The Insider

Pipe Dreams
You've got to hand it to Houston lawyer George Fleming: He's nothing if not persistent in pursuing the $107 million payday he and his associates claim they're entitled to for representing approximately 38,000 clients in a decade-long lawsuit against the producers of leaky polybutylene pipe. Never mind that Fleming's request for fees and reimbursement of expenses -- nearly two-thirds of the total $170 million cash settlement -- was disallowed nine months ago by state District Judge Russell Lloyd, who called it "almost scandalous."

Now Fleming has come up with a new ploy to free up the polybutylene bounty. He's written many of his clients offering them a nominal payment from his firm, Fleming Hovenkamp & Grayson, if they'll sign away their rights to additional compensation from the disputed portion of the settlement.

Fleming contends his firm and 48 others represented their clients well and deserve the $107 million (he also calculates the settlement total to be $350 million, when the value of replacement plumbing for clients is included). Lloyd's order, he argues, violates Texas law governing contracts between responsible adults.

According to Fleming, the clients signed a contract at the start of the case agreeing to a 40 percent fee for the lawyers, "and most of them have agreed to honor the contract. They don't understand why Judge Lloyd would throw out their contracts when they are not incompetent and they are not minors."

But in view of Lloyd's ruling that cut the lawyers' share of the settlement to $40 million, Fleming says, "I thought I'd give [clients] the chance, at least the ones who want to take it, to resolve this litigation."

The clients already have received settlement checks, based on Fleming's original request for payment. If Lloyd's ruling is not overturned, the dollars shaved off the lawyers' fees -- which have been impounded by Lloyd pending an appeal of his order by Fleming -- would be disbursed to the clients.

In the letters he sent out last month, Fleming advises his clients that he expects to successfully appeal Lloyd's order. But the appeal could take years, the lawyer warns, so his firm is willing to provide a payment of approximately 14 percent to clients willing to forgo future claims to the undistributed portion of the settlement.

One such letter obtained by The Insider went to a client who was awarded a gross cash settlement of $3,611 but whose actual check came to only $1,444 after the deduction of Fleming's expenses and fees and a percentage of the discounted replumbing of the client's home. The client is now being offered an extra $213 by Fleming to sign away rights to the rest of the settlement.

"If you choose to reject this settlement offer," writes Fleming, "you may have the chance to ultimately get more, but you also risk getting nothing when the appeal is finally over. FH&G intends to pursue the appeal as to all who do not accept this offer, until the last appeals court ruling which could be years from now. We expect to be as successful in fighting for our own interests as we were in fighting for your interests against Shell, Celanese and Dupont."

Fleming goes on to advise clients that he and his partners "believe [Lloyd's] interference is wrong" and that the ruling "has placed our law firm and you in a conflict of interest."

Alan Morrison, the director of litigation for consumer advocate Ralph Nader's D.C.-based Public Citizen, contends that Fleming has charged his group of clients retail fees while actually processing their cases as a class action, with resultant savings in actual legal costs. Several other class-action suits were filed against the polybutylene producers, but Fleming has always maintained his clients were dealt with individually and never constituted a class of litigants. In a brief filed in Lloyd's court, Morrison argued that Fleming deserved only $20 million for his firm's work in reaching the settlement.

Morrison's reaction to Fleming's latest gambit is equally critical. "That letter is substantially misleading and not fairly evaluative in informing the clients of the relative likelihood of success [of his appeal]," says the consumer rights attorney. "And given the relationship of lawyer to client, I think it's highly unlikely that any agreements that he claims to reach as a result would be enforceable."

Fleming counters that Public Citizen has no standing in the case and says Morrison doesn't know what he's talking about. "He's trying to put himself in the role of representing 38,000 clients that I've represented for ten years? So he's going to tell the clients [who agree to the fees] that they can't do that? Baloney!"

Lloyd, meanwhile, acknowledges he has seen Fleming's letter to clients, but refuses to comment on a pending matter in his court.

Attorney Jim Moriarty, a former partner of Fleming in the polybutylene litigation, calls Fleming's letter "outrageous."

"George doesn't seem to understand the basics," says Moriarty. "The basics are that the judge has awarded him his fee, and all this dickering around and making offers to the clients flies in the face of the judge's order."

Moriarty and Fleming do have a history. Moriarty says that after he interviewed the first potential polybutylene plaintiff in February 1987, he quickly realized the enormous size of the undertaking and recruited Fleming to finance the litigation. But the two parted ways in the early nineties because, says Moriarty, "I just couldn't stand his greed anymore."

Moriarty says he's surprised Lloyd hasn't appointed an ad litem attorney to represent the interests of the clients, "because the real tragedy here is that the people who are owed the money aren't being represented by anybody. It's obvious the lawyer who has been paid tens of millions of dollars already has no interest whatsoever in looking after the interest of the client."

"That's nonsense," retorts Fleming, who says that over ten years his firm and 48 others in 13 states spent at least $22 million in documented expenses on jury trials, appeals and more than 8,000 depositions, among other items. For all that and more, argues Fleming, $85 million in legal fees, on top of a reimbursement for the $22 million in expenses, is reasonable.

As for Moriarty's labeling his old partner as "greedy," Fleming shoots back, "If hypocrisy was an Olympic sport, Moriarty would take the gold, silver and bronze." Fleming claims his fee arrangement was similar to Moriarty's.

But not all of Fleming's polybutylene clients are happy with the outcome of the litigation. Neal Barbee remodeled his mobile home in Baytown using polybutylene piping, which later failed and caused more than $40,000 worth of damage. He signed on with Fleming's firm and eventually received a settlement of $39,500. But after Fleming claimed his cut, Barbee wound up with a check for $19,000.

Barbee's claim was much higher than the average plaintiff's, and in hindsight he feels he should have been represented separately rather than being bundled with thousands of smaller cases. Barbee says he asked Fleming's attorneys whether it would be better for him to file an individual suit, "and they said, 'Let's go with the lawsuit, you'll be compensated fairly.' And they were saying Shell and Celanese would pay the legal fees."

Barbee says he tossed the letter he received from Fleming last month offering him $1,096 to sign over his settlement rights.

"He gouged us the old-fashioned way," says the embittered retiree. "He told us one thing with one hand and did something else with the other hand. He wasn't fair."

Fleming says Barbee's case required two home inspections costing $200 each and a 138-page deposition that cost $500 for the court reporter alone, as well as extensive preparation for the deposition.

"If you figure what we earned hourly, we didn't make much more than checkers at the Randalls stores," claims Fleming, who notes that Barbee signed a contract agreeing to the lawyers' fees.

Despite the criticism from various quarters, Fleming is unrepentant.
"I haven't picked up a file and just settled this case," he says. "We did it the old-fashioned way -- we worked for our money. I don't think you're really talking an outrageous legal fee."

Tell it to the appeals court, counselor.

Barkley Posts Up
The adjectives "Byzantine" and "Machiavellian" always seem to come up short in conveying the reality of courthouse politics. Case in point: the jockeying for position in the upcoming Republican primary for the judgeship of Harris County Criminal Court No. 14. The bench is now occupied by Republican Jim Barkley, whose previous sideline of selling golf clothes out of his judicial chambers earned him the honorary title of "the Harold Wiesenthal of the county judiciary," a reference to the colorful Heights clothier and golf enthusiast.

Barkley announced earlier this year that he would not seek re-election. Marshall Shelsey, a county court administrator and friend of Barkley's, then declared his intention to run for Barkley's seat. At the same time, the apparent upcoming opening in Court No. 14 also attracted the eye of Shirley Cornelius, an assistant prosecutor under District Attorney Johnny Holmes.

Because Holmes forbids his employees from running against incumbent judges without resigning from the D.A.'s office, open benches are a prized commodity for assistant prosecutors seeking career advancement. Cornelius, who was jockeying with another prosecutor to run for a to-be-vacated county court position, immediately changed her trajectory and set her designs on Barkley's bench.

Barkley previously settled a damage suit against a local hospital for a botched cancer diagnosis, and during interrogatories for the suit indicated his health would not allow his standing for re-election. But within days of Cornelius's decision late last month to seek election to his court, a reinvigorated Barkley notified GOP headquarters that he would indeed be running in next spring's primary. Shelsey, meanwhile, said last week that he was dissolving his campaign committee and notified Holmes's first assistant, Don Stricklin, of that decision. Since the district attorney has nothing to do with campaign filings, the call was taken as a notice to Holmes that his assistant should get out of the race.

To Cornelius and other court watchers, the suspicion is strong that Barkley is simply blocking prosecutors from challenging Shelsey and will conveniently step aside either before or just after the primary filing deadline to give his friend an open path to his bench.

Barkley dismisses the conspiracy theory and vows he will indeed stand for re-election.

"I changed directions," explains the judge. "I just decided to run for re-election. No jockeying or anything."

Barkley does allow that he and Shelsey are close friends and says he was planning to support Shelsey for the bench. But Shelsey, according to Barkley, alerted him to some unspecified personal issues that gave Barkley additional reasons to seek re-election.

But Cornelius has no doubt that her boss's rule is being exploited to clear the field for Shelsey.

"I do think Barkley will file, and I think Marshall will file right behind him. And Barkley will then withdraw his name," she says.

Cornelius met with Holmes last week to vent her frustration. "As I told Johnny," she recounts, "they're going to get away with doing this, and circumvent the whole democratic process, whether you like it or not." Cornelius says she is not in a position to resign and forgo county insurance coverage for her family.

Holmes has no intention of altering his rule banning his prosecutors from running for occupied benches, a stricture he formulated after then-judge A.D. Azios accused Holmes of encouraging a subordinate to run against him in the early eighties.

"I don't want that rule to be used in this manner," Holmes says of the alleged Barkley-Shelsey squeeze play. But if it is indeed a conspiracy, Cornelius has the option of either resigning and running now or waiting out her opponents to see what they do. Holmes says he had this advice for Cornelius: "Suppose [Barkley] stays in there? How bad do you want the bench? If you want the bench, run for it, whether it's occupied or not."

Easy for him to say.

Hotzemania, Round Two
The legal contretemps splintering the first family of Houston conservatism, the Tanglewood-bred Hotzes, has taken an exceedingly nasty turn, judging by a court filing last week in Fort Bend County.

As first reported here ["All in the Family," July 24], Chris Hotze and Gretchen Hotze Heerensperger filed suit in February against five of their older brothers -- including political activists Bruce and Steven -- accusing them of damaging the younger siblings' financial interests by exploiting the family business, Compressor Engineering Corporation, for their own benefit. Chris and Gretchen accused their older brothers of taking disguised dividends and inflated compensation, and of squandering "time and money on personal political gains."

Steven Hotze runs a web of political action committees and private companies involved in religious right politics. Bruce Hotze spearheaded the unsuccessful initiative to force City Council to get the approval of voters for substantial tax and fee increases. Compressor Engineering has been used as a political staging base by both.

Last week the younger Hotzes claimed their brothers have retaliated against them for filing the suit by engineering a cash call against notes held by the family's limited partnership, Inter Nos, which is funded by Compressor Engineering. Chris and Gretchen are minority shareholders in both.

According to court documents, Bruce, Steven, Rick, David and Mark Hotze control both Compressor Engineering and Inter Nos, and Compressor Engineering is now refusing to loan Inter Nos funds or allow renewals on outstanding promissory notes from Inter Nos to Compressor Engineering.

"If plaintiffs fail to meet the cash call, they are in jeopardy of forfeiting their entire partnership interest to defendants," the younger Hotzes claim in their pleading. The tactic, they contend, "is merely a continuing attempt" to force them out of the family business.

The latest filing also adds another brother, Jim Hotze, a Republican activist and CPA, to the list of defendants. However, the document specifies that Jim is included only because of financial technicalities and exonerates him from involvement in the alleged "oppressive" actions by the other Hotze brothers against Chris and Gretchen.

The plaintiffs are asking that prior to a jury trial, the court appoint a receiver for Inter Nos and an appraiser for Compressor Engineering, and enjoin the older Hotzes from using funds from the family businesses for their legal costs, or from trying to dun their siblings for more cash for Inter Nos.

If this mess ever gets to trial, those who have long wanted to put a microscope on the connections between the Hotzes' private and political finances should have plenty to eyeball.

Maxine, Hard at Work
A sharp-eyed correspondent called our attention to this July 30 press release from UH's office of media relations:

"University of Houston School of Theatre Director Sidney Berger will be in Los Angeles Aug. 35 to make a cameo appearance on the set of the remake of the 1962 cult classic Carnival of Souls. Berger played the role of John Linden in the original, and film producer Peter Soby has asked him to play a small part in this new Hollywood version. Berger says this will be the second time he has had to revisit Carnival of Souls. Several years ago People magazine documented the rescreening of the film, and Berger was a part of the endeavor as well. 'The film itself is spooky and looking at my character from a distance would be even spookier,' says Berger."

As our correspondent noted, the UH-produced verbiage had a remarkable similarity to this item from gossipist Maxine Mesinger's column in the Chronicle two days later:

"Sidney Berger, director of the University of Houston School of Theatre, will be in L.A. Sunday through Tuesday to film a cameo role in the remake of the 1962 cult classic Carnival of Souls. Berger played the role of John Linden in the original, and producer Peter Soby has asked him to play a small part in this one. Actually, this will be the second time he has had to revisit Carnival of Souls. Several years ago People magazine documented the rescreening of the flick, and Berger was a part of the endeavor, as well. 'The film itself is spooky and looking at my character from a distance would be even spookier,' says Berger."

Firsthand Knowledge
Ousted UH System chancellor Alexander Schilt will be back in the classroom this fall, teaching in the School of Education's Department of Educational Leadership and Cultural Studies on the UH main campus. His subject, for students who want to hear it from the horse's mouth, is "Current Criticism of Educational Leadership." Maybe he'll just read his old press clips.

The Insider can be reached at 713-624-1483 or 713-624-1496 (fax), or by e-mail at Insider@houstonpress.com.

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