O.C.’s effort to annul pension deal is costly

Costs are quickly mounting in Orange County’s effort to invalidate its pension agreement with sheriff’s deputies, public records show.

The county has already paid a total of more than half a million dollars to four law firms in the last year to research and develop a strategy for a legal challenge -- and that’s before supervisors have even decided to take the case to court.

The billings, and the number of firms involved, indicate the county’s extraordinary effort to nullify its own labor pact and is raising novel issues that have required extensive -- and expensive -- legal research.

The county has declined to produce any of the opinions or other work the firms have done, citing attorney-client privilege. But two of the four firms have concluded that the case is not legally viable.

Supervisors are expected to vote next week on whether to move forward with the case. In a recent interview, Supervisor Chris Norby said Kirkland & Ellis, the firm most recently retained by the county, believes it may have found a way to get traction on the case.

“They think it’s viable, but how viable is the question,” Norby said.

The legal challenge faces an uphill battle because state and federal laws, as well as constitutional protections, generally safeguard worker pensions from employers who want to roll them back.

In San Diego, lawsuits seeking to undo that city’s pension agreements with public employee unions were resoundingly defeated, creating $1 million in legal bills for the city and an additional $1.5 million in attorney costs it had to cover for defendants who prevailed.

The county, much like cities and other counties throughout California in recent years, awarded generous benefit packages to employees during bull markets, only to be faced with having to cover the steep costs of those arrangements when markets declined. Orange County reached a pension deal with the sheriff’s deputies union in 2001, allowing deputies to retire at 50 with an average pension of about $70,000 a year.

But the structure of the deal, which awarded retroactive benefits that had not been paid for by either the deputies or the county, created a huge shortfall in the amount of money the pension fund will need over time to cover all its costs.

There is a $2.3-billion pension shortfall overall; some county officials estimate that dropping the retroactive portion could eliminate up to a quarter of the deficit, which is why supervisors -- led by board Chairman John Moorlach -- are hoping to throw it out.

Moorlach and his chief of staff, Mario Mainero, have argued that the agreement is legally invalid because it constitutes a gift of public funds and violates the state’s constitutional prohibition on deficit spending by the government.

The county produced the firms’ billing records in response to a formal records request by the Assn. of Orange County Deputy Sheriffs, which has hired a law firm to fight any effort to undo the pension agreement. The records covered billings up to Dec. 1 of last year, and it’s likely more money has been spent since.

“The county has now spent over a half-million dollars of taxpayers’ money and gone through four sets of law firms attempting to find one that agrees with them,” said Wayne Quint, president of the deputies union. “It is time to stop wasting the county’s money.”

The county had spent $504,086.79 on the firms at the time the records were produced. Of the four, Chicago-based Kirkland has been paid the most, billing more than $221,200, records show.

A substantial amount, 235 hours for nearly $65,000, was for work performed by a first-year associate at the law firm.

In an interview, Moorlach defended the spending, saying if the county succeeds in reining in its costs, the legal costs will have been a fraction of what it saves.

“If our original analysis is correct, then it’s a small price to pay for the savings that could be garnered,” he said.

Reish Luftman Reicher & Cohen, a Los Angeles firm retained by the county in March, received more than $125,000, the second-highest amount. The San Francisco firm Orrick, Herrington & Sutcliffe was paid $99,600, and the Phoenix-based Snell & Wilmer received about $57,700. Both Orrick and Snell questioned whether the county had a case.

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christian.berthelsen@latimes.com