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test cases. DeCastro estimated that his legal fees for
representing the Thompsons at the trial of the test cases would
be approximately $60,000.18 It was estimated that the newly
agreed reductions would generate approximately $60,000 of refunds
to the Thompsons from the $121,770 they had paid earlier toward
satisfaction of the deficiencies and interest under the earlier
settlement. The new agreement also preserved the Thompsons’
chances to prevail on the merits of the litigation. McWade and
DeCastro agreed that if the results of the trial were more
favorable to the Thompsons than the new agreement, the Thompsons
would be entitled to the results of the trial.
When the new agreement was reached, respondent’s official
settlement policy still provided for a 7-percent reduction in
determined deficiencies, elimination of the negligence penalty,
and other minor concessions, although, as the time for trial
approached, some nontest case petitioners’ attorneys continued to
negotiate 20-percent reduction settlements. The new agreement,
18As petitioners point out, DeCastro was somewhat
inconsistent in his recollection of his proposed billing. On
June 2, 1992, he initially denied that the new agreement was
designed as a mechanism for respondent to pay his fees, but he
admitted to the contrary 8 days later. On Aug. 11, 1992,
DeCastro recalled estimating that it would cost a minimum of
$30,000 to try the Thompsons’ case. After being shown documents
indicating he had billed the Thompsons for more than $30,000,
DeCastro said he had told McWade that his fees would be roughly
$65,000. As respondent points out, DeCastro’s bills to the
Thompsons, as of Nov. 29, 1989, totaled $58,738.20.
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