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Judge Tentatively Upholds Sempra Class Action Settlement

California Superior Court Judge Ronald Prager in San Diego late Wednesday tentatively upheld Sempra Energy's $1.8 billion class action settlement and then Thursday heard several hours of objections to the deal from attorneys representing various state and utility interests. California's attorney general has argued the settlement could preclude several pending legal actions involving Sempra, and the value of the deal is overstated.

Prager on Thursday indicated he would issue his final ruling "shortly." And a Sempra spokesperson said the company has no idea exactly when that will take place.

In part of his nine-page draft ruling, Judge Prager somewhat dismissed the state attorney general's concerns about the impact on other pending litigation, pointing out that in a separate recent settlement between Sempra and Southern California Edison Co., the San Diego-based energy holding company "unambiguously conceded" that the terms of deal would not interfere with other legal actions.

In play is the conclusion of a long-running, $23 billion class action lawsuit alleging that Sempra's two California utilities and El Paso Natural Gas colluded to drive up wholesale prices at the California-Arizona border in the midst of the 2000-2001 energy crisis. The settlement was originally valued at $350 million, and later raised to more than $1.5 billion by Sempra when the overall value to the state and major retail utilities were all considered (see Daily GPI, Jan. 5).

In his draft ruling, Prager seemed predisposed to approve the settlement, which he noted came after "a long arduous fight that expended unbelievable resources in an attempt to remedy an unprecedented situation." He also noted that when the plaintiffs filed the class action lawsuit in 2000, California Attorney General Bill Lockyer's office "declined to participate."

As part of the draft ruling, Prager said it is "undisputed" that what he called a "comprehensive" discovery by the class action plaintiffs' attorneys was done with no assistance from the Attorney General's Office. "The attorney general recently became active in this case after he initially declined to participate," Prager said. "The attorney general's participation is curious since he objects to the settlement and does not support its resolution."

Noting the case was two months into a jury trial in his San Diego courtroom before the settlement was reached, Judge Prager said the "risk, expense, complexity and duration of further litigation absent the settlement would have been astronomical." In addition, the judge noted the plaintiffs' case was "not strong," and was one of numerous cases filed during and in the wake of the energy crisis to remedy various alleged wrong-doing from that crisis. "The evidence presented at trial was credible, but not unexplained," Prager said in the draft decision.

The judge called the noncash parts of the settlement -- all subject to approval by the California Public Utilities Commission -- "significant," placing a value of "millions" on them, although he acknowledged the exact value was disputed.

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