,000 settlement at the center of the Taxpayers Watch lawsuit.

The district filed for bankruptcy in August 2006 as a way to deal with more than $45 million in debt stemming from failed attempts to build a sewer.

In its 2006 lawsuit, Taxpayers Watch — made up primarily of former board members Richard LeGros and Gordon Hensley—sued board members Chuck Cesena, Lisa Schicker, Julie Tacker, Steve Senet and ex-board member John Fouche.

The lawsuit alleges that Cesena, Schicker, Tacker, Senet and Fouche had agreed to pay about $488,000 to settle the lawsuits against the agency’s old leadership.

Before the former Los Osos board was recalled Sept. 27, 2005, it was involved in several lawsuits. The plaintiffs in some of those ended up winning election to the district board after the recall.

On Nov. 20, 2005, the new board dropped the old board’s lawsuit against Measure B (which defined where in the community a sewer plant can be built).

That initiative was designed to block construction of a midtown sewage treatment plant. Voters narrowly approved the measure and as part of the same election overthrew the board majority.

On Nov. 23, 2005, the district settled the activists’ lawsuits.

That day, the new board hired the activists’ law firm— Burke, Williams & Sorenson.

The lawsuit filed by Taxpayers Watch argues that the new board members — who had supported the activists’ efforts —had personal ties to the organizations that benefitted from those settlements.

The money used to pay those settlements came from a low-interest state loan given to the district to build a sewer, according to the lawsuit.

The lawsuit asks that the district reclaim the settlement money paid to Burke, Williams & Sorenson.

Biggs declined to comment on details of the law firm’s potential conflicts of interest. “Because the Taxpayers

Watch case is inextricably intertwined with the pending bankruptcy and the various matters of litigation that are being pursued or are stayed by that action, we also are prohibited from further representation of the district in any of those matters,” according to the letter.

San Luis Obispo-based firm Shipsey & Seitz — general counsel from the formation of the district in 1998 until the recall election—will serve as interim general counsel, Schempf said.

The board will decide at Thursday’s meeting whether to begin searching for a permanent general counsel.