Law Firm Settles Legal Malpractice Suit for $3.85 Million

Price, Postel & Parma Accused of Getting Too Cozy With Engineering Firm

Price, Postel & Parma, one of the oldest law firms in the state and once Santa Barbara’s premier water-rights legal team, settled a malpractice suit brought against it by the Montecito Water District and Carpinteria Valley Water District for $3.85 million. The lawsuit was initiated in 2012 and officially settled this year on April 7. Terms of the agreement were released in response to a Public Records Act request filed by The Santa Barbara Independent.

That the lawsuit was filed at all qualified as huge news in Santa Barbara legal circles. One of the founding attorneys for Price, Postel & Parma essentially gave birth to the Montecito Water District, and for decades the firm represented both of the complaining districts. Boardmembers for the two water districts, however, experienced a violent crisis of faith when, they claim, attorneys for Price, Postel & Parma pressured them to settle a major construction malpractice case on the eve of a trial they’d been assured they would win. That lawsuit involved a cover for the Ortega Reservoir that allegedly caused the reservoir to leak at a rate of 79 gallons a minute.

Over time, some water boardmembers grew convinced their attorneys took a dive in the case because of a conflict of interest. During court proceedings, attorneys for the two water districts sought to introduce internal memos and emails showing that Price, Postel & Parma had ambitious business plans that involved a close financial relationship with engineering firm Penfield & Smith, which was involved in the reservoir cover. In addition, they sought to introduce memos they claimed showed their attorneys with Price, Postel & Parma felt their relationship with Penfield & Smith could leave them vulnerable in the courtroom.

The problem started when the two water districts ​— ​which jointly own and operate the Ortega Reservoir ​— ​were required by new federal regulations to cap the reservoir with a metal roof. But the work inflicted serious damage to the foundation, discovered in 2007, causing it to leak. Repairs would cost in the order of $5 million. Water district officials were caught off guard when their attorneys urged them to settle for $2.9 million. They were even more flummoxed to discover there wasn’t adequate insurance coverage to pay for the repairs. They accused their attorneys of being asleep at the switch. Both water districts have since obtained new counsel. None of the parties involved would comment for this article.

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