01-17-1995 - BKK Litigation BudgetCity of West Covina
Mem.moranduni
TO: MAYOR AND CITY COUNCIL MEMBERS AGENDA—
ITEM .NO. K-2. C.
FROM: CITY MANAGER DATE January 17. 1995
SPRINTED ON RECYCLED PAPER
SUBJECT: BKK LITIGATION BUDGET
SUMMARY: This report evaluates the status of, the budget originally
established to fund the costs of the litigation between the City
and BKK Corporation to enforce BKK's compliance with the
terms of the Memorandum of Understanding entered into in
1985. Because litigation has been on -going, costs have
exceeded the budget amount approved, and it is recommended
that additional funds totaling $1;240,000 be appropriated from
the "BKK Augmentation Fund"_ to continue the litigation and
resolution.' of associated issues with the BKK Corporation
through the end of fiscal year 1994-95.
Introduction
At the meeting of January 3, Mayor Pro Tem Herfert requested that I report to you on the
status of the budget for the BKK litigation. Prior to that meeting I had forwarded to the
City Council members the monthly report for December 1994: Because that report might
contain confidential information, I have not attached it to this memorandum.
The purpose of this report is three -fold:
1. To review the amounts that have been spent in litigation and
associated issues with BKK; ,
:. ..2.- To provide tut -estimate •of. the cost - of--- continuing -the litigation
efforts as well as to resolve the other associated issues between
BKK and the City; and
3. To recommend additional appropriations to support these efforts
and to evaluate and recommend alternatives for providing the
necessary funding.,
In June 1993, the City filed a lawsuit in the Pomona Superior Court seeking the
Court's confirmation of the validity of the memorandum or understanding entered
into between the City and West Covina in 1985, and requiring the closure of the
class III area of the landfill no later than November 1995. BKK subsequently
filed a like lawsuit in Los Angeles Superior Court seeking an interpretation of the
MOV in favor of allowing the landfill to receive waste through 2006. (The
various legal actions that. have flowed from the original lawsuits are described in a
separate confidential report from the City Attorney.) At the time of filing the
lawsuit, the City Manager recommended and the City Council approved a budget
for the litigation of $1,305,000. The original budget was comprised as follows:
Litigation
Community Information
Legislative Affairs
Total
BKK Litigation Budget
winword\BKK.95\1itbgtrp.doc
$1,200,000
$ .45,000
$ 60,900
$1,305,000
1
The total in charges to the BKK litigation account through December 1994 is
$1,410,456 with an anticipated additional expense for services received but not
paid of approximately $178,441. .
Discussion
If the BKK litigation budget had been limited solely to the support of the
litigation it is likely that we would be within or close to within the appropriated
funds. In fact, it was with the October 1994 litigation budget report that it was
thought that the current report could come to the City Council in January with
some remaining cushion. However, since the initiation of the litigation there have
arisen a number of issues relating to BKK and indirectly related to the closure
issue that have required legal and in some cases expert consultant support and
have added to the overall cost burden on this budget. The following is a list of
issues that, in addition to the litigation, have been addressed or are presently being
addressed and which have required legal/consultant support:
• LEAIUUP Fees Litigation
• Business License Audit and Preparation of Demand
• Evaluation and Preparation of ULTP Notice of Violation
• North Expansion Area Review and Preparation for Appeal
of RWQCB Decision
• Class I Financial Assurances Issue — Past Monitoring and
Contact with DTSC, and Evaluation of Possible Lawsuit
• Class III Financial. Assurances Issue — Past Monitoring and
Contact with DTSC, and Report to City Council
• General LEA Issues Including LEA Evaluation and
Certification, Solid Waste Facilities Permit Process, etc.
• Defense of BKK Defamation Lawsuit
Flooding )Encident Cl'aini and Lawsuit
We have not separated the cost of responding to these issues for the past
year, but it is apparent that the breadth and scope of issues. that have been
and are being managed and responded to is quite broad. As we indicated
when the litigation was initiated, the City needed to be prepared to proceed
actively on all fronts to press its interests.
Typical of these issues is the amount of work that has gone into the MOU
litigation. Attached is a. memo from the City Attorney that summarizes
the various legal actions associated with the MOU litigation.
An important question to ask is whether or not the cost of pursuing these
various issues has been managed effectively and whether benefit has been
produced commensurate with the cost. We feel that the answer is a strong
"yes." None of these issues are ones that could be ignored and all are
legally and technically complex. Since the inception of the litigation the
City Manager's Office has had in place a system for the review of legal
billings that could be fairly described as rigorous. Each and every bill,
which is very detailed is reviewed and the attorneys involved understand
and adhere to the City's policy of acceptable billing practices (copy
attached). A discussion of the product produced in the BKK litigation and
the other litigation issues is more appropriately discussed in closed -
session, but we feel that the City Council will be comfortable that a quality
product has been produced.
BKK Litigation Budget 2
winword\BKK.9511itbgtrp.doc
It is difficult at best to give a completely accurate estimate of the cost for
concluding the MOU litigation and the other various BKK related issues.
However, for the balance of this fiscal year an estimate of the cost related
to MOU litigation and the related BKK issues is as follows:
MOU Litigation $1,028,000
Other BKK Issues 212,000
If the MOU litigation or. any of the other issues are resolved at less cost,
then the balance of the budget will not be expended. In managing the
various costs, so that we can more easily report to the City Council on the
status of the budgets, the City Manager will have the Finance Department
prepare separate budget expenditure accounts for the MOU litigation and
the other issues that _will utilize attorney or special consultant services.
c Additionally, when the City Council directs .that an issue be pursued that
will result in direct costs, we will give an estimate of the cost and ask for a
specific appropriation if the cost will be more than nominal. In this way
staff and the City Council will be able to anticipate the total. cumulative
cost of responding to the various individual issues. Also, please, it should
be noted that these estimates are through fiscal year 1994-95, assuming the
MOU trial occurs before June 1995.
The original budget for the MOU litigation was appropriated from the
General Fundreserve.'- The City -Council can appropriate -the additional
funding from any unrestricted reserve fund. These include the General
Fund. -- projected reserve balance as of June 30, 1995, of $9,051,000; the
BKK Augmentation Fund -- projected reserve balance at the end of this
fiscal year of $1,408,000; or the Long Range Strategic Financial Plan
Implementation fund -- projected reserve balance of $2,275,000 , at year-
end.. In light of the City Council discussions when the BKK
Augmentation Fund was created, it would seem appropriate that the
additional appropriation come form this source. This would leave an
unappropriated reserve in this Fund of approximately $158,000.
When the MOU litigation was begun, the view was expressed that the
process would not be easy nor would it be inexpensive. The number of
issues being addressed has expanded considerably since the original MOU
litigation was begun, but as the City Council has indicated, all have
important implications for the West Covina Community and especially the
residents that live in and around the BKK landfill. Given the present
relationship between BKK and the City -it is likely that the issues will only
be resolved through the continued involvement of attorneys and
consultants. We realize this is a large amount of money. We look
forward to discussing in closed session the details of these amounts and
the utilization of the funds already spent.
e
BKK Litigation Budget 3
winword\BKK.95Vitbgtrp.doc
It therefore is recommended that the City Council appropriate funds for
the . purposes and in - the amounts indicated in- this staff report from the
BKK Augmentation Fund and direct the City Manager to establish'
separate budget expenditure accounts for the various BKK issues requiring
direct expenditures for legal and consulting services. as indicated in this
staff report.
Respectfully,
ge7s E. Star ird l'
E izabeth Dixon
anager City Attorney
BKK.Litigation Budget
winword\BKK.95\1itbgtrp.doc .
4
I. APPOINTMENT OF COUNSEL
A. Selection
1. City Attorney, Redevelopment Agency, Non -Tort
Litigation
The City Attorney, and Redevelopment Agency counsel
are selected by and work for the City Council, and
work with staff. The City Attorney . or.
Redevelopment Agency counsel will handle non -tort
litigation. In specific situations, after
consultation with City Attorney or Redevelopment
Agency counsel, City Council may refer certain
matters to special counsel.
2. Tort or Workers' Compensation Litigation
Counsel for each specific case will be selected by
City staff. The selection shall be based on the
nature and complexity of the action, the experience
and ability of the attorney, as well as other
relevant factors.
B. Written Agreement - Terms
The City will enter into a written agreement with each.
firm providing over $1, 000/year in services. The. form of
the agreement is set out in Attachment A.
The agreement shall incorporate these policies unless
explicitly set out to the contrary and will clearly state
hourly and/or retainer billing rates,. as well .as the
names._of' all prof essionals'who' will provide services
(including partners, associates, law clerks and
paralegals). The agreement also will include disclosure
of any conflict.
1. For ' ' tort `matt'ers; in: addition td 'the, written
agreement, within five days of the receipt of the
file, the attorney handling the case shall verify:
a. That he/she has the requisite ability to
handle the matter;
b. That he/she will have the time available to
properly represent the City, including
preparation and attendance at all depositions,
hearings and trial;
c. That the attorney and law firm to which he/she
belongs have no ethical or legal conflicts on
this, specific matter that would disqualify
him/her from. representing the City in the
pending action.
1
I
II.. BUDGET, CASE ANALYSIS AND STRATEGY
A. Non-Litigation.Matters: For matters which involve more
than, .a routine response (i.e. extensive research or
opinion letters), the attorney should provide a cost
estimate prior to beginning work on the case or project.
B. Litigation Matters: Within thirty (30) days following
receipt of the case counsel shall prepare and send to the
City (and to the Third Party Administrator. when tort or
workers' compensation) all of the following:
1. 1 Analysis. An initial, comprehensive, confidential
written analysis of the action including a brief
synopsis of the facts of the action, and
identification of the strengths and weaknesses of
the action shall be provided. Counsel shall also
provide an initial. impression of liability and
identify the pertinent statutes and/or case law
that may affect the outcome of the action.
2. Investigation. Counsel should identify additional
information or documentation that is needed.
I.Whenever possible, this investigation and .
information gathering shall be done by the City, or
its Third Party Administrator when applicable.
3.. Strategy. Counsel should define the strategy to be
used -in each action, including:.
a.. The anticipated course of action to be taken
and prospect for success. (i`.e. motion to
dismiss, motion for summary judgement,
i�
negotiated- settlement;. trial,- •etc-.•.):--.
b. The facts or elements which must be proved or
disproved and the discovery necessary to
establish the defenses or proof.
c. The timing of the discovery, filing of
motions, negotiations or other objectives.
d.. A description of how the work will be
distributed among those who will be working..on
the action.
as The tactics to be used in the action and the
advantages to be gained, by use of. these
tactics.
2
Budget. Counsel will also provide an estimate'of
the anticipated cost of each significant aspect of
the action, including:
a. Discovery/Litigation/Pre-Trial Motion expenses
up to trial
b. Outside expert expenses through trial
Co Trial expenses .
III. LITIGATION MATTERS: COMMUNICATION BETWEEN COUNSEL AND CITY
A. Correspondence and pleadings. Copies of all
correspondence and pleadings shall be promptly provided
by counsel to the appropriate City staff, Risk Manager
and Finance Director. It shall also be provided to the
City's Third Party Administrator (and insurance carrier
when the action meets excess reporting criteria) when it
involves tort or workers' compensation litigation.
Counsel will keep the City fully advised of the progress.
B. Depositions and hearings. Tort litigation and workers'
compensation depositions will be scheduled by counsel to
permit the attendance of a representative of the City as
well as each of the plaintiffs/defendants represented by
said counsel.
Immediately upon receipt, notice of all hearings shall be
sent by counsel to the City (and the City's Third party
Administrator and insurance carrier when it involves tort
or workers' compensation litigation)
C. Evaluations. Upon request and at such other times as
deemed necessary, counsel shall provide confidential
written or .oral evaluations of the .action. The..
evaluations shall disclose any weaknesses or strengths
that have been discovered, and changes in applicable
statutes .or case law, and increase or decrease in
anticipated costs, and (if possible) the potential
liability and settlement value. of the .action.. These.
evaluations should be as' straight=forward and as
objective as possible to allow the City to meaningfully
analyze the action and to determine the course of action
to be taken.
IV. SETTLEMENT AUTHORITY
I
Counsel shall not settle any lawsuit or make 1 a settlement
offer in any amount without prior authorization of the Risk
Manager, City Manager, or City Council (depending •on amount).
V. LEGAL
Bills for legal services and costs shall besubmitted to the
City Finance Director, or if it relates to Tort or Workers'
Compensation Litigation to the Third Party Administrator, on
a monthlvl.basis.
3
Fees -and costs shall be .`billed at the previously agreed upon
rate.
All bills shall state with particularity the legal work
performed, the hours expended to perform the work, and the
costs incurred. Attorneys -submitting the bills for payment
are responsible for the content of the bills and will work
with the City and/or its Third Party Administrator to resolve
problems or answer questions.
Legal fees must be submitted in the following format unless
otherwise agreed:
■ Each legal activity will be dated,and itemized. Block
billings (multiple daily descriptive explanations of
activities with a single. time entry) generally are not
acceptable for retainer accounts but may be used when all
time is spent'on the same matter.
■ The name or initials of the attorney who completed the
itemized tasks must be included with the entry.
■ The amount of time to complete the itemized task must be
broken down into tenths of hours.
■ The cost to complete each itemized task .must be shown.
■ The rates charged by each attorney/paralegal covered
within said billing, must be summarized with the amount
of hours to depict a cost per attorney/paralegal.
■ Tothe extent possible, photocopy charges should be
identified on, the bill, including date duplicated, number
of pages, and subject matter. Documents may be referred
to the Third Party Administrator, the City or an outside
service for reproduction..
■ To the extent possible, long distance telephone charges
and FAX expenses should be identified by date, subject
matter, and the person to which they were sent/placed or
received, and number of pages if applicable.
■ Outside contract services (i.e. court reporters,
investigators, copy services, process servers, etc.) if
at all possible should be billed by the outside
contractor directly to the City or its Third Party
Administrator for payment.
■ Mileage and parking shall be itemized as to where and
why, attorney, date,. number of miles, and charge per
mile.
4
^ VI.' ATTORNEY 'OVERHEAD :
The following items shall be considered within the attorney s
overhead, and shall not be billed separately to the City
unless specifically authorized in advance by the City:
■ Conferences between attorneys within the same law firm.
■ Review of 'the same records more than once unless the City
requests. that a file or case be transferredto a'
different attorney.
■ Messenger services and/or overnight mail delivery.
■ All secretarial services.
■ Overtime
■ Postage
■ Document binding
■ Questions regarding bills.
VII. TRIAL REPORT
At the conclusion of all trials, a brief. summary trial report
should be directed to the City (and its Third Party
Administrator when applicable) outlining the trial results.
VIII.FINAL.REPORTs
At the conclusion of the action, a short summary report should
be directed to the City (and its Third Party Administrator
when applicable). Original closing papers and the final
billing should.be attached.
IB. PAYMENT
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City shall timely raise questions and comments so that
attorneys are paid with promptness.'
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To: Mayor and City Councilmembere
Jim Starbird, City Manager
city of West Covina
From: Elizabeth Dixon, City Attorney
Re: Expenditures on BKK Litigation Matters
This memo explains how the City's money has been spent in the
BKK-MOU litigation and the LEA/UUP fees litigation. The City has
spent a lot of its money on this litigation and we welcome the
opportunity to explain to you, in as much detail as you want'how,
it has been utilized. We believe we have controlled costs and that
you are getting an excellent product and result for your litigation
dollars.
BKK-MUV 1.Ytigation`Summar�
This case. has been a busy one from the beginning. We have
functioned an the lead counsel in the case. As --I have told you in
the -past, we are ready and waiting for trial.
Burke, Williams and Sorensen has had an increasingly smaller
role as .the litigation evolved and we eliminated duplication of
effort. Generally, they have handled challenges relating to Colin
Lennard as well as his deposition and certain procedural matters,
most of which are related to discovery.
We prepared and filed the lawsuit on June 21, 1993. BKK
served the cross -complaint three days later as a separate
complaint. The next step, therefore, was a motion to transfer,
which BWS drafted in coordination with us. We then demurred to
certain provisions of the cross -complaint and eventually the court
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dismissed BKK's causes of action far inverse condemnation. The
case was at issue by January, 1994 (i.e. "background" motions had
..;been compl+ated, .leaving. only relevant factual. and. legal issues) .
Next, .BKR brought - a motion for a preliminary injunction
requesting that all City action referring to the MOU be stopped.
In response, we prepared a summary of the entire case. This
summary includes declarations from all surviving city
Councilmembers from 1985 as well as community and staff members
involved in the Mou negotiations, as well as newspaper clippings
and numerous documents as exhibits. We reviewed all City files
related to the MIT as well. After seeing our opposition, BKK
withdrew its request for a preliminary injunction.
BKK then brought a motion for an expedited trial date; a June
date was assigned and a discovery cut-off seta Thereafter, we
participated in taking or defending at least 55 depositions. (We
did not defend Colin Lenard and one other minor witness). Over 60
days (2 months) have been spent. in depositions. The transcripts of
those depositions have almost 20,0000 pages at this time and over
half a million pages have been put into our computer database. Of
these, approximately 50,000 will .,be used as exhibits. Discovery
(depositions and document requests) have been referred to a special
master because of the complexity and volume of the requests.
BKK also brought a motion to disqualify which was defeated_
Thereafter, the parties brought cross -motions for summary judgment,
which again required summary of the extensive evidence. These
motions both were denied. All such notions required tremendous
preparation in terms of legal reisenrch, factual investigation and
preparation of pleadings.
If6re recently, there have been'- meetings and, depositions with -
each side's expert witnesses. We have, learned a tremendous amount
about the landfill, its operation and intentions, from our expert
witnesses. This information is of ongoing use to the City in its
day -today dealings.with the landfill as well as other litigation
and prospective litigation, such as the business license tax
matters.
There also have been preparation of motions in limine (which
are used to try limit the evidence BKK is allowed to present in the
case). We will be bringing at least five motions in limine at the
time of trial.
Finally, there has been preparation for trial. Mr. Hampel has
reviewed and prepared all exhibits, all depositions and all other
discovery material. He has prepared his opening and closing
statements, his list of witnesses and the questions he"ll ask them,
as well as his cross-examination of BKK's witnesses.
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RUTAN & TUCKER
_ - ATTARNEYS AT LAW
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We are very proud `of the job we have done: We believe that .we
have spent your money carefully and constructively to win this
case. We have donna large and small things to save costs: selected
consultants with lower rates -for governmentaldntLties, bargained
over rates, used volume discounts from shorthand reports, and 'even
reduced our copying costs by half and sent out large jobs (where
possible). We believe BKK has spent over $3 million so far.
The amounts expended also include all amounts for the expert
witnesses (which are charged directly to the City at the City's.
request)., all other costs, and several other BXK-related matters.
Specifically, the amounts include attorneys' fees for the LEA/UUP
fees lawsuit.
At present, that case is ready either for settlement or trial.
We are defending'BKK's challenge to our resolutions requiring
payment of costs (including legal fees) incurred under the UUP and
by the. LEA. Based on our challenges to BKK's petition_, that
petition has been amended several times. There have been a variety
of motions, again including cross -motions for summary judgment. As
a result of those motions, the city won a significant victory for
all LEA�s when the court ruled that LEA's were entitled to
attorneys' fees for independent counsel. The costs in the future
turn on whether BKK agrees to the City's reasonable settlement
offers.
We would like to answer any and all questions, either in open
or closed session.
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