But our eyes weren’t the only ones that got a little bigger as we approached trial. Macpherson also realized the potential downside in a jury trial and saw the benefits of settlement. That both sides were within a month of picking jurors and making their opening statements was a scenario that never existed before and would never exist again. As it turns out, there is some truth to the old saying that most settlements occur on the courthouse steps. Last month, we were on the courthouse steps.
Others have said the City should have taken the case to judgment, because even if we lost, we would be able to ward-off any real fiscal pain by declaring bankruptcy. This is not true. In fact, two years ago the two of us made this same argument to the Honorable John E. Ryan, a retired federal district court judge who had graciously offered his services to mediate a settlement between the City and Macpherson. Judge Ryan, who oversaw Orange County’s bankruptcy in the late 1990’s, said two things that informed our approach to this settlement. First, he told us that ours would be a bankruptcy from a judgment and that that was different from other communities with “cash flow” issues (i.e., Vallejo, Stockton) because there was no precedent for it. And, to drive the point home, the former Navy fighter pilot tapped his copy of the U.S. Bankruptcy Code and looked us dead in the eyes and in his thick Boston Irish accent said, “You might get into bankruptcy but there’s no chance of you getting out of it. It is no trapdoor.” In other words, the City wouldn’t escape a judgment because it was more than we could afford. As the judge who presided over the largest municipal bankruptcy in American history, we trust he would know.
Regarding the coming oil project proposal, it is understandable that residents want conclusive answers about safety, the environment, noise, height, pollution, and the potential upside as well. We await these details as well, and the City Council structured the settlement with an eye towards these concerns. In other words, E&B will be educating us on the full scope of their project proposal, both impacts and benefits, well in advance of making any decision. The project proposal will go through an environmental review process that includes feedback from the community before ultimately being placed on the ballot for a yes or no vote by the residents of Hermosa Beach.
At a minimum, we’re confident E&B will propose a different project than Macpherson did. Why? Because this isn’t 1992. Whatever project E&B finally proposes will have the advantage of 20-years of technology advancements, and E&B’s size and the high price of oil today will allow them to address issues Macpherson couldn’t have.
One last point. Some have said the Council was wrong to even allow the prospect of a vote on oil drilling. “We have already voted it down once,” they say, “and we shouldn’t have to vote again.” Fine. When the measure comes up for a vote your choice is clear. In fact, the settlement was designed to allow folks to disagree. More so, we think this is the way the process is supposed to work; that the voters get to decide the City’s future on major issues. Not the City Council. Not a jury. Not a bankruptcy judge. Voters do. You do. After considering all the facts and circumstances the residents of Hermosa Beach will get to decide.
More than anything, we are ecstatic that the lawsuit is finally over. The threat of hundreds of millions of dollars is gone, and this is the first time for nearly a generation that Hermosa Beach does not face the prospect of financial ruin from the Macpherson lawsuit. Our potential liability of $750 million is capped at $17.5 million. Viewed another way, a $750 million judgment breaks down to a liability of more than $100,000 per parcel. The $17.5 million equates to a liability of $2,500 per parcel. That alone is enough for us to be pleased with the settlement, but our knowledge of the lawsuit makes us even more certain that the City is walking away with a very good deal.
