King Benjamin's Mine
Benjamin Hall has never lacked for audacity, and the latest legal gambit of the self-described "South Carolina country boy" has Houston energy executives fuming and political consultants shaking their heads in bemusement.
As Mayor Bob Lanier's city attorney, Hall ramrodded a lawsuit against Valero Energy that resulted in the company forking over $14 million to the city for unpaid user fees on pipelines running under Houston rights of way. Hall hired noted plaintiffs' lawyer John O'Quinn to work with the city's legal department on that suit, then resigned as city attorney at the end of last year to join O'Quinn's firm, O'Quinn, Kerensky & McAninch. [See "Boss Hall," by Brian Wallstin, in the December 22, 1994, Houston Press.] He was barely out the door at City Hall when he began recruiting Texas municipalities for a large-scale blitzkrieg against pipeline owners using principles he learned in the Valero litigation.
Hall is considered a potential mayoral candidate in many quarters, but he may have struck a gusher of political poison along with the vein of legal gold he sees buried beneath the streets and other properties of the state's cities. The companies he's now attacking are the very firms whose contributions help fuel the campaigns of candidates for Houston city offices, and, as a major downtown player points out, the local economy remains very energy-dependent: "The major employers are energy companies, all of whom have pipelines that run under public streets. And they are, it's safe to say, furious about the theory that Benjamin's advancing. People don't soon forget those sorts of things."
A consultant who works in city campaigns puts it more bluntly: "The spin out there is Ben has totally screwed himself with the business community in filing this lawsuit and his chances for a shot at the mayor's seat or any political office are now dead ... Hopefully, he'll make a lot of money from this, 'cause that's all it's going to get him, if he wins."
Hall acknowledges he might pay a price for the litigation, but says the pipeline companies' "greed" won't cause him to back off.
He's doing it for the little guy, he explains.
"The taxpayers deserve this," he says, "and nobody deserves to use public property without paying for it."
Hall claims to have more than 20 municipal clients lined up, and he already has filed two suits on behalf of Baytown -- one against a group of Enron subsidiaries and one against Houston Lighting & Power. In the former, Hall is squaring off against attorneys from his old law firm, Vinson & Elkins.
The basic theory that Hall is pushing is that the transmission pipelines that run under cities' rights of way are actually distribution lines, similar to cable and electrical lines, and therefore the owners are subject to municipal franchise fees.
"The law requires anyone using public property to get the consent of cities to use public property," says Hall, who claims that a number of companies have simply trespassed on public property without permission. "We've found 'em. Now they are all upset because they've essentially stolen public property, didn't get the consent, and don't want to pay for it."
Some companies have even been making money off the use of municipal property that they never had rights to in the first place, Hall claims. "There are so many tricks that have gone on, it's almost unforgivable what we've discovered," he says. "People are not only using public property, but in some cases leasing public property for profit. Those people who are doing that would not like this [litigation] to go on. They'd like to kill it."
His predecessor as city attorney, Clarence West, credits Hall with pointing the way to a line of litigation that could mean big bucks for taxpayers and attorneys. West himself is considering signing on some municipal clients of his own for similar lawsuits.
"In my looking at the statutes, I think the pipeline companies have to have consent of the cities," says West, now with the firm of Dow Cogburn & Friedman. "I think they have to pay street rental fees. What the magnitude of the fees are will be determined by how many streets they cross. In aggregate, it could perhaps add up to a substantial amount of money."
Hall's targets apparently think so, too, because they're going all out to exterminate the litigation before it spreads. A raft of energy companies have formed the Texas Energy Coalition Against Lawsuit Abuse, with Fulbright & Jaworski as their counsel, and they've launched a publicity and lobbying campaign utilizing consultant Denis Calabrese and Austin publicist David Weeks, among others. Hall labels the maneuver a propaganda effort by the coalition members because "they can't win in court, and they're trying to win it now by causing cities not to collect the money." The coalition, Hall claims, is hoping to stall litigation until the next Legislature, when they can get designer legislation from compliant lawmakers to immunize pipeline companies from the municipalities' claims.
Calabrese says Hall's argument that the pipeline companies owe the cities 2 percent to 4 percent of their gross receipts doesn't make sense.
"[Company officials] have been in meetings with Hall, where they say 'What do you mean, how can we have 2 to 4 percent of gross sales? We don't make sales,'" Calabrese claims. "Hall says, 'Then, maybe we need to talk about another way to base this on.'"
Still, Calabrese's employers aren't taking Hall's threat lightly. O'Quinn and Hall are hardly flakes, and the liability involved could run into the billions, says Calabrese, noting, "It would be quite the precedent to set if you could put a surtax on pipeline companies like you can distribution companies -- something that in our opinion is unheard-of and brand-new."
Hall won't divulge the names of the clients he's signed up and says there's a good reason to keep mum for now. "Can't give you that," he says, "because they have targeted my clients. Every time they learn of one of my clients they rush to that city and bombard them, [saying] 'Those people are going to drive us out of business if you sign them up.'"
Calabrese expects the coalition to zero in on any city that is a potential plaintiff. "Hall said he had 23 cities signed up," muses Calabrese. "I'd sure like to know who they are. The coalition has got to go out and tell its story in all those cities, and hopefully those he hasn't gotten to yet."
Hall claims his opponents' activities are just helping to spread the word about the pipeline lawsuits and attracting more clients for his firm. He's even considering casting the coalition's activities as a violation of law. "They may be involved in a civil conspiracy because it's unlawful for [the pipelines] to be on public property [without permission]," Hall says. "They're conspiring to stay there without paying for it. So we're looking at whether criminal charges may be brought against them, in addition to a civil charge."
Among the cities Hall wants to add to his stable of clients is his former employer. "I didn't want anybody to say I was going back to my home to use my influence there, but I anticipate that I will," he says of the chances the city of Houston might sign on with him.
While one source claims Hall has been telling people Lanier supports the concept, the attorney is coy. "I don't know what the mayor's position is," says Hall, "but having worked with him a number of years, I know that if the city is owed any money, he is not apt to turn away from that issue."
Lanier was unavailable for comment, but co-chief of staff Dave Walden seemed decidedly cool to the idea.
"I think he's out trying to get clients and make money," says Walden of Hall's efforts. "I can categorically deny that we've got any contract with Mr. Hall. Nor do we have any intention of seeking a contract."
Walden says the issue is being reviewed by Hall's successor at City Hall, Gene Locke, and regulatory affairs director Kathy Moseley, and so far the Lanier administration hasn't been informed "that there's anything there to pursue."
Nevertheless, the energy coalition is taking no chances, and has requested an audience with Lanier. Walden says that is in the works.
Hall's pursuit of the pipeline litigation is only the latest example of a public official quitting his job, then using the knowledge and contacts accumulated on his public watch to make hay in the private sector. Former city attorney West did something similar.
"Just like anybody who works in government service, you gain some insight both as to how [government works] and, with a city the size of Houston, you also gain knowledge of situations which may arise in other cities," explains West.
During West's tenure as city attorney, he became well-versed on the subject of improper franchise payments from telecommunications companies, particularly Southwestern Bell. "When I left the city, I did talk with and have represented other cities in franchise matters with telecommunications companies where they also had not been paid properly," he says.
Hall says he gave everyone fair warning of his designs in his farewell news conference at City Hall, when he said a motivating factor in his resignation was the prospect of an income in "seven figures."
"I said I was leaving to collect debts owed to taxpayers by corporate users of public property," notes Hall. "I left with the intention of doing precisely what I'm doing. And it's just worked out to be very nice, it sure has."
Even Hall's opponents concede his suits will likely win money for his clients, though they contend his visions of billions in revenue will shrink drastically when both sides sit down to bargain.
"To the pipeline companies' credit, they've looked at all the law, and they say the only thing they can find is that the city can impose a reasonable regulatory fee that's related to their cost of having a pipeline under a city street," says Calabrese. He predicts the companies would likely pay "whatever that fee might be ... but that's not what the plaintiffs are talking about."
In any event, the reaction of the energy companies indicates that even if Hall has yet to strike pay dirt with his lawsuits, he's certainly hit some very sensitive nerves. And if he ever runs for office in the future, the attorney will likely not find many energy dollars in his campaign coffers. Of course, by then he may not need them.
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