Carlyle tries (again) to force release of the city's Mountain Water legal bills

Missoula Mayor John Engen says the city wants to be “as open as we can.”

Mountain Water and its parent investment firm, the Carlyle Group, spared no expense in trying to keep Missoula's water utility out of public hands. They flew in attorneys from the firm that represents Hillary Clinton, traveled to airports by limousine and billed more than 130 eight-hour days simply "assessing" the case.

And the city's attorneys embarrassed them for it.

"We've made some hay out of some of the silly stuff, ranging from Metamucil to lunch at Hooters," Mayor John Engen says, "but fundamentally, when Robert Dove, as director of Carlyle's Infrastructure Fund, said he was going to make this as expensive as possible, he kept true to that."

Even after turning over the utility in June, the firm continues to fight for every last dollar. Its latest legal filing seeks to put ratepayers on the hook for an additional $3.1 million in attorney fees and expert witness expenses that a judge previously ruled to be exorbitant.

In pursuit of its case, Carlyle is trying again to drag the city's legal expenses into the light of day, in hopes of proving that its own fees were no more excessive than what the city's private lawyers have billed Missoula ratepayers, according to an appeal filed with the Montana Supreme Court last month.

The condemnees first sought to inspect the city's bills last year as the same argument played out in Missoula County District Court Judge Karen Townsend's court. Because the final valuation of the utility was higher than the city's offer, Mountain Water was entitled to "necessary litigation expenses" incurred during the condemnation suit. Townsend shaved $3.1 million from the $7.1 million in claimed fees after they were scrutinized by city attorneys. Carlyle claimed the city was a pot calling the kettle black, but Townsend declined to make the city produce detailed invoices, saying city expenditures were irrelevant.

Since then, the Indy and Missoulian have requested the same records, but been rebuffed by city officials who worried their release could affect future litigation, such as the appeal filed last month. (Carlyle's opening brief cites a February Indy story about the city's refusal to produce the bills.) On Oct. 17, the city denied a joint request filed by the newspapers after ownership of the utility was transferred. Engen says releasing the records now could jeopardize the city's position in the new case and "cost ratepayers more money."

The current appeal is one of six lawsuits related to the condemnation still pending, and marks the seventh time the utility's former owners have appealed to the state's high court. Natasha Prinzing Jones of Boone Karlberg, one of the city's lead attorneys, describes the suits as "tangential," though they involve significant sums. In addition to the $3.1 million at stake in the attorney fees case, a separate suit in Helena district court seeks to reimburse Mountain Water for property taxes it paid under protest during the condemnation process—around $5 million, Missoula County attorneys said earlier this month.

Were the city to lose the cases, it might have to increase water rates or defer planned capital improvements, Engen says. Rates are currently set at 6 percent less than Mountain Water's 2014 levels (6 percent being the penalty that Montana's Public Service Commission imposed on the then-private company for its unauthorized sale to Liberty Utilities last year). But Prinzing Jones says she's "very confident" the city will continue to prevail in court, as it has throughout the three-year condemnation process.

City officials estimate their running legal tab, including attorney and expert witness fees, is about $8 million. That's comparable to the condemnees' costs, as Carlyle points out in court documents. But the city contends that such a comparison is "apples-to-oranges" and argues that the city's legal bills are high because Carlyle and Mountain Water made sure they had to be.

"Carlyle's strategy was to unabashedly use its vast resources and army of attorney [sic] to bury the city and its few attorneys," the city wrote in an Oct. 4 reply brief. Prinzing Jones says her firm billed the city at a discounted hourly rate of $200.

But exactly how the $8 million bill was tallied may never be fully disclosed unless Carlyle prevails in its appeal. Engen won't promise to release an itemized accounting of the city's fees even after litigation wraps up, saying only that he wants to be "as open as we can." In a joint interview with the mayor, Prinzing Jones made a case for not releasing invoices, comparing them to medical records between a doctor and patient.

She also said the cost to review each line item and redact confidential information would make the exercise irresponsible.

"The cost attached to that analysis alone would be thousands of dollars," she says. "And that would be an absolute waste of taxpayer dollars at this point."

Staff Reporter

Staff Reporter

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