Experts Find Lax Control by City Over Holden Legal Bill

The city of Los Angeles might have been able to save taxpayers hundreds of thousands of dollars defending two sexual harassment lawsuits against City Councilman Nate Holden by tightening cost controls and more closely monitoring attorneys’ work, according to three legal auditing experts who reviewed the bills for The Times.

While they lacked the time or access to conduct a full-scale audit of the $1.3 million in legal bills from two city-hired law firms, the experts said a preliminary study of nearly 1,000 pages of documents obtained this month under the California Public Records Act revealed scores of charges worth a closer look.

The Times-commissioned analysts challenged items as narrow as the $3,139.66 one firm charged for after-hours air-conditioning and as broad as apparent overstaffing, use of legal professionals for secretarial work and a billing format that makes scrutinizing costs more difficult. The experts questioned why attorneys at the first firm billed for 12.1 hours of telephone calls in one month when phone records document only 6.7 hours of calls, and wondered whether a lawyer at the other firm counted meals and bathroom breaks when he calculated 21 billable hours in one day.

Perhaps most problematic, they said, was the second firm’s billing in quarter-hour increments rather than the more common 6-minute chunks, which means a $250-an-hour lawyer earns $62.50 for a five-minute task rather than $25.

“We’ve got some real problems, I mean serious problems in this legal bill,” said Judith A. Bronsther, whose New York-based Accountability Services Inc., Legal Cost Control Specialists spent about 50 staff-hours examining the bills.

“This is something that has to be managed from the beginning,” Bronsther added, agreeing with the other experts that much of the blame belongs to city officials who failed to outline a clear budget for the case in the lawyers’ contract. “I don’t think that they intentionally, for the purpose of bilking the client out of money, did these things. I just think that simply no one has held them accountable and said . . . that it’s not enough to win, you have to win at a fair price.”

The city has hired an auditor to examine the bills from the two firms that defended Holden and several other city employees. The downtown firm of Casterline & Agajanian charged about $500,000 for 23 months of pretrial work, and Christensen, White, Miller, Fink, Jacobs, Glaser & Shapiro of Century City rang up $800,000 in four months.

Christensen, White was hired at the last minute when Holden rejected a settlement offer that Casterline & Agajanian supported. It was Christensen that won the first case after a six-week, nonjury trial and got the second case dismissed on summary judgment. Christensen also bore the brunt of The Times experts’ critique, with analysts finding far fewer faults with Casterline’s bills overall.

“We were hired because we know how to win and protect against multimillion-dollar exposure,” said Skip Miller, the lead Christensen, White partner on the case, noting that the legal fees were far less than the $7 million the women sought in their original claims. “Nobody likes paying legal fees, but when you get sued, you want to get the best overall job for your money. Law, and especially the trial of cases, is not an exact science, it’s not something you can put on computer. It’s still very much an art form.”

Regarding his firm’s bill, Tim Agajanian said: “I think the taxpayers’ money was well spent.”

State law requires public agencies to defend their employees in lawsuits connected to their jobs. The city attorney’s office often uses private attorneys because it lacks the expertise to handle certain matters, or--as in the Holden case--has a conflict of interest, typically because the city itself is also a defendant.

At City Hall, the Holden bills have attracted attention because they are so much higher than officials expected.

“When outside counsel is hired, who controls the expense and the bills?” said Councilman Joel Wachs, who heads the Government Efficiency Committee. “Who watches? I just think a lot of money is wasted there.”

The city attorney’s office usually hires and supervises outside counsel, though the City Administrative Office was charged with monitoring the Holden bills because of the conflict of interest. Ultimately, Wachs and other council members are responsible for setting cost-control policies.

City Atty. James Hahn acknowledged that his department has failed to keep a lid on private attorney bills, but said that is why he has moved to hire outside auditing firms to help train his staff and design a better system for controlling costs in future cases. Three firms have been selected.

“We could gripe about the bills or grouse about them, but we didn’t have any way to really verify this stuff,” Hahn said. “I think now we’ll be able to have that ability. As a result, I think we’ll still get good legal [work], but we won’t get any gold-plated legal bills.”

The issues raised by The Times’ analysts on the Holden bills mirror the preliminary concerns of the city-hired auditor, Cooper, Kasparas & Scharf, said Dan McGowan, senior analyst in the City Administrative Office. The city has paid only $200,000 of Christensen, White’s fees so far, McGowan said, because the rest of the charges are being scrutinized.

“I told Skip Miller we weren’t going to pay a penny until we got word back from the auditor,” McGowan said. “They’re used to doing things in a certain way. But their ‘certain way’ might not be things the city wants to pay for.”

The bulk of Casterline’s bills have been paid, but they also are being audited.

Miller--who earned $250 an hour for the Holden job rather than his normal rate of $350--said he welcomes the city audit but objected to The Times’ review, saying it is unfair “to have our bills dissected by firms we know nothing about nor have had a chance to sit down with.”

For its analysis, The Times consulted three attorneys at established firms in the burgeoning field of auditing legal bills.

Andre E. Jardini, president of KPC Legal Audit Services Inc. in Glendale, is one of the consultants the city selected to help instill cost controls on outside counsel in the future; Bronsther, who lectures and writes frequently on the topic, was among those who bid on the city’s legal cost-control contract but was not selected; John J. Marquess, chairman of Legalgard Inc. in Philadelphia, had no involvement with the city’s bills until he was contacted by The Times.

While the city’s auditor will be able to review the case files and interview people as part of its research, The Times’ experts said their review cannot pinpoint abuses, only raise questions.

All three said the most troubling things in the stack of bills were Christensen’s use of quarter-hour increments and its habit of “block billing”--listing a series of activities done each day and an aggregate amount of time rather than a single entry for each task--as red flags begging for a closer look.

“Most knowledgeable clients now insist on [6-minute increments], knowing that it is more efficient and more tightly tracks the time spent,” Jardini said.

“The national norm is [6-minute intervals] and to go beyond that is unacceptable. It means they’re rounding their time up,” Marquess agreed. As for block-billing, he added: “It’s just unacceptable because it doesn’t allow for any accountability, any assessment of the reasonableness by the person paying the bill.”

Miller said he has always used quarter-hour chunks, and “none of our clients have ever questioned that.” He said he had never heard of block-billing, but that the summarizing of tasks is “exactly what our clients ask us to do, which is to describe the time as accurately as we can.”

But the format presents auditors with problems when, for example, they discover that Christensen associate Steven J. Aaronoff billed for 21 hours Oct. 17. Aaronoff listed his activities in two chunks, one for nine hours and another for 12, naming three phone calls and a meeting along with broader activities such as “work on cross-examination outlines” and “prepare trial outlines.”

Not only is it tough to analyze Aaronoff’s efficiency, the experts said, but any 21-hour day attracts attention.

“Did he forget about his lunch? Did he forget about his dinner? Did he forget about talking to his colleagues?” Bronsther asked. “Not every hour in a lawyer’s day is billable. They must eat, sleep and go to the bathroom like everyone else.”

Explained Miller: “He literally pulled an all-nighter.”

Marquess and Bronsther also criticized Christensen’s bills as too vague, listing “review documents” or “prepare for trial” rather than more detailed descriptions.

“ ‘Work on outlines.’ What outlines? ‘Work on trial brief.’ What work were you doing on the trial brief?” Marquess asked as he eyeballed one Christensen time sheet. “What is this person doing? I have no clue.”

Another issue that caught the experts’ eyes was staffing.

Each firm had a team--six people at Casterline, nine at Christensen--assembled for the cases, triggering multiple reviews of the same documents and a series of money-consuming interoffice meetings to keep everyone up to date, the experts said. (For internal meetings, Casterline often billed for only one participant’s time, while Christensen routinely billed for each attendee.)

Christensen also had two $250-an-hour partners in court for each of the 25 trial days, plus a third lawyer on 10 days and a fourth three days. Both firms sometimes billed for two lawyers--at Christensen, even two high-priced partners--attending the same outside meetings or handling one deposition.

“The staffing of the trial was on the rich rather than the lean side,” Jardini said. “I try a lot of cases. Typically, I do everything.”

John F. Lagle, another lawyer who bid on the city’s auditing contract, said the trial staffing seemed smart. “A partner who’s been practicing for 15 years is much more effective than an associate, particularly during a trial,” Lagle said. “Though the cost may be greater, the effectiveness is probably twice as great.”

In court, Miller handled the factual disputes, and partner Michael O’Connor--who also billed $250 an hour--worked with psychologists and other expert witnesses.

“I couldn’t have done the case without Mike,” Miller said, noting that his firm was hired just six weeks before trial. “One human being in that short period of time, no matter how great a lawyer he or she is, could not have tried that case alone.”

The experts said staffing levels were most worrisome at Christensen, both in double-teaming the trial and in having as many as seven different people work on the summary judgment motion in the second case. Bronsther, however, said Casterline also may have used too many people, particularly since in the early stages of discovery and depositions, each employee spent just a few hours per week on the Holden matter.

But Agajanian said having two partners, two associates and two paralegals gave the city “a better benefit for their bargain” by making sure that someone intimately familiar with the cases would always be available.

Bronsther also noted that, for the month she inspected closely, the Casterline firm billed for nearly twice as much time spent on phone calls made from the firm’s office than the phone records show: 12.1 hours on the firm’s time sheets, vs. 6.7 hours on the phone bill.

Agajanian explained the discrepancy by saying his firm includes preparation time and post-call note-taking as time spent on a phone call when lawyers count their hours. Bronsther agreed that it’s an acceptable practice, but said it does not account for such a wide disparity.

The Times’ auditors also noticed that both firms sometimes had paralegals or even lawyers billing $70 to $150 an hour for making copies or scheduling appointments. Law firms typically do not bill for secretarial work, including administrative salaries as part of overhead, the experts said. If professionals do secretarial tasks, they added, it should be off the client’s clock.

Miller said that when paralegals bill for copying it is either because they need to familiarize themselves with the documents or because the material is too complex for clerks to handle.

While billable hours require complex investigation and analysis, expenses such as photocopies, faxes, messengers and air-conditioning are more concrete. The legal cost experts said that without a full audit, they could not determine whether the firms overused luxuries such as messengers, but that photocopies should be reimbursed at 5 to 10 cents per page, and Christensen’s fax charges, which ranged from $1 to $3.55 a page, suggested a profit center for the firm.

Miller said, “I don’t have a clue” how the cost of faxes is determined, but that his firm is not making money off the service.

All the experts said it could be difficult for the city to recoup costs for the expense items, since it agreed to pay the 15 cents per photocopy, and otherwise did not lay down guidelines in advance, instead stating simply in the contract that expenses “shall be reasonably necessary.”

In general, those who analyzed the bills for The Times said their concern was not just the firm’s billing habits, but a lack of involvement by city officials in tracking costs.

Over the past five years, the auditors said, private companies that incur large legal bills have begun drafting specific budgets for each project rather than trying to slash bills after the fact. The city, they suggested, should follow suit.

“The city is certainly sophisticated enough to have said, ‘Here are the rules of the game,’ ” Marquess observed. “These are citizen tax dollars, and there’s a higher duty of care on both sides to ensure that they get cost-effective representation.”

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A Look at the Experts

The Times asked these three legal auditing experts to review about 1,000 pages of documents detailing nearly $1.3 million in private attorneys’ fees connected to the sexual harassment cases filed against City Councilman Nate Holden.

* Judith A. Bronsther, president, Accountability Services Inc., Legal Cost Control Specialists, New York City. Lawyer since 1979, specializing in corporate finance. Auditing since 1991.

“No one has held [the attorneys] accountable and said, ‘You have to deliver cost-efficient services.’ ”

* Andre E. Jardini, president, KPC Legal Audit Services Inc. at law firm Knapp, Petersen & Clarke, Glendale. Lawyer since 1976, litigation. Auditing since 1986.

“The lawyer doesn’t get to print money by sending out a bill. They’re going to be scrutinized and they should be.”

* John J. Marquess, chairman, Legalgard Inc., Philadelphia. Lawyer since 1977, insurance defense, civil litigation, real estate and business. Auditing since 1987.

“If I were a client . . . I wouldn’t pay this bill without an audit. I’d have too many darn questions.”