THE CITY OF NEW YORK AS A MAJOR
A FOLLOW-UP ON THE PRICE WATERHOUSE STUDY
AN OVERVIEW OF THE PROBLEM
Administrative judges are rightly concerned about the growing number of City tort cases and their impact on an already severely taxed court system. As contrasted with non-City cases, of which only 16% are over Standards and Goals, 39% of the tort cases instituted against the City fail to meet this temporal standard.4 In an attempt to dispose of these City cases post-note of issue, the Office of Court Administration has recently proposed the creation, in one location, ofseveral court parts to handle all trial-ready tort cases in which the City is a defendant.5 Initially, a single Citywide court part will be established in Manhattan to conference the oldest trial-ready City cases pending in the five counties. If a case cannot be settled, it will be sent back to the county of origin and jury selection will begin immediately. If this proposal is actually implemented, there may eventually be one or more additional Citywide parts in Manhattan where trial-ready tort cases against the City, irrespective of county of original venue, will be conferenced. If this is accomplished, existing City Parts in the individual counties may handle only pre-note of-issue proceedings in City cases.6
The Office of Court Administration anticipates that, if implemented, this attempt to consolidate all post-note-of issue cases against the City in a single county, before judges who will uniformly apply the same operating procedures, will help reduce the inventory of trial-ready cases. However, this proposal does not address the disposition of claims and cases at their earlier stages, which is where the more significant backlog exists. Indeed, a substantial reduction in pre-note cases should necessarily result, over time, in a related decrease in post-note cases. As will be discussed below, in order for there to be any meaningful reduction in this inventory of pre-note-of-issue cases, all principals -- not only the courts, and the offices of the City's Corporation Counsel and Comptroller, but also the Mayor and the senior managers of the City's agencies --must work together, in good faith, to implement procedures directed towards resolving the problem.
Some progress has already been made. The Corporation Counsel's Tort Division, and the Comptroller's Bureau of Law and Adjustment ("BLA") -- which under the New York City Charter is responsible for the settlement process7 -- have recently made significant strides in implementing an early resolution procedure for certain less serious tort claims against the City. However, a necessary prerequisite to any successful settlement process is the early investigation and evaluation of claims, irrespective of their size. In the case of claims made against the City, this means (among other things) that City agencies must, at a minimum, be prepared to provide information and documents to BLA and the Tort Division quickly and efficiently and to make knowledgeable witnesses available for interviews and depositions as and when required. Further, BLA and the Tort Division must have adequate staffing and funding to permit them to conduct their investigations and do whatever else is necessary to allow claims and cases to be evaluated --and, it is hoped, settled -- in their earliest stages. Unfortunately, none of this has yet been done.
In analyzing the City's response to this litigation crisis, it is easy to assume -- not without some justification -- that there is a tendency among elected officials and their appointees to defer any hard decisions involving major capital expenditures until a later date and another administration. To the extent that this political inertia is a contributory factor in the City's failure to launch an all-out attack on the current inventory of tort cases, it jeopardizes the long-term financial health of the community. In fiscal years ending June 30, 1993 and 1994, the City paid$236.2 million and $289.2 million, respectively, to claimants; by 1997, this figure had risen to $322 million and, by 1998, it had increased by almost 20% to $380 million8. Price Waterhouse projects that if no new action is taken to address current trends, these annual payouts will increase by $275 million in another year, and by almost $600 million in ten years.9 As of June 30, 1993 and June 30, 1994, pending claims against the City exceeded $343 billion and $286 billion respectively10 -- and that figure is probably much higher today. While it is difficult to predict the actual cost of those claims, the City has estimated its future liability, predicated on those claims, at $2.6 billion.11
It is unlikely that our judicial system, as presently constituted, will be able to handle this growing inventory of City tort cases and still provide all litigants with "speedy" justice. Unless this problem is addressed rationally and with expedition, not only will it become increasingly difficult to obtain a judicial resolution of tort cases against the City within any rational time frame, but the growing volume of those pending cases will eventually reduce the availability of judicial resources to other litigants.
Both the judicial and the executive branches have had a tendency to allow City cases to wend their way through the litigation process at a pace preferred by the defendants, without thesame insistence that the City adhere to the same Standards and Goals that apply to other litigants -- and, at least in theory, to the City itself.
This tendency for City tort cases to proceed on a much slower track than is the norm is not inexplicable. Merely by the volume of cases pending against it, the City is a unique defendant. Through its various agencies, particularly the Police Department, the Department of Transportation and the Department of Education, the City is perhaps accused of responsibility for a greater number of non-wartime personal injuries than any other entity in the world. Since the City has a direct or indirect involvement in almost every aspect of the lives of its residents and its visitors, an arguable nexus almost invariably exists between many types of bodily injury or property damage and an act or omission of a City agency or employee. Even where the City's potential legal liability is remote -- and sometimes even where it is non-existent -- claimants' lawyers tend to view the City as the "deep pocket" of last resort. As a result, in many instances, the only limitations on a claimant's ability to join the City as a party defendant are the imagination and good faith of plaintiff's counsel.
Some judges have become openly sympathetic to the constant plaint of the City's lawyers that they are unable to move cases at the same pace as non-City litigants because the Tort Division is underfunded and understaffed. There is also an implicit recognition on the part of many judges that City cases must be allowed to move more slowly than other lawsuits, and that both Standards and Goals and the discovery deadlines imposed on other litigants are inapplicable to City cases, because the City's lawyers, acting in good faith, are just unable to obtain the same degree of cooperation from their clients (the City agencies) as can the private Bar from its clients. City agencies seem unwilling or unable to supply documents, or to produce witnesses, within thesame time frames as other parties to a lawsuit. This is only partially excused by the fact that, because of the high volume of cases against it, the City (and its agencies) bears a greater discovery burden than does the typical tort defendant.
Nor should it be forgotten, in analyzing whether the courts should treat the City as "just another litigant", that, unlike any other defendant, the City makes direct use of the taxpayers' dollars to settle cases and satisfy judgments.12 At least in theory, money not expended for these purposes could be used for the betterment of all taxpayers. It is for this reason that many courts are unwilling, for example, to take defaults or impose other financial sanctions against the City for non-compliance with discovery orders, believing that the ultimate effect of any such sanction would be to place still another financial burden upon the taxpayer. While this analysis may have some logic, it must also be recognized that such an attitude does not encourage the City (and its agencies) to comply with discovery requests and disclosure orders.
As recently as two years ago, the City failed to comply with over 50% of state court orders directing it to provide discovery within a specified time frame.13 In other words, despite numerous judicial determinations that there was no merit to the City's excuses for non-compliance with legitimate CPLR discovery requests, the City, in the majority of cases, continued to fail to comply with its legal obligations. As one experienced and knowledgeable jurist told us, the City's compliance with discovery demands tends to come "when the guillotineis about to fall," following "motion after motion to compel."14 The inevitable consequence of this procrastination has been to delay the completion of discovery in City tort cases. As noted earlier, there have been few, if any, sanctions imposed for this failure to comply with judicial directives. Unfortunately, this means that there is no pressure on City agencies to remedy this dilatoriness. Even when its lawyers have requested compliance with discovery requests on a timely basis (and its lawyers are not always prompt in seeking such agency cooperation), the agencies seem to realize that there is no compelling reason for them to work harder, or more expeditiously, or with greater efficiency, in order to comply with these requests. And so, they do not.15
For whatever the reason, the Mayor and his appointees have themselves chosen to join in this path of least resistance, and have failed to enact procedures to mandate agency cooperation in lawsuits in which the defendant agencies seemingly perceive themselves to be disinterested parties. Despite Price Waterhouse's urgings, such cooperation from the City agencies remains wanting; despite the earlier recommendation of this Council, the Office of the Mayor has yet to take any meaningful steps to motivate City agencies to accept their responsibilities in this regard. There is still no agency accountability, and, despite recent efforts by the Tort Division and BLA,there is still no reason to believe that this major impediment to the reasonably rapid preparation of City tort cases for trial will soon be eliminated.
THE PRICE WATERHOUSE REPORT
Price Waterhouse concluded that the City's tort inventory is best managed through greater settlement efforts during the early stages of a claim/lawsuit. To succeed in such efforts, the City must make an initial investment, in year one, of approximately $50 million. However, Price Waterhouse's cost model demonstrated that this investment would be rapidly offset by positive savings in reduced settlements. Indeed, from a cash-flow perspective, Price Waterhouse believes that the City should turn the corner soon after year one. In a worst case scenario, this initial investment would be fully recouped after year three; in a best case scenario, recoupment wouldtake place within year one.17 The cumulative savings, in today's dollars, from adopting Price Waterhouse's recommendations would exceed $300 million (in today's dollars) by year ten. By year twenty-five, the City will have avoided more than $600 million (in today's dollars) in settlement costs relating only to its four primary claim categories: roadway, sidewalk, police action and schools.18 These savings alone would seem to be a persuasive incentive for implementing Price Waterhouse's recommendations.
Although Price Waterhouse made over one hundred individual recommendations, this report will focus on that consultant's "key recommendations" (all of which were given a high priority).19 We will then consider whether the City's responses to those recommendations are sufficiently energetic and complete to suggest a meaningful effort to reduce the backlog.
In reading the following analysis, it should be kept in mind that Price Waterhouse stressed, in its Report, that its recommendations are interdependent, particularly those identified as high priority; neglecting one recommendation could negate the effectiveness of other recommendations.20
1. Increase staffing to reduce workloads. 21
The City's attorneys handle many more cases than the other institutional litigants considered as a benchmark by Price Waterhouse. In the Tort Division, there were 485 personal injury and property damage cases pending per attorney. The six municipalities studied by Price Waterhouse25 had a median case load that was at least 12 times lower, at 39 cases of all types, per attorney. The number of new suits per attorney per year for the City was 94, whereas, in the median group, it was only 17. However, both groups closed at much the same rate, about 13-15cases per year per attorney.26 Therefore, although the City has a much higher flow of new cases, it does not dispose of them any more quickly than its peers in other cities. These statistics support the conclusion that the historical growth in the inventory of City tort cases has not been because of any lack of effort by its attorneys but, rather, is the direct result of understaffing.27
During the same period, the number of pending personal injury and property damage claims per BLA staff member was 383 while the median for all claims in those other cities was 119. On the other hand, the City only closed 119 personal injury and property damage claims per claims examiner, while the group median closed 138 claims of all kinds.28 To the extent that these naked statistics are revealing, it might be argued that, despite being understaffed, BLA's settlement effort could have been more strenuous. There is, however, another possibility: because each BLA examiner's caseload burden was three times that of the median group, that workload may well have diluted the efforts that the typical BLA examiner could devote towards settling any particular case.
Price Waterhouse seems to have adopted the latter view. It concluded that, in addition to the Tort Division, BLA was also significantly understaffed. According to Price Waterhouse, theadditional cost of adding 230 more staff to these departments would be de minimis when compared to the City's annual payouts in resolving lawsuits by settlement or judgments. Staffing costs would only be increased by less than 5% of those annual payouts and, assuming that Price Waterhouse's projections are on target, these costs would be readily recouped from the lower average payouts that would result from a more intensified early settlement strategy.29
2. Claims examiners and attorneys should be organized
Price Waterhouse recommended that both the Tort Division and BLA should organize their staffs in functional teams that will permit specialization in various categories of claims and cases. This form of claim/case management would help insure that all claims and cases receive the appropriate degree of investigation and analysis. Price Waterhouse recognized that, because of their traditionally high workload and understaffing, neither the Tort Division nor BLA is currently able to adopt a purely vertical system in which individual claims examiners and attorneys have oversight responsibility for all aspects of a claim or case.31 Without a significant increase in staff in both departments, different tasks in the same matter will continue to be assigned to different individuals. In the past, this task-oriented process has meant that the City frequently lost the history of a claim or case; staff often duplicated work previously completed by colleagues; and there was no one with oversight responsibility for the entire claim or case.32
3. Reduce costs through better work-up of claims
and early settlement at lower average values.33
For similar reasons, the City was unable to pursue fraud and third-party claims.35 Price Waterhouse's "conservative" estimate is that there is suspected fraud in 10% of all claims against the City. If a dedicated Fraud Team identified even 20% of these expected fraudulent claims, savings to the City in payout avoidance would be over $11 million.36
In addition, claims covered by insurance were not always recognized as such since City agencies routinely failed to uncover the existence of such coverage on a timely basis.37 As a result, an undetermined percentage of meritless claims were contributing to the City's case inventory, and, ultimately, were unjustifiably receiving settlement dollars. According to Price Waterhouse, by allocating responsibility for these investigations to third-party vendors (underfavorable financial arrangements), the City could expect to reduce its average payouts and increase investigation of fraud and subrogation opportunities.38
Historically, the strategy of the Tort Division and BLA had been to defer settling cases and claims with merit until the eve of trial.39 In part, this has been caused by the City's inability to conduct proper investigations in the early stages. This absence of investigation, in turn, has prevented a proper evaluation of cases until after discovery has been completed, thereby further contributing to the pre-note-of-issue inventory.40
Although the eight insurance companies studied by Price Waterhouse41 had among them a wide variance in the percentage of claims that resulted in the filing of a suit (running from a high of 46.5% to a low of 4%), the median percentage of such claims was 17.5%. The estimated percentage of City claims that resulted in the filing of a lawsuit was over five times higher --98%. Viewed another way, the insurers studied by Price Waterhouse settled, on the average,82.5% of their claims pre-suit. The City, by contrast, has only disposed of 2% of the claims made against it pre-suit.42
As Price Waterhouse concluded, the City's settlement strategy has not been fiscally productive. To the contrary, its deferral approach towards settlement has resulted in increased costs to the City measured in higher payouts and increased administrative expenditures associated with carrying claims and preparing cases for trial.43 Since such an operating philosophy necessarily delays any reduction in case inventory, most frequently until after the cases are scheduled for trial, it was also responsible for the excessive caseload carried by the Tort Division's attorneys. As a consequence, these lawyers often found it difficult to prepare adequately for court appearances, settlement conferences and trials.44 This, in turn, means that, in many instances, cases were not being properly evaluated, for there was neither the available personnel nor time to take thorough depositions or to follow up on discovery. Presumably, as a result, cases were either being settled for too much money, or were being forced to trial because, based on the City's available -- albeit incomplete -- investigations and its cultural reluctance to pay significant sums, those cases were traditionally undervalued.
As noted, in the private sector, insurance companies typically settle the majority of their cases early in order to achieve lower average costs.45 In such situations, for example, while the cost of investigations would remain constant, there would be supplemental savings in legal and other trial preparation costs. According to the Price Waterhouse Report, insurance companies provide a proven model which the City should not ignore.46 Not only would a concerted effort to resolve claims and lawsuits in their early stages save the taxpayers money in the long run, but it would also begin to reduce the City's inventory of tort cases before additional funds and efforts were expended in preparing them for trial.
Accordingly, Price Waterhouse recommended that, effective with the fiscal year beginning July 1, 1998 (i.e., last year), the City should budget an additional $25,000,000.00 for increased early settlement and approximately $25,000,000.00 to improve staffing, investigative ability and operating procedures.47 Based on the cost-benefit analysis that Price Waterhouse conducted, it concluded that, while an early settlement philosophy would result in an initial net cash outlay in the early years, the cumulative benefit of settling cases early would catch up within four years because those cases will have been closed.48
4. Increase agency involvement
Price Waterhouse believes that a soft charge-back process should be used to incentivize City agencies to take affirmative steps to improve procedures and correct situations that give rise to claims (i.e., risk management) and, once a claim has been made or a case filed, to cooperate with the Tort Division and BLA in the discovery process.50 Disposition costs are currently paid out of the City's general fund. As a consequence, agencies whose operations give rise to claims have no motivation to make changes to operating procedures or to correct situations that should be a part of any organization's risk management program.51 In addition, the agencies have no incentive to prioritize requests from both BLA and the Tort Division for key documents or witnesses required in litigations.52 That such production might be required because of a CPLR deadline or a court order has been of no apparent concern to the agencies. Under Price Waterhouse's recommendations, some portion of the costs involved in disposing of claims arising because corrective measures had not been taken after adequate notice, and costs of defending successful motions to compel discovery (presumably, including sanctions), would be charged against the budgets of the defaulting agency. In short, as did this Council in its April,1998 report, Price Waterhouse recognizes that agencies must be made accountable for any failure to cooperate in the defense of lawsuits.
THE CITY'S RESPONSE TO PRICE WATERHOUSE'S RECOMMENDATIONS
BLA is responsible for settling all claims against the City.54 As BLA interprets this mandate, a representative of BLA must attend all settlement conferences. This perceived requirement creates significant scheduling problems for both the courts and the City. It necessitates two City representatives -- a lawyer and a claims examiner -- attending each settlement conference where, generally, only one should be required. For years, insurance companies have delegated settlement authority to their trial attorneys at pre-trial conferences called for that purpose, while maintaining only telephone contact with the claims department.55 In light of the severe staffing shortage in both BLA and the Tort Division, the City might be better served in its efforts to reduce its backlog of tort cases if BLA followed this practice and delegated authority to Tort Division attorneys (or at least Tort Division managers) to settle cases within certain fixed limits, with instructions to contact the BLA claims examiner if greater authority were needed in order to dispose of a case.56
On the other hand, in the last four years, BLA has made strides in addressing the overall caseload problem. In 1994, there were over 1,000 active claims per examiner; BLA has decreased this number to less than 400 claims per claims examiner, again without adding any personnel. To accomplish this, BLA has reassigned existing personnel to a newly created pre-litigation division whose purpose is to settle claims at the hearing stage.57 BLA has recently begun to retain outside lawyers to conduct hearings under section 50(h) of the General Municipal Law, and is in the process of contracting with third parties to investigate accident scenes and interview witnesses, and with doctors for the physical examinations of claimants in appropriate cases.
While hearings are not conducted in every case, BLA tries to do so wherever the claimant is represented by an attorney. In the last year, it conducted about 2,000 hearings in "serious" personal injury cases and over 6,000 such hearings in total. As previously noted, on an annualized basis, BLA receives about 16,000-17,000 notices of claim. Thus, even with this new emphasis, hearings are only being conducted for less than 40 percent of all claims.58 We do not know what percentage of accident scenes will be investigated by these contract investigators, or what percentage of personal injury claims will now result in medical exams. As previously noted, Price Waterhouse believed that it would cost $3.45 million to do this pre-trial investigation adequately. We do not know what portion of BLA's $2 million budget increase is being used for this purpose, but certainly not all of it. Presumably, with current funding and staffing, there will be only relatively few investigations and physicals. Under Price Waterhouse'sscenario, there would be 7,500 outsourced investigations annually and, during the same time period, 3,000 outsourced medical exams.59
BLA has also replaced three paralegal lines with newly hired attorneys who have been assigned to bulk up BLA's Early Intervention Unit ("EIU"). The principal purpose of EIU is to settle cases within the first 60-90 days after they have been placed in suit. Where EIU previously had only two full-time employees, as a result of reassignments, it now has seven attorneys. The ensuing improvement in early case dispositions has been significant. Formed in 1994, EIU had settled, on the average, 650 cases annually in its first two years. In 1996, 925 cases were settled; in 1997, the number had increased to 1,144 cases; and last year, 1,524 cases were settled by EIU, a 33% increase over the prior year. However, most of the cases settled by EIU are small, typically involving only property damage or nuisance claims. Price Waterhouse would expand the role of EIU to all cases.60
According to the September 23, 1998 Joint Press Release, BLA has also created an early settlement unit to focus on Board of Education claims. In fiscal 1998, that unit settled 119 claims, pre-suit, at an average cost of $6,947, compared to a projected cost of $27,124, thereby reaffirming the benefits of early settlement.61 The long-term savings on these settlements were stated to be $1.6 million, and expected savings in fiscal 1999 were projected to be $4 million, again validating Price Waterhouse's recommendations. A similar program has been instituted with respect to trip-and-fall sidewalk cases, with like results.
Some judges have suggested to us that BLA's renewed efforts to settle smaller cases soon after their commencement has not been applied to the more serious cases pre-note of issue. In part, this may be because BLA does not have the financial and personnel resources needed to obtain data sufficient to allow an early evaluation of the worth of these cases. As previously mentioned, it may also be that BLA has not yet fully accepted the fact that there are also significant cost benefits to be gained from the early resolution of these more serious cases; and that BLA is still adhering to its previously ingrained approach of opposing early settlements of these lawsuits as a matter of principle.
In partial conformity with Price Waterhouse's recommendations, BLA has created a fraud unit to train all claims examiners to identify spurious claims, which will then be referred to the Department of Investigation and the appropriate District Attorney for investigation and possible prosecution.62 However, the inability of BLA to adequately investigate all claims, and to take physical examinations in all potentially serious personal injury cases, will continue to be an invitation to some miscreants to maintain their fraudulent practices.
In August 1994, BLA began the implementation of an electronic imaging program ("OAISIS") to enable the rapid transmission of its files to the Law Department. Once a lawsuit starts, these files are now electronically delivered to the workstation of an attorney in the Tort Division who works on the case. In this manner, through interdepartment cooperation, the fruitsof BLA's labors are made instantaneously available to litigation counsel.63 Unfortunately, the same is not true with regard to the records and files of most City agencies.
Currently, the Board of Education appears to be the sole exception. Unlike its sister agencies, the Board has also installed OAISIS. Thus, the Board can now automatically transfer its records to BLA once a notice of claim is filed. However, the Board of Education is only responsible for about 8% of claims against the City.
As noted, the other City agencies have not yet attained this level of cooperation with BLA or the Tort Division, and we have seen no evidence that they anticipate doing so. Whether the cause of this failure to use modern technology in the litigation process is budgetary, cultural or a combination of both, is unclear. Whatever the cause, however, there is a substantial need for this type of record retrieval and re-delivery program in those City agencies that are most frequently involved with tort claims or litigation.
BLA believes that the expansion of its Early Implementation Program with the Board of Education to other agencies would require more claims examiners. Assuming that this assessment is accurate -- and it is consistent with the Price Waterhouse recommendations -- the expansion of the Program to other agencies (particularly the Police Department and Department of Transportation, which are responsible for about 50% of all tort claims filed against the City) would undoubtedly reduce the number of City employees involved in the retrieval process, and would be a major step in providing BLA with much of the information necessary for theevaluation of cases at the claims stage. It thus appears clear that the expansion of OAISIS would facilitate the early disposition of many of these claims.64
In the past, the City has apparently incurred defense costs in -- and paid money to resolve -- many cases that were actually covered by insurance, either directly or through subrogation. The failure to determine the existence of such coverage can again be placed at the feet of the respective agencies who, for cultural or other reasons, have not been quick to cooperate with BLA even in this area.65 As a result of this inertia, the City has lost the benefits of insurance in innumerable cases and, as an arguable result, has wasted significant taxpayer dollars in defending and resolving cases for which that responsibility belongs to others.
Under its program with the Board of Education, BLA is now in a position to determine, electronically, whether there is insurance for any given claim and then to cause appropriate action to be taken. We are unaware of any similar mechanism in place with other City agencies.
B. The Tort Division
In addition, a full-time attorney has been assigned to the Tort Division's Management Information Systems department, with another attorney soon to follow. The Tort Division is now using its computers to prepare, in a matter of minutes, most form motion papers that in the past took hours to complete. It is expected that this innovation will substantially reduce the City's numerous defaults in motion practice.
Eight attorneys have been promoted to the position of manager, and they are now supervising attorneys in their various tasks. Depositions that had previously not been taken until at least nine months after being noticed are now taking place within three or four months in most boroughs and within six months in Brooklyn.
Despite this strengthening of supervisory functions, the Tort Division does not plan to verticalize case assignments (although vertical units do exist in other divisions of the Corporation Counsel's Office, which handle medical malpractice, lead and asbestos cases and major litigations). The managers of the Tort Division agree with Price Waterhouse that the assignment of cases to attorneys for all purposes would be unmanageable given the current large number of pending City cases. Despite its drawbacks, we are sympathetic to task assignments with respect to these smaller cases. (75% of the Tort Division's caseload involves lawsuits with amounts in controversy of $25,000.00 or less, and 80% of the caseload involves matters involving $50,000.00 or less.67) Nonetheless, using different lawyers for each step of the discovery process is terribly inefficient and necessarily allows the possibility that important information will not be known by lawyers who were not responsible for obtaining it in the first instance. Nosophisticated private client would pay legal fees incurred for the duplicative work that results whenever a new lawyer has to review a file with which she or he is unfamiliar, merely to be prepared to take the next deposition or to oppose the next motion. Moreover, such an assignment process is often an invitation to malpractice. On the other hand, to divide the pending backlog of City cases among the current number of lawyers in the Tort Division would be to give to each an unmanageable caseload. As Price Waterhouse recognized, before these cases can be properly managed on a vertical system, the number of cases per lawyer in that Division will have to be reduced, either through the addition of more lawyers or a significant improvement in early case settlements, or a combination of these two factors.
It may well be that, in the interim, a hybrid assignment process is the appropriate solution. For example, the more serious cases (i.e., those in which the potential liability appears to exceed $100,000) could be assigned at the pleading or preliminary conference stage to an experienced lawyer, with expertise in the relevant area of law, who would have overall responsibility for that case and who would supervise the motion practice and discovery efforts of less senior attorneys who would also be assigned to the case. Depending on their availability and the complexity of each case on which he or she is working, these less senior attorneys could either be given certain specific tasks to perform, or they could be made part of the "case team" for the life of the lawsuit. As total case inventory decreases or more staff is added to the Division, these ad hoc case teams could be transformed into identifiable litigation teams, each with specific fields of expertise, to work together as a unit in preparing and trying a number of cases of like subject matter that are assigned to that team.68 This is not unlike the way many cases are managed at major law firms.
The other, less serious cases could continue to be assigned by task, but always with an eye towards the lawyers' workloads and the reduction of inventory. Over time, even these less serious cases should be assigned to a single lawyer, who would then bear full responsibility for their defense. Of course, when required, lawyers with available time could be assigned to assist the team leader or individual lawyer bearing ultimate responsibility for a case, but with the additional task of keeping that lead lawyer advised (in writing) of the results of their individual labors.
In connection with its newly adopted philosophy of settling cases at an early stage of the litigation, the Tort Division, together with BLA, is participating in pre-note-of-issue City Settlement Parts. Any party to the lawsuit may place a case on this calendar. The City has been successful in settling about half of the cases so calendared. During the current year, the City expects to conference about one thousand cases in these Parts, as contrasted to about seven hundred and fifty cases last year. Most of the cases resolved in these settlement Parts are in the $20-25,000 range, with injuries that are not permanent. While this new incentive is certainly welcomed, it should also be understood that the early settlement of 500 cases a year, in pre-note-of-issue calendar Parts, represents a disposition of but 5 percent of each year's new caseload.
In the City's 1998 fiscal year, the Tort Division and BLA had settled almost 6,400 cases; and total dispositions reached 8,767, also a new high. Based on these statistics, the Tort Division anticipates that it will soon be disposing of almost as many lawsuits each year as are entering the system annually. While this may not reduce the inventory of pending cases, it would certainly be a positive step, but it requires that the 1998 disposition rate continue to increase into the future. At the present time, we do not know whether fiscal 1998 (which also saw a drop in new cases to9,500, from over 10,900 in each of the prior four years) is the beginning of a new trend or merely an aberration.69 Indeed, any optimism should be tempered by the City's concession that one reason for a reduction in backlog was the assignment of judges to focus on clearing out old cases.70 More importantly, however, even if the Tort Division's projections are accurate, without additional incentives, the current unacceptable inventory of 62,000 pending tort cases will remain basically constant.
The Tort Division has taken some action to reduce the City's history of defaults on discovery requests. Now, when documents are received from agencies, they go directly to a paralegal for production, rather than being sent directly to the file, as had been done in the past.71 However, there is no procedure in effect to require agencies to initiate document production whenever a potential lawsuit arises. For example, only recently has the Department of Transportation begun giving BLA online access to its complaint system. Previously, in order to determine whether the City had received prior notice of a claim, BLA would have to write DOT requesting each complaint. Even today, in order to obtain access to a DOT accident report in response to a claim, BLA must make a written request to that agency.
Nor do the agencies have a common approach to the handling of documents. Some agencies funnel all requests for production through the same person while, at other agencies, itwill depend on where the documents are kept, or other factors. The Police Department, for example, has a decentralized record-keeping system. In some instances, the only place relevant records may be located is in a precinct house, and it is not always readily apparent which records are unavailable from headquarters or at which precinct they are being kept. Since keeping records is pointless without ready access to them, the record-keeping function of all agencies should be reviewed and (where necessary) revised. The goal should be a centralized system, ideally permitting electronic retrieval through the same optical system now used by BLA and the Tort Division.
The Tort Division is not totally without fault with regard to the City's delay in responding to discovery requests. Perhaps because of staffing limitations, the Tort Division does not normally request agencies to send documents to it until the preliminary conference stage of the lawsuit. Thus, as a practical matter, the Tort Division generally ignores discovery requests that are made prior to a preliminary conference -- despite contrary provisions of the CPLR. To further compound the problem, City agencies typically comply with these Tort Division requests only about 40% of the time. Moreover, once the Tort Division makes a request of an agency, there is no fixed procedure for following up on that request prior to the Tort Division being served with a motion to compel discovery.
There is no justification for the Tort Division not requesting relevant documents until after the preliminary conference and then not producing those documents, on a best case scenario, until the deposition of the first City witness. The Tort Division's lawyers know which documents are relevant to their cases, as do the lawyers in the agency/client legal departments. By the time of the preliminary conference, these documents should have been identified, and theagencies should already be in the process of collecting and forwarding them to the Tort Division. The current practice of unending delay in responding to legitimate discovery requests contributes to the growing inventory of City tort cases and is plainly unacceptable.
While the City's recurrent failure to honor its discovery obligations is better understood when considered in the context of the problems its lawyers have in collecting relevant documentation from agency clients early in a lawsuit, not even the City should be entitled, as a matter of policy, to simply ignore CPLR requirements. Although the Tort Division is meeting with court administrators in an attempt to persuade them to defer production of City documents until after the preliminary conference, it is difficult to rationalize such preferential treatment, at least unless and until City agencies unequivocally accept the responsibility of responding to such discovery requests within a reasonable time after the preliminary conference is held and then demonstrate that they will routinely produce the requested discovery in conformity with that obligation -- just like any other litigant.
Although the Comptroller's office is apparently in favor of imposing a soft-charge back incentive on City agencies, the City has rejected this concept ostensibly because it would only serve to reduce the agency's budget (assuming non-compliance) and that might result in the agency providing less service to the citizenry. In its September 23, 1998 Joint Press Release, the City announced that, in response to the Price Waterhouse recommendation, the Mayor would issue a directive to agencies to assign Deputy Commissioners the responsibility for ensuring that appropriate litigation support is provided to the Corporation Counsel. This has not been done and there is no evidence that even this first step towards agency accountability is still on the Mayor's agenda.
The only apparent action that the City has undertaken to remedy agency non-compliance is to institute periodic meetings with legal representatives of the Police Department aimed at persuading that agency -- but, as of yet, no others -- of the merits of "partnering" with the Tort Division in defending cases against the City. Although it is not the sole culprit, the Police Department is probably the agency most unresponsive to BLA and the Tort Division's requests for cooperation -- even though this lack of cooperation invariably results in violations of both the CPLR and court orders.72 The Corporation Counsel's office apparently believes that these efforts at personal persuasion -- which have apparently been on-going for several months, still without success -- will ultimately cause the Police Department to reverse years of inertia and promptly begin working with the Tort Division and BLA in the discovery process. Should this unlikely event actually occur, the City believes it will then be able to instill its concept of "partnering" in other City agencies. As far as we can discern, the City has no realistic timetable within which to measure the success of its "partnership" proselytization efforts. Nor has it adequately explained why these efforts are currently restricted to a single City agency.
Even if the City's optimism proves to be justified, it has offered no justification for not imposing the required accountability on all agencies through standard management delegation techniques. Moreover, if agencies do not voluntarily accept this City's concept of "partnering",there seems to be no other agenda yet in place to resolve the repeated failure of the agencies to either co-operate in discovery requests or to implement a meaningful risk management program.
Dated: May 6, 1999
Council on Judicial Administration
Paul H. Aloe
John L. Amabile**
Richard T. Andrias
Steven J. Antonoff
Robert E. Bailey
Paris R. Baldacci
Celia Goldwag Barenholtz
Helaine M. Barnett
Gary S. Brown
Nancy A. Brown
Dierdre A. Burgman
Austin V. Campriello
Roy H. Carlin
P. Kevin Castel
Ellen M. Coin
Brendan M. Connell, Jr.
Melanie L. Cyganowski
William M. Dallas, Jr.
George B. Daniels
Julia R. Davis
Charles E. Dorkey III
Joan L. Ellenbogen
Linda A. Fairstein
Gerald J. Fields
John E. Finnegan*
Steven G. Foresta
Amanda J. Gallagher
John L. Gardiner
David R. Gelfand
Thomas H. Golden
Erika D. Gorrin
Salvatore J. Graziano
James W. Harbison, Jr.
Alexander W. Hunter, Jr.
Debra A. James
Barry M. Kamins
Beth L. Kaufman
Norman C. Kleinberg
Marilyn C. Kunstler
Deborah E. Lans
Robert J. Levinsohn
Robert P. LoBue
Mitchell A. Lowenthal
Jerianne E. Mancini
Jonathan W. Miller
Charles G. Moerdler
David M. Morris
Brian J. Noonan
Marilyn G. Ordover
Steven R. Paradise
Sheryl L. Parker
Jane W. Parker
Gerald G. Paul*
Ann T. Pfau
Richard Lee Price
Porfirio F. Ramirez, Jr.
Willian C. Rand
Claudia E. Ray
Roy L. Reardon
Steven A. Reiss
Rosalyn Heather Richter
Stephen G. Rinehart
David E. Ross
Jay G. Safer
Shira A. Scheindlin
Edward T. Schorr
Marcia Lynn Sells
Steven B. Shapiro
Jacqueline W. Silbermann
George Bundy Smith
Debra B. Steinberg*
Andrew W. Stern
Guy Miller Struve
Eric A. Tirschwell
Paul A. Tumbleson
Eric D. Welsh
Aviva O. Wertheimer
John S. Willems
Ronald P. Younkins
* Members of Subcommittee on Institutional Litigants
** Principal author of this report
1 In April, 1998, the Council issued two reports on the subject, The City of New York As A Major Institutional Litigant: The Need for Greater Cooperation Between City Agencies and Their Attorneys (in which we recommended that the Mayor issue "forthwith" an Executive Order or other appropriate directive assigning personal responsibility to a senior legal officer of every City agency for that agency's prompt compliance with discovery requests in pending litigations); and The City of New York As A Major Institutional Litigant: The Price Waterhouse Study (in which we urged that the City release Price Waterhouse's evaluation and report on the City's claims processing and litigation functions). As will be discussed in this report, the recommended agency directive has not been issued, and there is still no accountability at the agencies. The Price Waterhouse Report, "The City of New York Claims Processing and Claims Litigation Study", was finally made public in September, 1998.
In preparing the current report, the Council interviewed several administrative judges and judges experienced in the operation of City Parts; the Corporation Counsel of the City of New York and a number of his senior executives including those directly responsible for the operation of the Corporation Counsel's Tort Division; and the Deputy Controller for Claims and Contracts, the First Deputy Comptroller and several other representatives of the Comptroller's Office. Not only were the City's management personnel extremely cooperative, but they also impressed us with their dedication, creativity and hard work.
2 Unless otherwise noted, all statistical information contained in this report was provided by the City's Tort Division or the Comptroller's office, either in interviews or through documentation.
3 Price Waterhouse Report, pp. 3-4.
4 New York State Unified Court System's Comprehensive Civil Justice Program (1999). The Standards and Goals guidelines generally require that disclosure be completed and a Note of Issue filed within 12 months of the filing of a request for judicial intervention on a "standard" civil case and within 15 months of such filing in a "complex" case. Once a Note of Issue is filed, the guidelines provide for disposition of the case within 15 months.
6 Id. The proposal does not exclude the possibility of these cases being returned to their county of origin for trial by any available justice. Indeed, this may be required by statute. See CPLR 504(3) which provides, in relevant part, that all causes of action against the City are to be tried in the county within the city in which they arose.
7 Chapter 5, section 93(i), of the City Charter empowers the Office of the Comptroller to investigate, adjust and settle all claims in favor of or against the City.
8 Joint Press Release of Comptroller and Corporation Counsel, dated September 23, 1998 (the "September 23, 1998 Joint Press Release").
9 Price Waterhouse Report, p. 4.
10 New York City Office of the Comptroller's Bureau of Management and Accounting Systems, "Request for Proposals to Provide a Study, Evaluation and Report on Claims Processing and Litigation In The City of New York," (undated), p. 4.
12 Most businesses consider litigation expenses to be an operating cost which is passed on to the consumer, just as insurance premiums reflect all of a carrier's costs in conducting its business.
13 Corporation Counsel of the City of New York, "Summary of City's Proposal for Efficient Litigation of Pre-Note Cases" (undated); conversations with Office of Corporation Counsel.
14 Most of the approximately 16,000 motions handled annually by the Tort Division are discovery motions resulting from the City's failure to comply with discovery requests.
15 To compel compliance with Standards and Goals alone will not affect the total volume of pending City tort cases; it will merely transfer cases from the pre-note-of-issue stage to the post-note stage. However, a related result would be to force the City to investigate cases earlier -- both as to liability and damages -- and, as will be discussed below, this is a necessary prerequisite to knowledgeable settlement discussions.
16 Price Waterhouse Report, p. 2. Given the historical reluctance of governmental bodies to concede that their performance is lacking in any respect, the mere fact that Price Waterhouse was retained for this purpose invites two reactions: first, the retaining agencies deserve kudos merely for acknowledging that they need outside help; and, second, the problem must indeed be severe for the City to spend nearly $1 million in order to obtain outside expert advice.
17 Price Waterhouse Report, p. 51.
18 Id. Price Waterhouse's cost benefit analysis is premised on three key assumptions: (1) by settling claims early, the overall cost over the life of a category of claims will be reduced; (2) based on the many initiatives the City will employ, more cases will close administratively; and (3) due to investments in staffing and outsourcing arrangements, among other things, the City will realize savings from process efficiencies and claim/case inventory reduction. Id.
19 The final Price Waterhouse Report which has been released by the City only contains a Summary of Recommendations. Presumably, Price Waterhouse also delivered to the City a detailed discussion of those recommendations, but any such documents have not been provided.
20 Price Waterhouse Report, p. 98.
21 Id. at p. 7.
22 Id. at p. 3.
23 Id. at p. 7
24 Id. As part of its work, Price Waterhouse undertook a benchmarking study to gather data from private sector insurance organizations and from other municipalities with similar types of tort claims and cases. Id. at pp. 73-97.
25 Fort Worth, Texas; Long Beach, California; Pittsburgh, Pennsylvania; San Antonio, Texas; San Diego, California; and San Francisco, California were the six cities that responded to a Price Waterhouse questionnaire. Price Waterhouse Report, p. 94.
26 Id. at p. 96.
27 The City had 1.33 tort attorneys per 100,000 citizens, while the group median was .57 attorneys for all claims. Nonetheless, Price Waterhouse concluded that, based on workload, it was clear that the City had an insufficient number of attorneys. Price Waterhouse Report, p. 97.
28 Price Waterhouse Report, p. 95. The City had 1.11 claims examiners per 100,000 citizens for personal injury and property damage claims, while the group median for all claims was .41 examiners. However, the City and the group median were fairly comparable in the ratio between the number of claims examiners per attorney: .83 examiners per attorney for the City, .70 for the group. Id. at p. 97.
29 Id. at p. 8.
31 Id. at p. 6.
32 Id. As will be discussed below, lack of oversight responsibility was not caused solely by the absence of vertical assignments. A primary cause for the failure of City agencies tocomply with discovery requests and court directives is the inexplicable (unless explained by political expediency) unwillingness of the City's managers to assign oversight responsibility to anyone -- much less an appropriate individual -- in those agencies.
33 Price Waterhouse Report, p. 8.
34 Id. at p. 5.
36 Id. at p. 54, Explanatory Note to Line 13. More importantly, by not pursuing fraudulent claims, the City implicitly encourages the continuation of this illegal practice.
37 Price Waterhouse Report, p. 5.
38 Id. at p. 8.
39 Id. p. 5.
40 See id. There has also been a cultural reluctance, particularly at BLA, to pay substantial sums, in advance of a "drop dead" date, to what has been perceived as the "enemy", i.e., to people claiming that they were wronged by City acts or omissions, irrespective of the merits of these claims. There have been some indications that this cultural antipathy to making substantial settlement offers at early stages of cases and claims is disappearing.
41 The participating insurers were CNA Insurance, Crum & Forster Insurance Group, Fireman's Fund Insurance Company, Nationwide Mutual Insurance Company, Reliance Insurance Company, St. Paul Insurance Company, The Travelers Indemnity Company and United States Fidelity and Guaranty Company. Price Waterhouse considered the types of claims handled by these carriers to be relatively comparable to those handled by BLA and the Tort Division. Price Waterhouse Report, pp. 74-75.
42 Id. at p. 91. Pre-suit settlements tend to be lower since claimants gain the benefit of early payment. Disposition of cases in the claim stage also saves the legal and related costs involved in defending a lawsuit.
43 Id. at p. 5.
46 Id. at p. 73.
47 Id. at p. 8. $18.2 million of this sum was to be allocated to staffing; $3.45 million to outsourced investigations and medical exams, and $3 million to systems. Id. at p. 59. However, by year five, total staffing expenditures were projected to decrease by $2 million to reflect the decreased caseload. Price Waterhouse believed that this reduction in personnel could be achieved through natural attrition. Id. at p. 55.
48 Id. at p. 8. The City's annual budget is in the range of $30 billion.
49 Price Waterhouse Report at p. 8.
51 Id. at p. 6. Price Waterhouse reported that nearly every insurance company participant in its survey reported a formal structured approach to providing feedback, both to policyholders and carrier representatives, on significant avoidable claims. In Price Waterhouse's view, it is imperative that the City do likewise. BLA and the Tort Division should work closely with agency personnel on risk management efforts. Id. at p. 87.
52 Id. at p. 6.
53 See id. at p. 3.
54 The City's annual budget provides for funds to settle these cases. Representatives of the Tort Division have told us that this limitation on available settlement monies does not, as a practical matter, affect case dispositions.
55 See Price Waterhouse Report, p. 89.
56 See id. at p. 41, Recommendation 7.1.
57 At the time of the Price Waterhouse Report, of the more than $40 million spent annually on BLA and the Tort Division, only about 15% was devoted to BLA activities during the claim stage. Id. at p. 7.
58 We recognize that many of these claims may be insignificant. We do not have enough information to determine whether a policy of insisting on hearings even for minor claims would ultimately result in a decrease in the number of such claims over time or a reduction in their settlement value.
59 Price Waterhouse Report, p. 54, Lines 2 and 3.
60 Id. at p. 13, Recommendation 1.10.
61 It is unclear whether these settled cases are included in the above EIU statistics.
62 September 23, 1998 Joint Press Release. Price Waterhouse would apparently further expand this fraud investigation program. Price Waterhouse Report, p. 22, Recommendation 8.1. It also would have the Tort Division staffed with personnel who would be dedicated to a specific pro-active defense strategy with regard to possible fraud. Id., p. 13, Recommendation 1.9. To the best of our information, the Tort Division has not yet adopted this recommendation.
63 A side effect of BLA's optical imaging system its that it enables BLA to determine which successful claimants owe the City money. This permitted BLA to collect $3.4 million in fiscal 1998 which, presumably, it was not even equipped to identify readily in prior years. See September 23, 1998 Joint Press Release.
64 See, e.g., Price Waterhouse Report, p. 16, Recommendation 2.8; p. 17, Recommendation 3.7.
65 See id. at p. 6.
66 New York Law Journal, February 9, 1999, p. 1. The source of funding to pay the ensuing increased compensation and benefits is unclear.
67 Since there are over 60,000 pending cases, there are about 12,000 that involve over $50,000.
68 See also, Price Waterhouse Report, p. 30.
69 The Tort Division reports that, with greater staffing, it could dispose of even more cases through dispositive motion practice.
70 September 23, 1998 Joint Press Release.
71 The City has a ratio of .25 paraprofessionals per attorney, which is also the approximate group median for those insurance companies participating in the Price Waterhouse Study. See Price Waterhouse Report, p. 93.
72 In September, 1998, in James v. City of New York, 97 Civ. 9159 (S.D.N.Y.), District Court Judge John S. Martin ordered the City to pay $19,811.90 in sanctions for what he termed the "utter disdain" displayed by the Police and Corrections Departments for their discovery obligations in a police brutality case. According to the New York Law Journal of September 30, 1998, Judge Martin denounced the failure of Police and Corrections officials to remedy or explain their delays. The Judge noted that their "cavalier attitude" toward discovery demands was systemic and rooted in a belief that "obtaining information responsive to civil discovery demands is of the lowest priority, and court orders relating to such matters may be treated with contempt." Id.