Who’s minding the legal fees in your town?

There are, to paraphrase an old TV show, eight million stories in the naked city.

In any given year, hundreds of those stories may have to do with claims against the municipality where you make your home. Somebody has to sort out the fate of all those claims – whether the matter involves something as small as a kid who cuts his finger on a piece of municipal playground equipment, or as complex as a city’s compliance with state and federal environmental laws.

For just about every agency or city in the county, that sorting is done by a guy – or gal – most of us don’t know from Adam – or Eve. That person is a staff or contract attorney whose work is theoretically scrutinized by an elected board, but who is himself or herself, not an elected official. And just to remove the process one step further from the voter, complexities in municipal law, coupled with the demands of an increasingly litigious society (see accompanying sidebar) have resulted in an increase in the number of duties city and agency attorneys don’t do. As a result, more and more legal duties are being farmed out to outside firms, with their fees adding to the cost of doing the public’s business.

“The issue of outside counsel is to make money, whereas the governmental entity’s position might well be to do something entirely different,” says Monterey Attorney Gary Gray, who is representing anesthesiologist Hayward Maben III in his suit against Monterey County and Natividad Medical Center. “Ultimately, we’re talking about public funds.”

Unquestionably, there’s been a veritable explosion in the number of cases being handled by counsel. Agency and city attorneys maintain they were once Marcus Welby generalists, but that agency law has been transformed in the last two decades by a host of new legal requirements that have made agency lawyering a legal morass requiring the help of specialists.

“Just 20 years ago, there was no Brown [state open meeting] Act,” says Alice Vilardi, the city of Salinas’ interim city attorney. “There was no labor law for negotiating with public employees, there was no California Environmental Quality Act [CEQA], there was no Proposition 13. The list of laws that have been added to the municipal lawyers’ repertoire, where they need to have competence, has grown exponentially.”

“City attorneys are generalists and not specialists,” says Donald Freeman, who is the city attorney on a contract basis for both Carmel and Seaside. “We have to know a little bit about a lot of things and one of the things we have to know is what we don’t know.”

To get a handle on the inner workings of municipal and agency law, Coast Weekly surveyed four of the county’s largest cities, plus Monterey County Counsel and two notable public agencies, the Monterey Peninsula Water Management District and the Monterey Peninsula Airport District.

We found that in-house attorneys appeared to be getting the short end of the fiscal stick when compared to staff attorneys working on a contract basis. (Contract attorneys made cases for hidden costs they say aren’t obvious from such a comparison, but more on that later.) We found out that fees charged by outside attorneys working on agency and city matters generally fell in the $120-150 an hour range, although there were some exceptions. We found that most referrals tend to go to local firms, although we saw exceptions to that pattern as well.

Perhaps most importantly, we found that there was no system in place for selecting or monitoring the work of outside counsel called in to assist the staff attorney, and that both of those duties were left up to – you guessed it - the staff attorney. And while that system appeared to be working in the agencies we surveyed, several attorneys acknowledged that the potential for cronyism does exist.

“That’s a constant fight, truly it is,” says Rick Harray of Harray, Masuda and Linker, a Monterey firm often called to handle cases for agency attorneys.

“I’m not sure that all cities have a process for deciding who gets hired under what circumstances,” says Attorney Michael Stamp, who has represented the city of Pacific Grove, and litigated against other government agencies – among them, Monterey County and the city of Seaside – in the course of his practice. “Some cities go about it rationally, and other cities go about it not so rationally.”

“Sometimes I work where there’s an ‘old boys’ network,” says Harray, “and you wonder why some public entity is hiring somebody when you, as a lawyer, know they really can’t fight their way out of a wet paper bag.”

But many of the staff attorneys who hire outside firms say concerns about gambling public money on untried talent also favor older firms that have been in the area for years. “We’re more apt to go with people who have been tried and proven as opposed to running a risk with a high-dollar case on somebody who’s new,” says Freeman.

Harray, for his part, insists Harray, Masuda and Linker are on many agency short lists when it’s time to go to court because the firm has a reputation for triumphing more and costing less – a claim that’s echoed by several agency attorneys.

“We either win the cases or settle them for not very much money,” says Harray. “This firm does only what is necessary to do to end the lawsuit. Other firms, it’s whatever they think of and their bills look a lot different.”

“The more routine parts of an agency attorney’s job include acting as the legal voice for the city on matters pertaining to land use and jurisdiction, advising city leaders on the legalities of policies they want to pursue, conducting seminars for officials and employees on issues like open meeting law and sexual harassment policy, and attending council or board meetings to provide legal advice on a moment-by-moment basis.

It’s when it comes time for battling worker comp issues joining forces on state and federal laws – or sometimes, just going to court to fight a plaintiff bent on bringing an issue to a judge – that agency attorneys hire outside help.

In general, the agency attorneys interviewed by Coast Weekly say that they have a get-tough attitude toward what they feel has been a proliferation of claims – filed by everyone from employees, to members of the public who feel they’ve been injured or damaged by public property to members of the public who want their environmental concerns addressed in land-use cases.

“When I retire, my claim to fame will be that I saved the city millions of dollars,” says City Attorney for Monterey Bill Conners, who adds that the city of Monterey refuses to settle cases as a way of avoiding litigation. “I’ve had attorneys tell me ‘I won’t file a case against the city of Monterey, because I know I’m going to have to go to the mat to prevail.’”

Bu, says Monterey Attorney Mary Margaret O’Connell, there’s another side to that get-tough policy – one that puts a tremendous burden on individuals who feel that they’ve been wronged by the very entities they may be supporting with their tax dollars.

“That leaves the burden to the person who’s already been harmed to try and fight a battle with city hall,” says O’Connell. Under appellate case law public entities “are supposed to have some amount of investigation to divide the valid claims form the invalid claims,” says O’Connell. “But they don’t do that.” And, when cases are referred to outside counsel who are getting paid up to “$200 to go up against the plaintiff’s counsel doing it on contingency, who do you think has an advantage?”

Determining what gets handled in-house and what gets shipped out depends on a variety of factors, including the expertise of the agency’s staff attorney, his or her time commitment to the agency (obviously full-time in-house attorneys working on salary have at least theoretically, more time to expand than part-time attorneys working on a monthly retainer), and whether the attorney is working alone, or has other lawyers in the office. Litigation by its very nature, pulls an attorney away from the office on depositions and court work, making it nearly impossible for a one-person office to take many cases to court – and still provide counsel on issues back at the office.

“Litigation – regardless of what it’s for – is time-consuming,” says George Thacher, who has been Pacific Grove’s on-staff city attorney since 1983. “Offices that are set up to do things like that can do it much more efficiently.”

“In Salinas, we have two attorneys,” says Vilardi. “One can deal with the demands of litigation.”

“The type of law encountered by an agency, in turn affects whether that agency will need to go to court very often – and hence, possibly require the services of an outside attorney. In Monterey, where the bulk of claims filed against the city are , according to Conners – “slips and falls” or other types of perceived injuries or accidents, there can be quite a few ongoing cases requiring litigation, and some of those go to outside counsel.

According to Conners, the same factors that make Monterey such an enjoyable city for tourists and residents also make it a target for suits. Monterey’s population is 33,000, but Conners estimates that the city swells to three times that size during the summer tourist season. The density alone, coupled with such amenities – and potential hazards – offered by attractions like the Monterey Sports Center, recreation trail and Dennis the Menace Park make the city a liability waiting to happen. “If lawyers had their way there would be no parks,” says Conners, who this year budgeted $70,000 for outside legal counsel – just in case.

“We’ve created a ‘slip and sue’ mentality,” says Don Wolfe, the founding executive director of Citizens Against Lawsuit Abuse, an organization founded in 1996 to stern the tide of frivolous lawsuits. “It used to be that you slipped on the municipal sidewalk or in the supermarket, you dusted yourself off and went on your way. Now it’s ‘slip and sue.’”

On the other side of the coin there are entities like the Monterey Peninsula Water Management District, which – by virtue of the fact that it owns no public facilities – is almost never bothered by the kind of cases that haunt Monterey.

Instead, counsel David Laredo spent the bulk of his time in FY 1995 and 1996 tracking two separate matters – the five complaints filed against California American Water company over its pumping practices from the Carmel River, and the application the district made to acquire water rights and building permits for the New Los Padres Dam that went down in defeat in November of 1995. Laredo says he doesn’t farm out much of the district’s legal business with the notable exception of bond counsel, a specialized field that most attorneys avoid.

Similarly, the Monterey Peninsula Airport District handled few injury complaints in FY 1995-96 – a happenstance that airport Attorney David Willoughby admits is “surprising given the volume of passengers that goes in and out each year.” When Willoughby litigates, he says it’s usually on matters involving the “several hundred” leases the airport handles on everything from airplane hangars to business space. “Where we’ve had significant items of litigation have been long-term leases come to expiration and tenants are reluctant to relinquish them.”

Willoughby says he’s most likely to hire outside counsel – from the Monterey-based Fenton & Keller where he used to work – when the district is confronted with legal actions, or when the district is called to act as both a witness and a plaintiff. “You can’t be a witness and advocate in the proceeding,” explains Willoughby. Similarly, other agencies will hire outside counsel when they have to separate say, a city’s liability from that of an employee.

What’s to keep contract attorneys from taking on a case and essentially gouging the agency doing the contracting? Theoretically attorneys that contract with agencies agree to a per-hour fee that’s in keeping with the local rates – rates that local attorneys say usually hover around $120 an hour and go as high as $150 an hour.

Staff attorneys who contract with cities and agencies, like Seaside’s Freeman, Monterey Peninsula Water Management District’s David Laredo and the Monterey Peninsula Airport District’s David Willoughby all sign contracts allowing for a monthly charge – or retainer – based on either a certain number of hours or the idea that the attorney will be doing routine work. “Extraordinary” hours or duties get billed at a higher rate, usually around $150 an hour.

If there is a flaw in the system, it’s that oftentimes only the agency attorney has the professional expertise to know the difference between what is “extraordinary” and what is merely ordinary, between a piece of legal work that should be able to be concluded quickly and one that is expected to drag on, thereby mounting the legal fees. Since lawyering isn’t a precise science, it’s hard to get outside firms to agree to the same sort of parameters a city or agency could get from a contractor looking to pour concrete for a new playground.

“It’s essentially a time and materials contract where you’re allowing the contractors to decide how much time to put in,” says Stamp. “No one would put a lawn in under those circumstances.”

Although city councils and other public boards often are the ones who ultimately end up approving legal expenditures, those members many times end up replying on the legal advice of their paid attorneys – with some exceptions.

Wolfe, who is also the vide mayor of the city of Saratoga, says he recently opposed his city attorney’s advice to settle an employee’s suit for $1,500, even though the attorney warned city officials that defending the case could ultimately cost Saratoga $10,000. “I said, ‘wait a minute, we’ve got to take the jack pot out of the justice system,’” says Wolfe. Eventually Saratoga did take the matter to court and won its case against the employee, but not before spending “several thousand dollars for our attorney to talk to his attorney, because one person thought they could use the civil justice system as a lottery to make some extra funds.”

“What is more important to elected officials than fiscal responsibility to the public?” asks Gray, an elected member of the Carmel Unified School District’s Board for the past 11 years who believes that elected officials need to be more involved with scrutinizing the legal work of their agencies.

Several local attorneys told Coast Weekly that they take seriously their role of monitoring outside legal help – even to the point of rejecting bills they think are out of line with what their agency should be receiving.

“I recently sent a bill back and said ‘you’re doing a wonderful job, but this is excessive,’” says Elaine Cass, the city attorney for Hollister and former city attorney for Seaside. Cass says she’s also firm about keeping costs down through a variety of techniques, including keeping the rate her city is willing to pay low, and keeping a sharp eye on who gets the contract. “I think the practice of law is fairly competitive,” says Cass, who says her city’s own rate is $90 per hour – a good $20 to $30 less than other local cities. “And even if you’re best friends with another attorney, you need to look at the bill.”

“You have to select very carefully and know what you’re getting,” says PG’s Thacher, who adds he’s especially opposed to the hiring of out-of-town lawyers, since they’re unlikely to know the courts, the opposing counsel and most importantly, local judges.

Stamp has also been a particularly vocal critic of out-of-town attorneys, and in a well-publicized letter to then-Chair of the Monterey County Board of Supervisors Edith Johnsen, Stamp last July blasted the county for paying more than $300,000 in legal fees to lawyers the county counsel’s office brought in “from Los Angeles and the Bay Area.”

Stamp says he’s particularly wary of out-of-town law firms, who can work in a case for a Monterey County agency “bill five times what should get paid” and – even if they end up losing a case – “don’t lose anything else, because there’s no personal stake in it anyway.”

“Costs have run amok,” says Gray, who maintains that the amount of money the county has spent on outside law firms fighting Maben amount to $435,000 – much of it spent on “one of the largest firms in the country,” an L.A. based firm that has used a dozen different attorneys on Maben alone.

“As a general rule, this is not what we like. I much prefer to use attorneys from this area,” says Monterey County Counsel Doug Holland, whose staff of 14 attorneys and one legal assistant enables the office – at least theoretically – to handle most types of litigation. “I want to use attorneys that my judges have seen , I don’t want new faces, and as a general rule, I don’t like unknown quantities.”

Holland maintains that it was on the insistence of the County’s insurer, rather than his own advice, that outside firms were brought in on Maben and a host of other cases involving employees at the county’s Natividad Medical Center. “Sometimes we have to go and get someone from outside the area,” says Holland. “But I do that very reluctantly.”

Agency attorneys agree that there are sometimes good reasons for bringing in out-of-town firms – for issues like bond counsel or cases involving CEQA, or in cases that are filed in federal court, or in another city.

Seaside City Manager Tim Brown makes such a case for that city’s paying two different law firms – the San Francisco-based Goldfarb and Lipman, and the Washington, DC-based Kutak Rock – a combined total of close to $400,000 in Fiscal Year 1995 and 1996 to help Seaside acquire the Army’s two golf courses, Blackhawk and Bayonet.

Brown insists that Kutak Rock was hired before he came on as city manager in July of 1994, and says he helped put the brakes on legal fees, which he says were out of control before he came on board. According to Brown, “less than $150,000” was spent on outside legal fees “under my leadership” and “that’s a not bad return” for the city’s acquisition of the two courses.

By comparison, Marina’s City Manager John Longley says his city never spent more than $10,000 in any given year on acquisition of the former Fritzsche Airfield, but he ads that the transfer of the golf courses to Seaside was much more complex, requiring, among other things, special legislation to bring the transfer to fruition.

When does it make sense to hire an in-house staff attorney? Obviously the size of the agency and the volume of its legal needs has something to do with that decision, although several attorneys interviewed for this article said they know of larger Southern California cities where staff counsel was a contracted employee. A 1989 League of California Cities survey of the state’s 471 cities showed that only 125 had in-house counsel, although locally, cases were made for both types of service.

“You still want someone to go to your meetings, someone your council members can come in and visit every day,” says Thacher.

“There does come a pint in time when it’s more cost-efficient to fund in-house, there’s no question,” says the water district’s Laredo.

“Then the question is how long you would have that need for those services.”

Laredo points out that the amount of time he puts in for the district can vary tremendously – depending on the week and the year. He says that during his busiest times of dealing with the State Water Resources Control Board, the water district gets the benefit of several attorneys from DeLay and Laredo, whereas during the slow times, he works alone and puts far fewer hours per week.

“One big concern is a law library,” says Ray Millard of the Monterey Peninsula Water Management District. “If you hire a [staff] attorney, he’s going to be continually trucking down the road to go to the law library, or you’re going to have to buy one and that’s one heck of an expense, and then you’ve gotta maintain it and keep it up. Particularly in this state with water law, being up to date is real important.”

On the surface, the water district’s payments to Laredo – which totaled $231,000 in FY 1994-95 – look like enough for a fairly good down payment on a staff attorney – and a law library as well. But Laredo and other no-staff attorneys say looks are deceiving.

“When you’re talking in-house attorney, you haven’t asked the question ‘what is your total budget? How much do you pay for your secretary, your library, your costs?’” says Laredo.

“With a lawyer in private practice, the general rule is their overhead runs 44 to 55 percent,” says Rob Wellington, a Monterey attorney whose practice focuses exclusively on providing counsel for small cities (like Marina and Del Rey Oaks) and other governmental agencies. “The person who is paid $200,000 – maybe he pocketed half of that.”

Perhaps the ultimate truth about agency attorneys is an unsettling truth about our society: Whether a public a public agency hires on-staff or outside assistance, in this litigious age, one attorney invariably won’t be enough.

“Even if you have a full-time city attorney,” observes Freeman, “in today’s world you’re still going to end up hiring experts.”

“There’s a litigious mind set,” says Wolfe, “that we can tap our towns and cities and hamlets and villages as a lottery. It’s a misuse of our civil justice system.”

Claim Game

The following represents figures for worker comp. and legal claims filed against each entity surveyed for FY 1995-96. Every worker injured in any way on the job is required by law to fill out a claim. The majority of all claims do not become suits.

[Coming soon....]

**

City of Monterey

**

Figures for staff attorneys include benefits.

Ratings provided by the Martindale-Hubbell legal directory, based on peer responses from other attorneys. Attorneys are rated “A,” “B” or “C” based on their skills. A “V” rating means that other lawyers believe that the firm has demonstrated the values consistent with professional legal standards.

Monterey County

**

City of Seaside

**

Pacific Grove

**

Monterey Peninsula Airport District

**

Monterey Peninsula Water Management District

**

Salinas

**

*Resigned January, 1997.

So Sue Me!

The case is infamous. When a woman successfully sued McDonald’s a few years ago after burning herself on a cup of McDonald’s drive-through coffee, it seemed that the American Judicial system had infally spun out of control. The sheer volume of lawsuits such as this one in American courts today begs the question, has litigation replaced baseball as America’s favorite pastime?

“In the San Jose phone book there are 14 pages of florists, four pages of accountants, 35 pages of physicians of all types and 105 pages of attorneys, many of them screaming at you to transfer responsibility for your own acts on to someone else for financial gain at the expense of justice,” says Don Wlfe, executive director of Citizens Against Lawsuit Abuse (CALA).

According to the National Center for State Courts in Williamsburg, Va., in 1994 there were 19,004,662 civil cases filed in state courts across the land, or 22 percent of the total state caseload. (The number, however, is miniscule as compared to the real court-clogger, traffic violations which accounted for 52,072,396 cases or 60.2 percent of the caseload.)

In Monterey County there has actually been a slight decrease in the number of civil cases filed during the last two years. According to the Monterey County Superior Court, there were 5,078 civil filings in Monterey County in 1995 and 4,420 in 1996.

CALA was formed last year in San JOse out of what Wolfe describes as “a demand on the part of local folks to stem the tide of frivolous lawsuits.” He says CALA wants folks to know that as taxpayers and voters, they are having to bear the cost of lawsuit mania. “Fifty percent of the cost of prescription medicine goes to the company to pay for lawsuit protection,” says Wolfe. “The Girl Scouts in Santa Clara County had to sell an additional 20,430 boxes of cookies to pay for their lawsuit protection.”

Douglas McWhirter