Loading...
HomeMy WebLinkAbout21 LEGAL SVCS AGREE 11-20-95NO. 21 11-20-95 DATE: NOVEMBER 20, 1995 Inter-Com TO: FROM: ' SUBJECT: HONORABLE MAYOR AND'MEMBERS OF THE CITY COUNCIL WILLIAM A. HUSTON, CITY MANAGER LEGAL SERVICE8 AGREEMENT The. City Council deferred action on the legal services agreement with Rourke, Woodruff and Spradlin because Mayor Potts indicated he had questions concerning the proposed agreement. Attached are a memorandum and proposed retainer agreement considered by the City Council at its October 2, 1995 meeting. Listed below are the questions from Mayor Potts and the responses. le Is this a better deal either than Rourke's prior contract, or other attorneys who bid to be the City Attorney? Rutan & Tucker (the largest law firm in the County) offered to handle, the first 100 hours of each month's basic services for $10,000. That works out to .$100 per hour, and that is a LOT of hours. Why are we paying Rourke $120 for the same service? Best, Best & Krieger/McNamara & Van Blarcom offered to handle the general city attorney services, including covering. Council and Planning Commission meetings, setting aside 24 office hours for those meetings, AND HAVING A SECOND ATTORNEY FOR FREE AT THE COUNCIL MEETING, all for $6,000 per month. That probably works out to less than $120 per hour, and maybe $100 per hour as well. Why aren't we demanding the same from Rourke? Please have Councilman Saltarelli and Mayor Pro Tem Worley describe in detailthe negotiations that went on, or have staff complete an overview of the process. Response: After reviewing the twenty-five proposals submitted, the City Council interviewed five law firms and decided that Rourke, Woodruff and Spradlin was the best qualified law firm. The City Council selected Mayor Pro Tem Worley and Councilmember Saltarelli to negotiate a retainer agreement to be reviewed and approved by the City Council. Legal fees were one of many other factors considered by the City Council When it made its decision regarding the best qualified law firm. Mayor Pro Tem Worley and Councilmember Saltarelli met together to discuss the merits of hourly rate billing, a flat retainer or combination. It was their conclusion that an hourly rate arrangement would be in the City's best interests. A problem with retainers for basic services combined with hourly rates for other services, often referred to as basic services, is the confusion and subjectivity associated with determining what are "basic'services'' and what are "special services". While the City can make this determination by either narrowly or broadly defining what services fall into what category, such fixed designations run the risk of being overin¢lusive or underinclusive to the City.'s disadvantage. . As an example of an overinclusive arrangement, the City could determine that the preparation of all agreements is a "basic service" and should be subject to the fixed fee retainer. HOwever, the nature of the agreement and the dynamics of the negotiation process differ according to the type of agreement and the fact-specific circumstances. A sidewalk repair contract is relatively straightforward to prepare and review. However, the Agreement between the City and Motorola to purchase a new police dispatch/communication system was very complex because of licensing agreements, warranties, integration with the 800 megahertz system, etc. While both could be considered basic services, the City would want to ensure the Motorola Contract received more than a bare bones review, and in fact, that adequate attorney time would be spent to appropriately advise the City. Because the City's daily operations are dynamic and involve both simple and complex transactions, defining ahead of time what are basic services versus speciallegal services in the most appropriate way for the City can be problematic. In addition to the difficulties of defining in advance whatshould be covered by a basic fixed fee retainer and what are special services, the flat fee retainer, plus hourly rate can lead to higher fees. When there is a combination of a fixed fee retainer for basic services and'an hourly rate for all other services (usually at a higher hourly rate) there is a tendency for numerous hours to be billed outside the retainer at the special services rates. Law firms with basic fixed fee retainers and special services fee arrangements will tend to perform straightforward transactional work (i.e., work that can be performed quickly) within the basic fixed retainer structure and seek to bill the more complicated or time consuming work at a higher hourly rate for additional or special services. In order to make money, a law firm will want to perform "bare bones" legal work within the basic service retainer amount and bill all other legal work at a higher hourly rate. While the City may want more time spent on complex transactional work, the higher rate for such special services could result in cost-prohibitive fees. Mayor Pro Tem Worley' and Councilmember Saltarelli concluded that given the dynamics and volume of the city's projects requiring daily legal services, the hourly rate arrangement for all transactional work is more cost-effective. Withthis arrangement the City can better control and track the amount of legal services being provided. Mayor Pro Tem Worley and Councilmember Saltarelli had discussions with Ken Smart, Managing Partner of Rourke, Woodruff and Spradlin, about a fee arrangement and the elements of a retainer agreement. The negotiated rate of $120 per hour for all transactional legal work is lower than most of the other proposals submitted by law firms and has been in effect since 1989. The negotiated rate of $130/$140 per hour for litigation is also lower than most other proposals. Mayor Pro Tem Worley and Councilmember Saltarelli required Rourke, Woodruff and Spradlin's original proposed .fee of $135 for transactional work to be reduced to the proposed rate of $120 per hour in order to contain costs. There are other public agencies with greater demand for legal services than Tustin that contract with Rourke, Woodruff and Spradlin and other, law' firms at higher rates. · What is the big problem with a basic services retainer? Bill Huston's memo of October 2 says that Tracy and Tom concluded that "a lump sum retainer or combination with an hourly rate would...create problems with tracking costs and lead to disputes about what is/is not covered by a basic services retainer". ae Why can't we define what is included in the "basic services"? Other firms were able to do so in their proposal. Did Rourke do so in its proposal? If so, why did the City's representatives (i.e., Tom and Tracy) let them off of the hook? Did Tom, TracY or Bill Huston speak with other City Managers or law firms about how to define tasks included in a basic services agreement? If so, identify those City Managers. Be Ce De If there is such a problem identifying the tasks included in the "basic services" retainer, why does the contract itself state what is basic services versus what is litigation? The contract says Rourke is paid $120 per hour for "transactional" work (i.e., basic services), and defines those services in Section 2.A(I)-'(iii) and (v). What is the real problem identifying the services to. be performed in a basic services contract? If there is so much trouble "tracking costs", how is it that Rourke can track the first 25 copies of zeroxing, and all copies after that are charged at $.25 per page? For purposes of billing the City at the higher litigation rate, when does a matter become litigation? At the demand letter, the Claim for Damages under the Tort Claims Act, or the filing of the complaint? Was there any negotiation about this point? Isn't it possible that there will be a "dispute about what is/is not" a "litigation" matter? Response .- (A) See answer #1 (B) There is a clear distinction between basic transactional legal work and litigation. (C) Keeping track of zeroxing .costs is straightforward because there is a copy counter on zerox machines. (D) Section 3 of the retainer agreement defines litigation service. A routine claim that is filed and placed on the - City Council's agenda for action is billed at the transactional rate. There are occasions (the exception, not the rule) where the initial review of a claim can involve extensive research. An example would be an alleged violation of civil rights or violation of state/federal discrimination laws. Where a claim is complex, the-law firm's litigation attorneys might be involved at the initial stage. In that instance, the billing would be at the litigation rate. Through review of the monthly billing, the City can make inquiry about any tasks that might be questionable and resolve any disagreement about whether the billing should be at the transactional or litigation rate. For the vast majority of legal matters, there will be a clear distinction as to whether it is transactional or litigation related. 3. Why is litigation paid at a higher rate? Work is work, and Rourke should only get one hourly rate. This proposal to pay a higher rate for litigation is at odds with what frequently happens in the private sector, where litigation work is paid less than transactional work. At a minimum, all work by Rourke's firmshould be at the same rate, $120 per hour so as not (paraphrasing Tom and Tracy's concern regarding a retain~er) to "create problems with tracking costs" or lead to disputes "about what is/is not" litigation. Or, is the $120 per hour rate a "loss leader"? Will we then see significant billing at the higher "litigation" rate to make up for the loss? Response: Most Public agency law firms bill at a higher rate for litigation work as is the case with law firms serving the private sector. Litigation work is typically more complex than transactional work and more specialized. Litigation attorneys also serve as trial attorneys who in both the public and private sectors usually, receive higher per hour rates. Three of the four other law firms interviewed'by the City Council proposed higher rates for litigation work. Their rates ranged from $135 to $245 per hour for litigation. The billing for litigation work will be detailed in the monthly statement. As with all legal work,, the City reserves the right to question any billing for litigation expenses. The City's risk management consultants (retained through the Orange County Risk Management Authority) also monitor litigation work that involves the City's self-insured liability program. Litigation costs and fees are reviewed by the risk managers throughout the duration of the claim. The City has a history of cost-effective litigation services provided by Rourke, Woodruff and Spradlin. It should also be notedthat litigation-work performed by associate attorneys will be billed at $130 per hour (see EXhibit A of the retainer agreement). A review of Rourke, Woodruff and Spradlin statements indicates that most litigation work is billed at the associate attorney rate, · Where are subsections "B" and "C" of Section 2? The proposed Retainer Agreement goes from Section A (at the top of page two) to Section D at the bottom. Did we allow the Rourke firm to write its own contract? If so, this is a very poor business and professional mistake on. our part. Response: There was a typo in the retainer agreement. Section 2 of the agreement includes subsections A, B and C. There are no subsections missing. The retainer agreement was drafted by Rourke, Woodruff and Spradlin pursuant to discussions between Mr. Ken Smart and Councilmember Saltarelli. Mr. Saltarelli is an attorney and has knowledge of the elements of a retainer agreement. · Why is the contract so "one-sided" in Rourke's favor? A· There is no Provision by which the firm agrees to indemnify, defend or hold the City, its officers, employees, etc., harmless for actions of the firm which result in damages; Be Where is the requirement for insurance coverage (professional, general commercial liablity, workmen's compensation, etc.); C® De Section 5 ("Discharge and Withdrawal"): Most contracts for city attorney services permit the City to terminate the agreement with or without cause on zero to 30 days' written notice. Why does the proposed'Retainer Agreement require 60 days' notice written notice by the City to terminate? why does it fail to allow the City to terminate without cause? Electronic research: One of the firms interviewed offered to put all kinds of electronic legal resources at our finger tips, and was not going to charge the City for it. Why does the proposed Retainer Agreement allow Rourke to charge the City for "computer assisted research of Federal cases, Federal statutes and regulations ~ (Agreement, Section 3.B). This seems to be because their library is inadequate, and they are trying to pass that cost on .to the City. E· The contract does not stop Rourke assigning or transferring its interest in the agreement without the City's consent. While this is probably unlikely to happen, what if some of the Rourke attorneys split off to form a new firm? Shouldn't the contract be drafted to address these contingencies? Again, where is the language protecting the City's interests in this relationship? Response: (A) The City retains all rights under applicable laws to pursue any claims for damages, including malpractice actions against the law firm. (B) The law firm has Commercial Property/Business Income Insurance for law firms and professional/general liability insurance. The law firm also maintains a Standard Law Corporation Guarantee through the State Bar of California to satisfy malpractice claims. A reference to insurance in the agreement is only needed if the firm does not carry such insurance. In this case the City is fully protected, both by insurance and the State Bar Guarantee. (C) Section 5 of the retainer agreement provides that the City can terminate the agreement without cause with sixty days notice. Sixty days is provided in order to ensure a smooth and orderly transition of the City's legal affairs to another law firm if deemed necessary. An abrupt change could be harmful to the City's interests given the volume and. complexity of the City's legal matters. Notwithstanding this provision', a client may terminate its attorney at any time it desires. (D) The use of electronic research is infrequent and generally Used when time is of the essence. It.is used when it results in less attorney time. Rourke, Woodruff and Spradlin contract for computer assisted research because they feel it is more cost-effective than an in-house system. Either way, it is a cost of doing business. (E) California State'Bar rules prohibit the transfer of any interests in legal work without the express consent of the client. Personal service contracts are not assignable. Any new law firm would be required to have a new and separate agreement. e Why does this contract .include redevelopment services? Two years ago Jeff Thomas, Bill Huston, Chris Shingleton and I discussed sending this work to a firm which speCializes· in redevelopment. We should have one firm handle all of the.City's redevelopment work, and the Rourke firm clearly was not the most qualified firm to handle that work. Response~ Rourke, Woodruff and Spradlin serve as General Counsel for the Tustin Redevelopment Agency. The law firm has 'handled the transactional work for the Agency because its attorney's are qualified and experienced to handle such work. The City has retained a separate law firm as special counsel for the creation of a redevelopment project area for the reuse of the Marine base. The Agency-retained special counsel because of the highly specialized nature of this sensitive project, that is likely to involve a substantial amount of agency financing. The Redevelopment Agency has the right to retain special counsel (as it did for the Marine base redevelopment project area) whenever deemed appropriate. · Any final contract should be reviewed by an independent law firm which specializes in contracts. This is the best route to protect the City. Or, include the items listed in Section 5.A-E above. Response: A legal services retainer agreement is not' a complex document. Councilmember Saltarelli participated in preparation of the retainer agreement, a document with which he is very familiar and experienced in-preparing. Mayor Potts also requested that any existing retainer agreement with Rourke, Woodruff and-Spradlin be included with this report. There is no currentretainer agreement. As indicated in previous reports to the City Council concerning legal services, the City's arrangement .with Rourke, Woodruff and Spradlin was created initially through City Council resolutions and minute actions adopted over the years~which established retainer and hourly rates. Mayor Potts also requested that the attached June 26, 1995 memorandum from the City Manager to the City Council be included in this report. The memorandum describes a law firm selection process suggested by Councilmember Saltarelli. WAH 10-2-95 ,)ATE: .OCTOBER 2, 1995 lnter-Com TO: FROM: SUBJECT: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL WILLIAM A. HUSTON, CITY MANAGER LEGAL SERVICES AGREEMENT RECOMMENDATION'. The City Council subcommittee of Mayor Pro Tem Worley and Councilmember Saltarelli recommend that the City Council adopt Resolution No. 95-95 appointing Lois E. Jeffrey City Attorney and authorizing a retainer agreement with Rourke, WoodrUff and Spradlin. BACKGROUND: Following a Request For Qualifications/Proposal process, the City Council selected Rourke, Woodruff and Spradlin to provide legal services subject to reaching an agreement concerning fees. The City Council appointed Mayor Pro Tem Worley and Councilmember Saltarelli as a subcommittee to negotiate a legal services agreement. DISCUSSION: Mayor Pro Tem Worley and Councilmember Saltarelli reviewed billings for legal services in order to assess whether it would be more cost-effective to obtain legal services on a straight hourly rate, a flat lump sum retainer fee or a combination. They concluded that a lump sum retainer or combination with an hourly rate would not be in the.City's best interests. Retainers for basic legal services combined with hourly rates for other legal services create problems with tracking costs and lead to disputes about what is/is not covered by a basic services retainer. Mayor Pro Tem Worley and Councilmember Saltarelli feel that an hourly rate billing system, with~controls over legal work assigned to the City Attorney's office (including task billing) would be the most cost effective from.the City's standpoint. The administrative system to control and monitor legal work assigned to the City Attorney's office is in place. The proposed legal services agreement includes a fee of $120 per hour for transactional (basic) services and $140 'per hour for litigation. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 22 23 24 25 26 27 28 RESOLUTION NO. 95-95 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, APPOINTING THE CITY ATTORNEY AND AUTHORIZING EXECUTION OF A RETAINER AGREEMENT WITH ROURKE, WOODRUFF & SPRADLIN WHEREAS, it is necessary for the continued efficient operation of the affairs of the City that the City Council appoint a City Attorney and otherwise provide for legal advice to, and legal representation of, the City; NOW THEREFORE, the City Council of the City of Tustin, California, DOES RESOLVE, DETERMINE AND ORDER as follows: Section 1: The law firm of Rourke, Woodruff & Spradlin is hereby retained as outside General Counsel to the City of Tustin; Lois E. Jeffery, Esq. is designated as the City Attorney to serve at the pleasure of the City Council. Section 2: The City Council hereby approves and the Mayor is authorized to execute the Retainer Agreement with Rourke, Woodruff & Spradlin, attached hereto. PASSED AND ADOPTED by the Cit. y Council of the City ¢ .Tustin at a regular meeting held on the 20th day of November, 1995. JIM POTTS, MAYOR ~AMELA STOKER, CITY CLERK STATE OF CALIFORNIA ) COUNTY OF ORANGE ) SS CITY OF TUSTIN ) Pamela Stoker, City .clerk and ex-officio Clerk of the City Council of the City of Tustin, California, does hereby certify that the whole number of the members of the City Council of the City. of Tustin is five; that the above and foregoing Resolution No. 95-95 was passed and adopted at a regular meeting of the City Council held on the 20th day of November, 1995 by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: Pamela Stoker, City Clerk RETAINER AGREEMENT FOR CITY ATTORNEY SERVICES THIS AGREEMENT is made and entered into as of the day of ,1995, by and between the CITY OF TUSTIN, a municipal corporation, hereinafter "the City", and ROURKE, WOODRUFF & SPRADLIN, a professional corporation, hereinafter "the Attorneys." NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows: AGREEMENT 1. Retention of Attorneys. The City hereby retains and employs Attorneys to provide legal services required to be performed by the City AttOrney of the City of Tustin and the Agency Counsel to the Tustin Community Redevelopment Agency ("Agency"). In this regard, Lois E. Jeffrey is designated as City Attomey for the City of Tustin, and Agency Counsel to the Agency. She will perform the services of City Attorney and Agency Counsel assisted by other attorneys in the firm of Attorneys, some of whom may, from time to time, be designated by the City Council as Assistant and Deputy City Attorneys. 2. Scope of Duties. The City retains and employs the Attorneys to provide legal services required in connection with City's operation as a general law City. The legal services to be performed for the City shall include those generally understood to be within the field of municipal law, including redevelopment law. Attorneys shall provide those legal services reasonably required to advise and represent the City and shall take reasonable steps to keep the City informed of the progress of the representation and to respond to the inquiries of City Council members and City staff regarding the status of matters for which Attorneys are representing the City or where advice has been sought. A. It is understood that the legal services shall include, but are not limited to, the following: (i) The preparation of ordinances, resolutions, orders, agreements, forms, notices, declarations, certificates and other documents; (ii) Attendance at all meetings of the City Council, the Agency, the Planning Commission, and attending all other meetings of City boards, commissions, and committees when so requested by the City Council or the City Manager; (iii) Rendering legal advice and opinions concerning legal matters that affect the City or Agency, including new legislation and cOurt decisions; (iv) Representing the City in litigation involving the City or Agency, including both prosecution and defense; and (v) Providing all other legal Services required as City Attorney or Agency Counsel. B. The legal services to be performed by Attorneys pursuant to this Agreement shall not include serving as bond counsel for municipal financing matters. 1100-0001 16907_1 C. Through the City Manager, the City shall cooperate with Attomeys and keep Attorneys informed of developments that pertain to Attorneys' representation of the City and providing services pUrsuant to this Agreement. 3. Fees, Costs and Expenses. A. Effective the first day of the month following execution of this Agreement, as compensation for services rendered pursuant to this Agreement, City agrees to pay Attorneys at the hourly rates set forth on Exhibit "A", attached hereto and incorporated herein by this reference. Exhibit "A" may be changed from time to time without otherwise amending this'Agreement by a Resolution adopted by the City Council at a regular meeting. The work described on Exhibit "A" as "Transactional" includes all work described in Section 2^ (i-iii) and (v) of this Agreement, except litigation. Litigation includes: the representation of the City or Agency in administrative or evidentiary hearings involving personnel matters or before another agency or tribunal; advice on claims requiring legal research and/or review of extensive documentation, court appearances on citations, motions to quash, and Pit(hess motions, and representation of the City or Agency in state and federal courts. B. City 'agrees to pay the following out-of-pocket costs and expenses associated with Attorneys' work pursuant to this Agreement: messenger deliveries; copying in excess of 25 pages; long-distance telephone calls; process servers' fees; filing fees fixed by law or assessed by the courts and other agencies; computer assisted research of Federal cases, Federal statutes and regulations; deposition and 1100--00012 ~6~_~ other court reporting fees; jury fees, witness fees; costs to obtain copies of documents in litigation, and other litigation-related costs and expenses as may be required to adequately represent City or Agency, such as transportation, mileage, meals and lodging associated with out-of-town depositions or appearances. C. To aid in the preparation or presentation of litigation, it may become necessary to hire expert witnesses, consultants or investigators. Attorneys will select any expert witnesses, consultants or investigators to be hired, but shall receive City Council or City Manager approval of the fees and' charges prior to any such engagement. 4. Statements/Task-Billing. Attorneys shall prepare and present detailed monthly statements for services rendered to the City for the month preceding the statement, indicating each discrete task performed by Attorneys. City shall pay the statements upon presentation or within a reasonable time thereafter. 5. Discharge and Withdrawal. A. Attorneys shall serve under the terms of this Agreement at the pleasure of the City Council, and the City Council hereby reserves the right to terminate this Agreement upon providing sixty (60) days' written notice to the Attorneys. B. Attorneys deem it necessary or advisable to do so upon providing sixty (60) days' written notice to City. Attorneys reserve the right to terminate this Agreement at any time 1100-00012 16907_1 C. When Attorneys' services are terminated, all unpaid charges shall become immediately due and payable. 6. Entire Agreement This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof, and contains all covenants and agreements between the parties with respect to such matter. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date indicated in the preamble to this Agreement. "City" CITY OF TUSTIN By: MAYOR ATTEST: City Clerk' "Attorneys" ROURKE, WOODRUFF & SPRADLIN 1100-00012 ~69o7_.1 By: KENNARD R. SMART, Managing Partner EXHIBIT 'A' CITY OF TUSTIN RATE SCHEDULE (11/95) Hourly Rates for Leqal Personnel Transactional Litiqation Partners $120.00' $140. O0 Associates $120.00' $130.00 Paralegals $ 75.00** $ 75.00 Billinq Increment We bill in increments of one-tenth of an hour (six minutes). Costs and Expenses In-office photocopying Mileage $ 0.25 per page (only after 25 pages) $ 0.25 per mile (out of County travel)- *This is a special, blended and discounted rate for both partners and associates. **Excludes secretarial functions performed by paralegals. ATE: JUNE 26, 1995 Inter-Com TO: FROM: SUBJECT: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL WILLIAM A. HUSTON, CITY MANAGER LEGAL SERVICES CONTRACT Councilmember Saltarelli has suggested the City Council proceed with interviews of five to seven qualified law firms. He also suggested the City Council select the best qualified law firm and then negotiate a fee, notwithstanding the fee set forth in the law firm's Request For Qualifications/Proposal. In the event a fee arrangement could not be agreed upon, the City .council could negotiate with the next best qualified law firm. This is the same approach used by public agencies when selecting engineering design firms (as mandated by State law). This approach would not be inconsistent with the City's Request For Qualifications/Proposals since the selection criteria (pages 5 and 6 of the RFQ/RFP) provides the City Council flexibility in modifying or waiving criteria to be used in selecting a law firm. Since a legal services contract is for professional services, the City Council is not bound to select, a law firm based on its quoted rates. Unlike a bid for a public works construction contract, the City Council can negotiate a fee other than that quoted in the law firm's proposal. While there are a variety of ways to determine which law firms are interviewed by the City Council, one simple approach would be for each councilmember to identify 5-7 law firms they feel are qualified. A list could be compiled which includes law firms identified by at least three Councilmembers (or whatever variation desired by the City Council).