County Called Lax in Handling of Lawsuits : Litigation: Disjointed system wastes millions in taxpayer funds, study finds. An official disputes the figures and conclusions reached.

Los Angeles County may be losing tens of millions of dollars annually through haphazard handling of the thousands of lawsuits filed against it every year, according to a soon-to-be released study by a pair of independent consulting firms.

The report, prepared by McGladrey & Pullen and Advanced Risk Management Techniques, concluded that the county has a disjointed system for tracking lawsuits and lax methods of holding departments accountable for their actions.

In one startling conclusion, the consultants said the county could save $400 million over the next four years “with an appropriate redirection and reallocation of resources.” The county’s 1993-94 budget is $13.5 billion.

According to the report, which was sharply questioned by County Counsel DeWitt Clinton, the county spent $134 million in fiscal 1991-1992 to settle and litigate lawsuits, a 251% increase in just three years.

“In this time of severe budget cutting, the county needs to exert greater control over (handling of lawsuits) that consume budget dollars,” the report concluded.

Clinton took exception to the cost figures as well as some of the conclusions.

He said the county spends well less than $100 million a year and may spend only about half the amount cited in the study. Clinton said total liability costs have leveled off in recent years, rather than climbing dramatically as stated in the study.

And Clinton said he was unsure of the source of the consultant’s information. “They never spoke to anyone in my shop,” Clinton said.

L. Michael Lynch, director of consulting services at McGladrey & Pullen, said he stands by the report’s figures. He said he did speak to county counsel staff, as well as workers in a number of other county departments, including the Sheriff’s Department, the auditor-controller’s office, the internal services division and the Risk and Insurance Management Agency.

He said that in order to ascertain the scope of the problem it was necessary to piece together information from a variety of sources.

The study, commissioned by the Citizens Economy and Efficiency Commission at a cost of $87,000, was requested by County Supervisor Gloria Molina, who was concerned over escalating costs of fighting lawsuits.

It will be considered by the Economy and Efficiency Commission on Wednesday and could go tothe Board of Supervisors for consideration next week, officials said.

The study found that the county invests much less than other government bodies in avoiding lawsuits and litigation. Only about 4% of the money the county spends on lawsuits is devoted to finding ways to limit risks, consultants found.

In fact, they said, the county’s policies “have not and do not appear to be containing costs, but rather are permitting (lawsuit) exposures to increase dramatically.”

Too much of the county’s resources are devoted to paying too many lawyers, the report found.

“Costs for legal defense for 1991-1992 were almost half (48%) of total tort liability costs, compared to an average 33% for other large public entities investigated,” according to the report.

The 49 law firms employed by the county are “too large a group to effectively monitor and control,” and the county provides “few or no incentives for the outside counsel to quickly and efficiently handle cases or to seek early settlements,” the report’s authors stated.

Clinton said the county actually employs 100 firms, many of them with minority lawyers, and he said it is cost-efficient to use a large number of smaller firms that are more appreciative of the county’s business than larger firms.

Clinton said most legal expenses are contracted at a moderate rate of about $100 an hour and workers’ compensation cases are handled on a flat fee basis.

Still, the study found that such legal expenses “can be substantially reduced through greater control” over the outside firms.

The consultants also recommended that the county consolidate the handling of lawsuits and liability issues into one specialized unit rather than spreading them among many departments.

“There is no source of current, accurate cost data,” and each county department has developed a separate system for handling lawsuits, according to the report. “As a result of there being no uniform approach, county departments have developed incompatible systems. None of the departments interviewed had all the data they needed to properly track tort liability incidents and associated costs.”

Finally, the study suggested that the county “expeditiously settle claims of clear liability before they become lawsuits.”