Governor Davis ignored the energy issue as the crisis was building, and didn?t spend any time dealing with it until blackouts were already upon us. Then, Davis had his chief negotiator, a consultant for the energy companies, negotiate with those energy companies and sign $42 billion dollars in massively overpriced energy contracts.
Senator McClintock has pledged to immediately sign a stipulation for the court case seeking to void those contracts, admitting that Governor Davis? negotiator had a conflict of interest, allowing the court to void those contracts and save the people of California a small fortune.
?Those contracts were negotiated under a clear legal conflict of interest by Davis' chief negotiator. This governor won't stipulate to these simple facts because it would require him to admit wrongdoing. I'll certainly admit Davis has done some things wrong!?
It is well-settled law that a party may not claim conflict of interest to get out of a contract when they knew about the supposed conflict at the time. Otherwise, you're providing an incentive for every party to sneak a conflict of interest into every negotiation just in case they want to get out of the contracts later.
In addition, you have to show that the conflict of interest actually caused damage. There is no reason to believe that the contracts didn't represent market value at the time they were entered into. You might recall how Gray Davis was bragging at the time that they represented a substantial discount over current power prices. Which was true.
The problem is that only idiots seek to lock in long-term supply contracts during a time of shortage. Markets always correct themselves and prices do, too. So, Gray Davis is an idiot. He locked in higher prices than a smarter businessman would have. But that doesn't make the contract not a fair contract at the time it was entered into, anymore than locking in a low price during a time of surplus makes that contract voidable.
The contracts were legal, and the conflict of interest claim will not fly legally.