Lawsuits crippling Detroit
*This is the kind of stuff that’s killing us. Although some of the lawsuits may be frivolous, the bottom line here is that this city really needs to tighten up on the kind of crap that leads to these lawsuits in the first place. There’s no way we should be leading the pack of major urban areas in lawsuits filed, especially when we’re the most broke.
And no, this is not to be read as an indictment of Mayor Kilpatrick. I have a lot of questions about that case, but I’ll get to that some other time. For now, I just want to emphasize that if we want to have any hope of getting it together, then we need to start getting it together sooner rather than later.
Just a suggestion…
Monday, September 24, 2007
Verdicts draining Detroit’s legal fund
Financially struggling city may deplete its $52M kitty as costly lawsuits pile up fast.
David Josar and Christine MacDonald / The Detroit News
DETROIT — A string of costly verdicts — and the possibility of more to come — may empty the $52 million pot that Detroit has set aside to pay its legal bills this year.The amount that Detroit doles out to settle legal disputes and borrows to pay them off equals $83 for each city resident — significantly higher than in several other big cities.Just three months into the fiscal year, awards against Detroit already top $10 million. They include this month’s $7.9 million award and interest in the whistleblower verdict against Mayor Kwame Kilpatrick, $1 million to pay 25 people illegally detained during homicide investigations and $676,000 to a Police Department accountant who was threatened with termination after reporting alleged wrongdoings to a former police chief and the mayor. Another $25 million judgment, which the state Supreme Court ordered Detroit to pay in June, against the city for seizing riverfront property for a failed casino project may be paid from a separate fund.
“When you see huge sums of money walking out the door it becomes a zero-sum game,” said Councilwoman Sheila Cockrel, who wants individual city departments to assume more responsibility for the lawsuits they generate. “It doesn’t improve the quality of life.”
Detroit is self-insured, meaning it is financially responsible for its own legal bills, rather than paying insurance premiums to a company that would shoulder the liability. In addition to the big-ticket cases, the City Council routinely approves hundreds of smaller payouts — from slip-and-falls to employment discrimination claims — each year.
Tuesday, for example, the council will be asked to pay plaintiffs in nine cases a combined $428,000 in damages, and to authorize attorneys to represent 16 police officers who are being sued over a variety of civil rights violations and brutality allegations.
And more potential settlements and judgments are ahead, including a case of another Kilpatrick bodyguard who alleges he was retaliated against, a man who was arrested and then released in the 2004 Hart Plaza fireworks shooting and strippers who claim the city’s licensing requirements are unconstitutional.
The high cost of lawsuits takes a toll on the financially struggling city, which has racked up a string of deficits since 2002.
Last year, including interest, it paid out a total of $62 million in lawsuits. The city does not track the number of lawsuits filed against it; instead, officials keep a running tally of total amount of money, which it had projected to fall for the current year, paid out in claims.
According to a City Council report this summer, police lawsuits alone have cost the city at least $214 million over the past 19 years.
Chicago, with three times the population and about 100 more square miles of area, pays roughly $24 a resident to settle similar disputes; Philadelphia pays $21 and Phoenix $10 compared to Detroit’s $83.
Still, Kilpatrick spokesman Matt Allen says Detroit is doing a good job of keeping costs in check and is “paying less every year to settle these claims.”
That tally does not include the cost of hiring outside attorneys to help the city’s law department.
The mayor has required a stiffer evaluation of whether a case should be settled, Allen said, and the city has been more diligent about putting in controls that ensure employees don’t make costly mistakes in the first place.
Cockrel acknowledges there have been improvements, but said the Risk Management Council, a group of city employees, should be more aggressive in pressuring city departments to avoid doing things that will get them sued — particularly the Police Department.
Until 1995, the city paid off lawsuits from a variety of funds. But the unpredictability of the claims made it difficult for individual departments to keep their budgets in check. To simplify financial planning, the city sold $100 million in bonds to create a self-insurance risk management fund to consolidate and stabilize payments from year to year.
Each year, the City Council reimburses the risk management fund with an amount equal to the five-year average annual payout. For instance, in fiscal year 2006-2007 Detroit paid $62 million to settle all claims and judgments and an additional $22.3 million in interest for the cost of borrowing the money.
Allen said if the city overspends any given year on lawsuits, the council can tap into the fund for more money the next year.
And it may need it this year, because of the crop of coming cases.
Today the city has a settlement conference with lawyers in federal court who represent Daron Caldwell, the man who was arrested, charged and then released as the Hart Plaza fireworks shooter in 2004. Caldwell is seeking $100 million in damages for his alleged wrongful prosecution. And on Tuesday, officials meet with lawyers in another federal case filed by a longtime Detroit police commander who alleges that white police officers are passed over for promotions by Police Chief Ella Bully-Cummings in favor of less qualified African-American and Hispanic officers.
Another group of cases has to do with city strip clubs. The owners of Zoo Bar are suing in federal court, in part because the City Council rejected its 2003 request to transfer the club’s permit to a new buyer. The new owners wanted to open a Hustler strip club.
The bar owners won a portion of the case in July, when a judge found, in part, that the city had too much discretion in preventing a strip club from opening. The case is continuing, and damages haven’t been awarded, but Zoo Bar attorney Brad Shafer estimates damages based on lost income could be up to $10 million. “Hustler clubs are extremely profitable wherever they are opened,” Shafer said.
Irv Corley, a City Council fiscal analyst, noted Detroit is only three months into the fiscal year, making it difficult to accurately predict if too much will be spent on lawsuits.
But recent judgments don’t help, he said.
“It just makes it that much harder for the risk management fund to accommodate the regular flow of lawsuits,” Corley said.
Resident Kenneth Peoples, who owns a two-family flat at Brush and Woodmont in the North End neighborhood, isn’t sure who’s to blame for the city’s negligence payouts.
“I find it hard to believe the city is responsible for all these problems,” said Peoples, staring down Brush at several large potholes that were barely visible because so many streetlights weren’t working. “But there are a large number of problems in this city that can hurt people.”
You can reach David Josar at (313) 222-2073 or firstname.lastname@example.org.