Potentially bankrupting lawsuit returned to California Supreme Court

The California Supreme Court has refused to catch a Hail Mary pass thrown by the City of Hermosa Beach, which must return to a trial court to try to stave off bankruptcy in a $700 million lawsuit by a spurned oil company.

The high court declined to step in to the 12-year-old lawsuit, rejecting a long-odds request by attorneys for the city, who hoped the justices would dismiss the breach-of-contract lawsuit by Macpherson Oil Company.

The company once held a contract with the city, allowing it to slant-drill under the Pacific Ocean from municipal land at Sixth Street and Valley Drive. Then Hermosa voters weighed in against the project in 1995, and a previous City Council in 1998 declared the contract canceled, citing safety concerns.

After years of arguing up and down the court system, the city has been told that it can get out from under the breach-of-contract claim if it can convince a jury that the oil drilling project was too dangerous to allow. With the Supreme Court’s decision not to intervene, the case will return to that trial court for testimony and arguments to determine whether Macpherson can collect all – or any – of the damages it seeks in lost profits.

City officials have long contended that municipal bankruptcy would result from a judgment anywhere near the multimillions sought by the oil company, an amount about 22 times Hermosa’s annual operating budget.

“We had filed a petition with the Supreme Court in the hope that the justices would put an end to this costly and time-consuming litigation,” Mayor Michael DiVirgilio said.

“Now that the high court has made its decision, our legal team will prepare a compelling case for the trial court that will defend the Hermosa Beach City Council’s decision to protect the health and safety of the community without facing the threat of huge judgments that could jeopardize the city’s future,” DiVirgilio said.

Jim Bright, attorney for Macpherson, said of the Supreme Court decision, “Needless to say, this is a victory.”

Bright predicted the city would have trouble with what he called a “ray of hope defense” that the drilling project was too hazardous to allow.

“The city’s in a world of hurt,” he said.

The last time lawyers argued in court over the oil project was Dec. 7, 2009, when a state appeals court gave the city a partial victory by allowing it to argue the safety issue before the trial court now set to hear the case. Before that ruling, the trial court was scheduled to consider the amount of damages the city would owe Macpherson, without any further consideration of the drilling project’s potential hazards. ER

Comments:

comments so far. Comments posted to EasyReaderNews.com may be reprinted in the Easy Reader print edition, which is published each Thursday.