Citizen v. City
In March of 2014, Ryan Ferguson filed a $100 million lawsuit against 13 defendants, including the City of Columbia and Boone County. Ferguson served almost 10 years for the murder of Columbia Tribune sports editor Kent Heitholt before being acquitted and released in November of 2013. Although suing municipalities is nothing new, how these lawsuits are handled is often a mystery, leaving many to wonder what happens behind the scenes. Who are the lawyers involved? How are settlements financed? Perhaps most importantly, how does this important process differ between the city and county?
For both the City of Columbia and Boone County, the litigation process begins when they receive a service of process, which is the physical copy of the lawsuit that has been filed. According to Nancy Thompson, city counselor for Columbia since 2013, everyone named as a defendant in the case gets served.
“When the city is the defendant, the city manager, city clerk, mayor or city counselor are most often the individuals designated by the plaintiff to receive service of process,” she says.
From there, Thompson says all civil lawsuits filed against the city are divided into those seeking damages, which go through risk management, and all others, which are handled directly by the city’s law department by either internal or external counsel. Thompson, who has been practicing in the field of public sector law for 27 years, says the decision on whether to utilize internal or external counsel is dependent upon several factors, including the level of specialized expertise in subject matter, existing time commitments on internal legal staff, the court in which the matter is being heard, conflicts of interest and so on.
“We all have to work really well together since cases may overlap,” Thompson says, adding there are 11 internal city lawyers, of which eight are full time.
CJ Dykhouse, county counselor for Boone County for the past six years, says though similarities exist in way the city and county legal divisions operate, the two entities are simply set up differently.
“The county counselor’s office has its basis in statute [a written law passed by the legislative body],” Dykhouse says. For this reason the county is represented by two internal lawyers, the county counselor and assistant county counselor. As county counselor, Dykhouse says he is the lawyer of first resort in many cases, but when it’s not appropriate for him to serve in this role, like the city, the county hires external counsel.
“For instance, if I don’t have the resources or because there are potential conflicts of interest,” he says.
The cost of litigation
Both entities rely on insurance policies to cover litigation costs, though they each take a different approach. “When people sue for damages, it comes through risk management, and payments are processed through our self-insurance fund,” says Sarah Perry, risk manager for the City of Columbia. Fees collected from all the city departments fund the self-insurance fund. “The amount funded is based on an annual actuarial study and is based on the city’s claims history and also on amounts the actuarial folks potentially believe could be needed in the future.”
Presented with different funding options at different security levels, the city finance department chooses what level it will fund to. In the same way a homeowner pays an insurance deductible, the city pays the first $500,000 from the self-insured reserve on every liability claim, whether it is litigated or not. Additionally, the city purchases public liability insurance with limits of $3 million per occurrence. “All expenses, whether they are the attorney’s fees, court expenses and the payout, if the payout happens, come out of the self-insurance fund or our excess insurance carrier,” Perry says.
Boone County also purchases insurance to cover lawsuits.
“What the tax payer pays is a premium to a risk pool of public entities created by Missouri statute called the Missouri Public Entity Risk Management Fund, or MOPERM,” Dykhouse says.
Claims in the nature of property issues, the operation of motor vehicles or workers’ compensation are originally handled through the county HR Risk Management Department. Then they are forwarded to the appropriate insurance carrier, and the insurance company tenders the defense and pays any claim. According to Dykhouse, county deductibles are typically $5,000.
“The thing about county government is that we have no or very little control over the revenue streams which support our operations, which are sales taxes and property taxes,” Dykhouse says, stressing that sales taxes support the vast majority of county government operations. “So we can’t just raise the rates if something bad happens. In order to manage that risk, we’ve liquidated that risk in the form of an insurance premium, and we buy insurance to manage known risks,” he says.
Seeking outside counsel
When it comes to hiring outside counsel, both Dykhouse and Thompson say they prefer attorneys or law firms that have either worked on city or county cases before or have represented other municipalities and have an understanding of the process. Rates for outside counsel vary widely depending on the location of the lawyer and/or firm and their area of expertise. For the city, any case involving electric utility regulations is a prime example.
“Spiegel and McDiarmid out of Washington, D.C. are highly specialized and are experts in what they do and how they do it,” Thompson says of the firm that charges $435 an hour. Whereas, when it comes to environmental issues, the city often relies on regionally based counsel.
“David Shorr at Lathrop and Gage, located in Jefferson City, handles our DNR and EPA compliance issues since he is an expert in sanitary sewer and stormwater matters,” she says. Lathrop and Gage charge $320 an hour with lower rates for paralegals in the range of $100 to $125 per hour.
Intertwined and streamlined
Although they are separate entities, city and county litigation proceedings do intertwine at times, such as with the Ryan Ferguson case. “On the city side, there are the employees within the Police Department,” Thompson says. “On the county side, you’re dealing with the prosecutor and the prosecutor’s investigators as defendants as well.” On the other hand, the city and county are on opposite sides of the TIF litigation because the county counselor brought suit against the city.
Thompson and Dykhouse both agree the court system is more streamlined today than ever before, but even with advanced technology, there is no one-size-fits-all progression of a lawsuit. “The time frame is really dependent upon the type of case and sometimes the complexity of the case,” Thompson says. “For instance, the more defendants you have, the more coordination there is, the more time it’s going to take.”
It typically takes more than a year to bring a lawsuit to conclusion. Even then, distinguishing a win from a loss is often a gray area. “We don’t necessarily consider a plaintiff’s verdict as a win or a loss,” Thompson says. “For instance, if you have someone who is making a demand of $300,000, and you are able to either settle it, or you get a defendant’s verdict for $10,000, then we consider that to be a win, even though in the win/loss column, it’s still going to be a plaintiff’s verdict.”
Dykhouse says he feels the county’s unique collaborative intellectual approach to solving problems is why they are rarely named as defendants. “We try to bring stakeholders to the table to talk it out and work through it to come up with solutions,” he says. He cites the county’s Chapter 100 tax abatement program as an example.
“Because tax abatements with the goal of economic development impacts essential revenue streams of our sister taxing authorities, we bring all the sisters to the table and talk it through. We wait until we have an agreement that the impacted entities will support before we will embark upon an economic development journey,” says Dykhouse, who, as a civil litigator and a transaction attorney, believes his primary mission is to solve problems.
Thompson agrees: “If we can be proactive and avoid litigation, then that’s my primary goal. And then if litigation is filed against the city, we shift focus and begin to manage the internal and external resources the best we can. If we have the ability to handle the litigation internally, it may be the most cost effective. If not, then we are going to find the expertise that can get us there.”