22 - Deletion of Attorney's Fees Provisions in Standard CMSD Agreements C osta Mesa Sanitary District …an Independent Special District Protecting our community’s health and the environment by providing solid waste and sewer collection services. www.cmsdca.gov Memorandum ITEM NO. 22 To: Board of Directors Via: Scott Carroll, General Manager From: Alan R. Burns, District Counsel Date: March 28, 2013 Subject: Deletion of Attorney’s Fees Provisions in Standard CMSD Agreements Summary By agreement , the parties can determine that the prevailing party shall be entitled to attorney’s fees in the event of a lawsuit to interpret or enforce the agreement. We have generally included attorney’s fees provisions in our agreement s . Staff is now recommend ing d elet ing the attorney’s fees provisions in standard CMSD agreements. Staff Recommendation That the Board of Directors approves deleting the attorney’s fees provisions from standard CMSD agreements. Analysis Ordinarily , attorney’s fees are not recoverable a s costs or damages in a lawsuit, absent statutory authority or a n agreement which authorizes attorney’s fees to the prevailing party. The District has generally included attorney’s fees provisions in its agreement under the assumption that the District wi ll generally be in the right and will prevail. However, there are compelling reasons not to include attorney’s fees in such agreement s . One reason is that fact that a party filing a lawsuit will have to pay an attorney out of pocket for the recovery, maki ng it important that the damages at stake will justify bringing such an action and paying an attorney to pursue it. If we assume that the District will most
Board of Directors March 28 , 2013 Page 2 of 2 likely be a defendant, it would work in our favor if the District did not have an attorney’s fees provision so that the plaintiff would be forced to consider if the recovery would justify the litigation costs without being awarded attorney’s fees . This may reduce the number of times the District is sued , which is not often . Another reason, and perhaps the most significant reason, is the disparity between what a public lawyer bills and what a plaintiff’s lawyer bills. A general counsel publi c lawyer bills lower and assume he will be paid. A plaintiff’s lawyer usually bills at substantially higher rate s and has a higher rate of not being paid. This is a big factor in settlement discussions, and over 80% of cases settle. In many of the cases District Counsel ha s been involved in (most pertaining to construction), the plaintiff ’s attorney tells the sett lement judge he has billed his client several hundred thousand dollars , while District Counsel bill is substantially less . Even assuming that the District has a 75% chance of prevailing, with that disparity in the attorney’s fees at risk, it levels out th e positions of the parties since the public agency has the bigger dollar exposure. Of course, there are advantages in retaining the attorney’s fees provisions. For instance, i f no settlement occurs, or the District prevails in settlement, then the attorn ey’s fees are paid to the District. Strategic Plan Element & Goal This item adheres to the objective and strategy of Strategic Element 5.0, Administrative Management , which states: “Objective: To create, maintain and implement policies and procedures to e nsure sound management of the District. Strategy: We will conduct periodic reviews, refine and implement policies and procedures, and assure the General Manager has the direction and tools necessary for successful District operations.” Legal Review Dist r ict Counsel prepared this report and recommends deletion of the attorney’s fees provision. While agreement revisions are not usually brought to the Board, this one is a significant policy decision.
Financial Review There is no financial impact to the D istrict for deleting the attorney’s fees provision. D eleting this provision could, in the future, save the District money for paying attorney’s fees to the prevailing party ; however the actual amount of money saved is undetermined. Committee Recommendatio n Not applicable. Public Notice Process Copies of this report are on file and will be included with the entire agenda packet for the March 28, 2013 Board of Directors regular meeting at District Headquart ers and on District’s website. Alternative Actions 1. Stay with having attorney’s fees provisions in all agreements . 2. Selectively incorporate attorney’s fees provisions in some agreements depending on parties and subject matter.