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Settlement Talks Continue as Pre-Trial Hearings are Planned in Sempra Lawsuit

California Superior Court Judge Ronald Prager in San Diego held a status conference earlier this month in a multi-billion-dollar class action lawsuit against Sempra Energy regarding its role in wholesale natural gas price spikes in 1996. Sempra CEO Stephen Baum told analysts last Tuesday that the judge has laid out an ambitious timeline for the upcoming trial as settlement talks continue among the parties.

The Continental Forge Co. litigation alleges that in 1996 Sempra, its utilities and El Paso Natural Gas conspired to drive up wholesale natural gas prices at the California-Arizona border. Sempra has vigorously denied the charges and attempted to get the case quashed through both the courts and FERC.

"We continue to have discussions with the plaintiffs attorneys and other parties in an effort to reach an appropriate resolution of the issues," said Baum during a conference call with analysts.

Judge Prager plans to hear more that 30 pre-trial motions on Aug. 24. On Aug. 29, the judge is scheduled to hear a motion for summary judgment from Sempra, and a motion to push back the trial start date, which the judge also rescheduled for Sept. 12.

"The judge indicated that he may revisit the trial date after we have resolved the pretrial motions, which may impact the scope of the issues to be tried," said Baum, an attorney and one-time chief general counsel for Sempra's predecessor company. "Obviously, there is a lot of work that has to be completed between Aug. 24 and Sept. 12 in order for the trial to start."

In the meantime, Baum said Sempra was still hoping for action from the Federal Energy Regulatory Commission in the form of a declaratory order that FERC has jurisdiction in the case. Sempra wants FERC to declare that it has "exclusive jurisdiction" over the issues raised in the Continental Forge class action case which would preempt the California proceeding.

"A FERC ruling in our favor would not by itself dispose of the litigation," Baum said. "We expect a FERC decision shortly and if FERC rules that it has exclusive jurisdiction, as we believe is the case, then we will ask the court to dismiss the case. We continue to view this case and others as a risk to be managed, and we are focused on trying to reach a satisfactory resolution."

Later in the call, Baum added more detail on court settlements generally: "Settlement talks generically, and I am speaking generally, occur right up to the courthouse steps and even in some cases while the trial is ongoing, or even when the jury is deliberating, or in fact some times when the jury comes back, so going to trial is not the end of the story," Baum said. "I don't want to leave the impression there is brinksmanship here; this is something on which we would like to reach a satisfactory solution.

"We're dealing with it as a risk management matter, and we're in discussions with the plaintiffs in this case about a resolution."

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