CALA recently released a report finding that just 17 of California’s 482 cities and 58 counties spent more than $1.09 billion on lawsuits over a four-year period from 2008-2012. And that’s just on verdicts, settlements and outside counsel. It does not even take into account the cost of in-house counsel and other administrative costs associated with the enormous number of lawsuits facing cities and counties.
These exorbitant costs came during the worst economic crisis of most of our lifetimes, as cities’ and counties’ revenues fell sharply and public services were slashed. Since January 2010, three cities in California have filed for bankruptcy and several other cities and counties remain on the edge of solvency.
That huge number – more than $1 billion spent by local governments over four years – demonstrates just how damaging abusive lawsuits can be to local government finances. Unscrupulous attorneys and plaintiffs too often treat public sector budgets as a coffer to be raided and file abusive lawsuits against local governments seeking a quick payday.
It is unacceptable for cities and counties to continue to pay out-of-control legal costs while vital social service and public safety programs face budget cuts. For example, in Los Angeles County, the $93.8 million spent in 2010-2011 on litigation was greater than the cost of capital improvement projects at more than 18 fire stations or other fire department facilities.
The additional tax burden the cost of litigation places on taxpayers is substantial. According to a study released by Towers Watson, the overall cost of the U.S. tort system in 2011 was $264.6 billion, which translates to $857 per person, or more than $3,400 for a family of four. These costs are paid through higher local, state and federal taxes, increased premiums for insurance and higher prices for products and services on a daily basis.
The legal system is intended to provide justice for those who have been injured, not to enrich a handful of plaintiffs and their attorneys. Until California’s legislature passes meaningful legal reforms that create balance in our courts and remove the incentives that encourage lawsuit abuse in the first place, high litigation costs will likely continue to plague California’s city and county budgets.
Public sector litigation should be on the minds of all taxpayers. They need to demand more transparency and they need elected officials who will fight for legal reform.