Arbitrator Rejects Government’s Claims in Dispute Over South Shore Litigations

An independent arbitrator has rejected the V.I. Government’s claims that the law firm it hired for complex environmental litigations against industrial polluters on St. Croix charged improper fees.

James T. Giles, a former federal district court judge who served as arbitrator of the dispute between the V.I. Government and the Law Offices of John K. Dema, said Wednesday that “the government had provided no evidence that the firm’s fees are unreasonable.”

The V.I. Government first hired the Dema firm in 2004 to pursue claims against former oil and alumina refineries on the South Shore of St. Croix and force them to address substantial pollution in the area. That pollution included the infamous contaminated “red mud,” the cleanup of which remains in progress.

The preamble of the government’s contract with Dema acknowledged that the litigations, against several deep-pocketed defendants including Alcoa World Alumina and Hess Oil V.I. Corporation, would be “complex, novel, prolonged, contentious, demanding and expensive.”

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The Dema firm went on to represent the government in four separate lawsuits and was able to obtain settlements valued between $126.16 and $144.16 million. Had the cases not been settled before they went to trial, the litigations would likely have turned into the longest environmental case in Virgin Islands history, according to Giles’ arbitration decision.

In 2015, Gov. Kenneth Mapp’s administration, represented by Attorney General Claude Walker, terminated the government’s contract with Dema, citing interpretations of the contract that were contrary to those of previous administrations. The government initially refused to arbitrate but was later forced to do so by a federal court order. Both parties in the dispute selected Giles as arbitrator.

In June 2016, the V.I. Inspector General’s Office released a report critical of the Dema firm at the same time as the government’s response to the firm’s arbitration claim was due. The timing of the report – and its content – caused legal representation for Dema to claim the Mapp administration was improperly directing the IG’s office as a litigation strategy.

The IG report accused Dema of miscalculating the legal fees it was owed under its contingency contract with the V.I. Government, exceeding a cap on allowable expenses and inappropriately withholding settlement monies to cover its legal fees.

The report also claimed that the award of the contract to Dema was “questionable in its inception” since there was no competitive bidding process.

Giles, in his decision as arbitrator of the dispute, called the government’s claims “without basis” and “erroneously asserted.”

He echoed the Dema firm in questioning whether Inspector General Steven van Beverhoudt, Walker and Mapp may have “undercut, in public regard, the desired appearance of independence and objective investigation.”

Giles’s decision orders the government to pay the $21.3 million it has been billed for the settled litigations, which will be split between the Dema firm and its co-counsel, Richard, Patrick, Westbrook & Brickman LLC.

Over the course of a decade, an estimated 45,000 hours was spent by lawyers representing the government in the South Shore litigations. Had the V.I. Government lost its cases, the Dema firm would have been paid nothing under its contingency contract.

Giles determined that, “based on the time spent on the cases, skill of the attorneys, difficulty of the litigation and their ultimate success,” a reasonable fee would be $30 million. He found the contingency fee awarded to the Dema firm to be 16.88 percent based on a low estimate of the cases’ settlement value, where a 20 to 25 percent fee would be expectable.

“But for the risk that the Dema firm and [its co-counsel] took, and the tenacity of former Attorney General [Vincent] Frazer and the involved governors, the South Shore litigation efforts likely would have failed completely and the major source of St. Croix fresh water and the other environments sought to be protected could today be contaminated beyond remediation and recovery,” Giles said.

In a press release sent out by the Dema firm Wednesday, John K. Dema had strong words regarding the Mapp administration’s attempt to disavow its contract with his firm.

“Working with the prior administrations to force the cleanup of the red mud contamination after 10 years of fighting is one of the proudest moments of my career,” Dema said. “This administration had nothing to do with that success.This administration doesn’t care about facts.It abuses the power of its office to chase headlines in an attempt to score political points. That abuse cannot be rewarded.”

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