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VOL. 124 | NO. 222 | Wednesday, November 11, 2009

Ruling Allows City To Switch Sides In Lee Suit

By Andy Meek

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The city of Memphis can switch sides in a lawsuit against the former head of the city-owned utility company in an attempt to recoup money the city paid this summer to that official, a judge decided Tuesday morning.

Shelby County Chancellor Arnold Goldin approved the city’s turnabout in a lawsuit filed this summer by attorney Ronald Krelstein. His suit – originally filed against the city – was an attempt to recover $426,422 the city paid this summer to former Memphis Light, Gas and Water Division president and CEO Joseph Lee.

Between the payment of that settlement and now, three different mayors have run city government. Those changes in the balance of power are largely responsible for why the bitter court fight against Lee continues.

It started with former Memphis Mayor Willie Herenton’s approval of the city’s legal division offering to settle a lawsuit Lee filed against the city. Herenton’s temporary replacement, former Mayor Pro Tem Myron Lowery, then hired a special counsel to try and recover that money.

Under the city’s new mayor, A C Wharton Jr., the effort to recover that money is continuing.

‘One for the record books’

From the beginning, Krelstein blasted the payment to Lee as an inappropriate giveaway of taxpayer money. He at one time described it in court as money paid to “take care of a friend” of Herenton.

The city paid the money to Lee to settle a lawsuit he filed in December against the city over attorney fees he claimed he was owed. Lee racked up $426,422.33 in attorneys’ fees and related expenses after he was indicted in 2007 on federal corruption charges, which prosecutors dropped in 2008.

He then asked his old employer to cover those expenses. But the City Council refused to allow MLGW to pay anything to Lee. That led Lee to file suit against the city in Shelby County Chancery Court asking for more than $7 million in damages.

In court Tuesday, Lee called Goldin’s attention to the filing by federal prosecutors that explains their dismissal of the case against him “in the interest of justice.”

“Judge, I’m trying to move forward with my life and realize the dream of One Memphis,” Lee said, in what appeared to be a reference to the “One Memphis” campaign theme of Wharton, who was elected Oct. 15 to finish Herenton’s term of office.

Hal Dockins, the attorney who represented Lee in his lawsuit against the city, told Goldin most of the defendants he’s ever fought against would “like a do-over” similar to what the city sought in Lee’s case.

“But if they could do that, we’d never get finality to lawsuits,” Dockins said, referring to the order Goldin signed this summer accepting the settlement offer the city proposed paying Lee this summer.

And former City Attorney Robert Spence, who represented Lee in the federal case, said the city’s attempt to undo its settlement with Lee was virtually unprecedented.

“I’m long in the tooth in the practice of law, but I’ve never seen this before,” Spence said. “I think this would be one for the record books. … We are a nation of laws, not men. And it doesn’t matter if city governments change.”

No conflict

In the case against Lee, though, it apparently does make a difference when governments change.

Lowery found several problems with the settlement paid to Lee, and during his three-month term of office he decided to try to get the city’s money back. Lowery allowed his deputy city attorney, Veronica Coleman-Davis, to team up with Krelstein.

That move followed an aborted attempt by Krelstein to bring a current City Council member, Bill Boyd, in to the case on behalf of the city to recover the money paid to Lee.

In a court motion, Boyd argued the actions surrounding the settlement to Lee were done to defraud the City Council and Memphis taxpayers. But on the day Goldin was to decide whether Boyd could step in, Krelstein announced his intent to work directly with the city under Lowery.

“This is nothing personal against Mr. Lee,” Lowery told The Daily News at the time. “I think Mr. Lee was wronged. I don’t want him to continue to suffer any adverse reaction. This action is similar to my longstanding view of the high prices this city has paid for attorney fees.”

Krelstein dropped the city from his suit, and a special counsel arrangement was reached with Krelstein, in which he agreed to represent the city.

Krelstein began working for the city in late September on a contingency fee basis. He’ll be paid 10 percent of the net recovery the city gets from his lawsuit, according to a copy of his agreement obtained by The Daily News.

Memphis City Councilwoman Wanda Halbert filed complaints with the state disciplinary board for lawyers against Krelstein and Coleman-Davis over that arrangement. She took issue with Coleman-Davis hiring Krelstein, which she argued was a conflict of interest.

The Tennessee Board of Professional Responsibility dismissed her complaint against Coleman-Davis but has asked Krelstein for a response to Halbert’s complaint.

Meanwhile, Goldin said in court Tuesday he doesn’t see a conflict of interest in Krelstein’s involvement.

“I don’t see a conflict. Mr. Krelstein didn’t change sides; the city’s changed sides,” Goldin said.

The judge did concede the case contained “a very unusual set of circumstances” but that allowing the city to switch sides doesn’t guarantee its allegations will prevail.

PROPERTY SALES 63 441 6,018
MORTGAGES 72 450 6,721
BANKRUPTCIES 0 1,045 4,093