Attorneys on Water Deal

Most coal readers will recall that the City has signed a Water Service Agreement with SME. I have remarked in the past that this is to the credit of Tim Gregori, the head of SME, because SME absolutely needs the water to build the power plant. He obtained a signed agreement for water, even though the City of Great Falls has no signed agreement with SME.

Given that the terms of our eventual agreement with SME have not been finalized and reduced to writing, one could suggest that it was somewhat, say, premature to enter into a binding, enforceable agreement to give up our water. We have lost any leverage that SME's need for water might have given us in the negotiations since we cannot threaten to withhold that to which SME has a legal, contractual right.

As an attorney, I could suggest that one might have wanted to make the Water Service Agreement conditioned upon certain things, most notably the City's continued involvement in the project. Or, perhaps, one could have conditioned it on the City and SME being able to negotiate a mutually satisfactory Development Agreement.

These are clauses that anticipate contingencies and allow one side or the other an 'out' to the contract. For example, most contracts to purchase a home contain one for financing: if you can't get your financing, you can get out of the deal.

Since the Water Service Agreement does not contain a contingency clause, my professional curiosity led me to wonder who represented the City of Great Falls in negotiating the agreement. This is because one could make a reasonable argument that this Water Service Agreement should have contained such a clause, and that the attorney representing us in the negotiations should have insisted on such a clause.

At one point, I wondered whether, perhaps, the City was represented by Luxan & Murfitt, a Helena law firm on this. If the City's attorney was Luxan, that would be a potentially troublesome issue because we know now that Luxan represents SME. If we were to encounter a situation where one law firm represented both parties to a contract, that would be a fairly unusual situation.

I have researched this issue as far as I can. I cannot definitively answer the question without drawing certain inferences. Since those inferences could lead to very strong conclusions, and since I cannot say that they are 'factual,' I will not draw them. I will only state the facts as I know them.

Fact: By email dated April 30, 2007, the City of Great Falls, acting through Peggy Bourne, informed me that the "legal counsel who worked on the water service agreement was a Mr. Torske. He was retained by SME. Dave Gliko provided legal review" for the City of Great Falls. Mr. Torske is James Torske from Hardin, Montana.

Fact: Harley R. Harris, a lawyer with the Luxan & Murfitt law firm, prepared a Memorandum, dated November 22, 2004, and entitled: "Legal Analysis-City of Great Falls Water Service To Salem Plant."

Fact: On December 7, 2004, the City of Great Falls ratified a contract whereby it agreed to pay Luxan & Murfitt $140.00 per hour for legal services.

Fact: On January 18, 2005, the City Commission authorized a payment of $2,737.28 to Luxan & Murfitt.

Fact: On March 15, 2005, the City Commission authorized a payment of $5,220.96 to Luxan & Murfitt.

Fact: On March 15, 2005, the City Commission was presented with and approved the Water Service Agreement.

Fact: On August 16, 2005, Harley Harris, a lawyer with Luxan & Murfitt represented to the City Commission that he had been representing the City for the last "six to eight months" on the water rights issue involving "concerning the change of the present point of diversion to be diverted upstream of the Morony Dam to allow the place of use to be the location of the proposed Highwood Station coal-fired generation plant."

Fact: On March 21, 2006, the City Commission authorized a payment of $6,050.81 to Luxan & Murfitt.

Fact: On May 16, 2006, the City Commission authorized a payment of $5,154.24 to Luxan & Murfitt.

Fact: On March 20, 2007, the City Commission authorized a payment of $8,712.19 to Luxan & Murfitt.

Fact: SME sends the City of Great Falls "Cash Flow Projection" sheets documenting SME's development costs, and the City of Great Falls then pays 25% of these expenses.

Fact: The City of Great Falls has provided me with what it represents to be all of the "Cash Flow Projection" sheets documenting all of the development costs that have been reimbursed or contributed to SME by the City. According to the information provided by the City, the total amount contributed is $1,534,412.55.

Fact: According to SME, it paid Luxan & Murfitt $9,588.17 prior to its January 13, 2006, report.

Fact: According to SME, it paid Luxan & Murfitt $19,785.43 on May 15, 2006.

Fact: According to SME, it paid Luxan & Murfitt $11,864.27 on June 15, 2006.

Fact: According to SME, it paid Luxan & Murfitt $20,412.09 on October 15, 2006.

Fact: According to SME, it paid Luxan & Murfitt $28,170.44 on January 10, 2007.

Fact: According to SME, it paid Luxan & Murfitt $25,717.26 on January 10, 2007.

Fact: According to SME, it paid Luxan & Murfitt $23,566.93 on February 15, 2007.

Fact: On February 21, 2007, I received a letter from Luxan & Murfitt wherein they represented SME.

Fact: The City of Great Falls paid 25% of all Luxan & Murfitt's charges to SME by way of reimbursement.

Fact: The disbursement records provided to the City of Great Falls by SME (and ultimately provided to me by the City) do not show any record of any payment to an attorney James Torske of Hardin, Montana. (UPDATE: I should have thought of this sooner. Thanks, Firefly. This is a search result from the City's website.)

No conclusions drawn.