Flower Mound resident Kirk Grady owned some Hunt County property with a woodpile for about three years before he sold it in 2002.
Hunt County now wants to collect as much as $2 billion from him in fines for improper waste disposal, he says. Hunt County sued Grady in Travis County last year, and Grady is fighting back with a federal lawsuit.
Grady’s Dallas attorney, Michael R. Goldman, blames the “ridiculous and unconscionable” legal action on the county’s hiring of a private law firm to prosecute the state lawsuit with a contingency fee provision. That means the law firm gets to keep a percentage of whatever is collected.
That has given the firm a perverse incentive to sue for as much money as possible, said Goldman. And critics say some elected officials could use the law to reward lawyers who give money to their campaigns, as was alleged in a Dallas case.
Such contingency-fee arrangements are legal under Texas law. The law, passed almost 50 years ago, gave local governments the authority to file lawsuits seeking civil penalties for alleged violations of the state’s environmental laws.
Grady is challenging that law as unconstitutional in the federal lawsuit filed last month in Dallas.
Goldman said there are currently about 50 such cases across Texas because law firms seeking big payouts are pitching these arrangements to mostly smaller cities and counties. He said the sales pitch is that local governments have zero risk and can earn potentially big revenues from enforcing state environmental laws.
Bexar County is contemplating a similar contingency-fee contract to sue a business over leaky underground storage tanks.
But Goldman said the deals are bad for businesses and an abuse of power.
Hunt County Civil Attorney Daniel Ray said the county is not seeking billions — or even millions.
He said no one would settle the lawsuits if there was really an attempt to collect that much money.
“The incentive is to settle the case,” Ray said.
An ‘unlawful dump site’
Earnest W. Wotring, a Houston attorney who is handling the lawsuit for Hunt County, said in an email that the wood on the property tested positive for asbestos, arsenic, and lead. He said it took more than 60 truckloads to remove the debris in December and that the county doesn’t believe people should be allowed to turn county land into an “unlawful dump site.”
He said the county’s contract is legal and that Hunt County officials are in “direct control” over the litigation and will make all decisions about possible settlements.
“Hunt County also believes that its contingency fee contracts can be an effective response to well-funded defendants who can hire high-priced lawyers that bill by the hour and get paid hundreds of dollars for every hour that the litigation continues,” Wotring said.
Wotring said it would be up a jury to decide how much in fines should be assessed. The range is $50 to $25,000 per day, he said.
“Hunt County has not taken the position in the lawsuit that Grady is liable for $2 billion in penalties,” he said.
Goldman is bringing a similar federal lawsuit against the city of Sulpher Springs — for seeking up to $63 million against his client, Noorallah Jooma, who lives in Denton County, for alleged waste disposal and storm water violations.
Private attorneys in that case are billing at an excessive rate of $950 an hour, he said.
Sulpher Springs’ contingency fee contract has language that allows the law firm to “needlessly drag the lawsuit out as long as possible so that they can seek greater amounts in attorney’s fees at trial,” Jooma’s lawsuit said.
“The problem with these arrangements is simple: they entrust the duty of impartially administering justice to attorneys with an overwhelming incentive to “win” the case – even if it is entirely bereft of merit,” Goldman said in the lawsuit.
Sulpher Springs officials could not be reached.
One Bexar County commissioner wanted no part of an effort by other commissioners to enter into a similar contract.
“I see this as nothing more than ambulance chasing at a different level,” Commissioner Kevin Wolff told the San Antonio Express-News in April. “It’s not fixing anything. It’s just a way to try and generate fees for a [law] firm, cloaked in ‘revenue for the county’ and ‘protecting the environment.'”
Dallas County faced similar accusations in 2011 when it sued the Mortgage Electronic Registration System (MERS) and its parent company in an attempt to recoup years’ worth of alleged lost revenue.
The suit said MERS – founded by Fannie Mae, Freddie Mac and several large U.S. banks – was a conduit for buying and selling mortgages by lenders. And it alleged that MERS avoided paying recording fees to the county when mortgages changed hands, as required by law.
Watkins, a Democrat, hired the Dallas firm, Malouf & Nockels, to handle the the MERS lawsuit. Malouf brought other lawyers in to help, including Terri Moore,Watkins’ former top assistant; Lisa Blue, one of his top political donors; and former Democratic Gov. Mark White.
The legal contract Dallas County commissioners approved gave the lawyers 25 percent of any recovery. But the lawsuit was not successful.
The wood pile
Grady bought an interest in 50 acres in Hunt County in 1998 that was leased to companies that recycled wood, the federal lawsuit said. In 2000, he bought out his partner. He sold the land to Republic Waste in 2002.
Grady says in his lawsuit that Hunt County doesn’t know when the wood pile was placed on the property. Grady also says he only learned about the wood when Hunt County served him with a lawsuit in 2015.
Hunt County also named Republic Waste as a defendant in the state lawsuit.
Goldman said the county is seeking the maximum amount of fines available under the law.
“The fact that a governmental unit in the State of Texas has proceeded in this manner is a clear violation of Grady’s constitutional rights,” he said in the federal lawsuit.