Attorneys at high-caliber firms in Los Angeles often gripe about the city's lack of large corporations, the most likely consumers of their top of the market legal services.
Instead of huge companies with headquarters here, the Los Angeles economy is dominated by small- and medium-size businesses, which are normally unwilling to pay $500 an hour and above for a lawyer. There is one group, however, willing to pay the high legal fees: local governments.
Among the largest consumers of top-rate legal services in the region are public entities such as the city of Los Angeles, Los Angeles County and the Los Angeles Unified School District. But the use of legal services, especially at top-market rates, by public agencies is increasingly coming under scrutiny.
Los Angeles County's rising legal costs, following the dismissal of litigation cost manager Robert Nagle last year, has caused alarm among some county officials. For fiscal year 2006-07, the county spent over $50.2 million on outside counsel, a 6 percent increase over fiscal year 2005-06.
The amount of money spent by the city of Los Angeles on outside counsel has risen rather steadily, from $17.5 million in fiscal year 1999-2000 to $31.9 million in fiscal year 2004-2005, according to a report issued by the state auditor. And while total cost went down to $24.8 million for fiscal year 2005-2006, for the most recent fiscal year, 2006-2007, the figure was up to $31.4 million.
In response to these numbers and legal fees totaling $1.35 million related to the employment discrimination case brought by firefighter Tennie Pierce, Los Angeles City Councilmembers Dennis Zine and Bill Rosendahl introduced a motion last month calling for a review in the city's process of selecting outside counsel.
"The bottom line is that the public needs to be protected. It is obvious, at times, we need outside counsel, but the costs associated with outside counsel have been very large and we need a better understanding of what taxpayers are paying for," Rosendahl said.
At both the city and county level, taxpayers are routinely paying for a cadre of top-shelf legal talent from some of the nation's most prestigious firms such as Bingham McCutchen LLP, Baker & Hostetler LLP and Orrick Herrington & Sutcliffe, which combined billed the city for over $1.5 million this past fiscal year.
Donovan Main, chief deputy of litigation in the Los Angeles County Counsel's office, said "when we get large, more complex cases, where there are unique factual issues or legal issues, we call on more high powered firms." Donovan said that the high-powered law firms the county counsel's office has called on include Jones Day LLP to handle employment and pension cases and Foley & Lardner LLP to represent it in healthcare matters.
Most public entities cap the rates they pay outside lawyers for more routine tort matters such as defending cases where an individual might be injured after falling. This rate varies between agencies but rarely rises above $200 an hour. For the complex matters that high-caliber firms compete for, however, usually no such cap exists.
Critics, like Rosendahl, accept that some matters may call for expensive outside legal expertise, but they contend that the city is not getting the best bargain and the fees paid to outside counsel at times appears irrational. While large, national firms are known to slightly reduce their rates for government matters, given the very high starting off point the resulting bills are often still quite large, which is how some described the bill submitted by Jones Day related to its defense of the city in the Pierce matter.
The firm was hired, with approval of the city council, in December to represent the city in the racial discrimination case brought by Pierce after the Mayor Antonio Villaraigosa rejected a $2.7 million dollar settlement reached with Pierce.
Jones Day helped get the payout to Pierce down to $1.5 million, but once the firm's $1.1 million bill and $250,000 in other legal cost are factored in, the payout by taxpayers actually increased by about $100,000.
Nick Velasquez, director of communications for the Los Angeles City Attorney's office, said the firm submitted monthly invoices but refused to provide them citing attorney-client confidentiality.
According to legal industry sources a partner in the local office of Jones Day would likely charge about $550 and a senior associate in the office might charge about $325 an hour. It is not clear how many Jones Day lawyers worked on the matter or whether the city received a discounted rate.
Cleveland-based Jones Day was one of 10 national firms that generate revenues in excess of a billion dollars. And Jones Day was among a group of firms that raised attorney starting salaries earlier this year from $145,000 to $160,000.
The top-tier firm has also done work for the Los Angeles Unified School District.
Velasquez said Jones Day was chosen for the Pierce matter as a result of "competitive selection process."
According to the motion approving Jones Day, the firm was selected from nine other firms based on experience and expertise in labor and employment matters, trial experience, availability and proposed rates among other criteria.
"I don't have any issue with them picking Jones Day or any other firm. My issue is the cost factor," Rosendahl said.
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