SR-01-13-2015-3C - 102-006From: Marsha Moutrie, City Attorney
Gigi Decavalles- Hughes, Director of Finance
Subject: Agreements for Workers' Compensation Legal Defense Services
Recommended Action
Staff recommends that the City Council authorize:
The City Manager to negotiate and execute five -year retainer agreements with the
following law firms for workers' compensation legal defense services:
a) Shaw, Jacobsmeyer, Crain & Claffey, a California -based corporation;
b) Armstrong and Sigel, a California -based partnership;
c) Law Offices of Stacey Tokunaga, a California -based partnership; and
d) Goldman, Magdalin & Krikes, a California -based partnership.
Provide the City Manager with the flexibility to allocate work between the law firms
based on their expertise in an amount not to exceed $4 million over the five -year
period. Future year funding is contingent on Council budget approval.
Executive Summary
Staff recently solicited proposals from private laws firms to provide legal defense
services to the City's Workers' Compensation Program. The City received five
proposals. A panel of City Attorney, Finance, and Human Resources staff was
convened to evaluate the proposals based on experience, references, quality of plan to
cost- effectively resolve litigation, and cost. As a result of this process, the panel
recommends the City pursue five -year retainer agreements with the law firms of: 1)
Shaw, Jacobsmeyer, Crain & Claffey; 2) Armstrong and Sigel; 3) Stacey Tokunaga; and
4) Goldman, Magdalin & Krikes. Staff estimates the legal defense services will cost up
to $4 million over five years; this expense would be funded through the Workers'
Compensation Self- Insurance Fund.
Background
The City has historically used private law firms to defend its employees' litigated
workers' compensation claims. The decision to outsource these services was made
many years ago, due to the private sector's ability to offer competitive pricing and more
readily accommodate the ongoing fluctuations in claim mix and caseloads. The City
Attorney revisits this decision annually to ensure the practice remains cost - effective.
Discussion
Staff solicited proposals from law firms for workers' compensation legal defense
services; the outcome of this process is described in detail below. The City currently
uses two firms for this purpose: Shaw, Jacobsmeyer, Crain & Claffey (SJC &C) and
Armstrong and Sigel.
Consultant Selection
Proposals for workers' compensation legal defense services were solicited through the
City's on -line bidding site and notices placed in the Santa Monica Daily Press. The City
received a total of five proposals. An evaluation panel composed of City Attorney,
Finance, and Human Resources staff reviewed and ranked the proposals using the
criteria set out in the RFP (i.e., experience, references, quality of plan to cost - effectively
resolve litigation, and cost).
The two laws firms currently used by the City, Armstrong and Sigel and SJC &C,
received the highest rankings from the panel due to their experience representing public
entities on workers' compensation matters, the quality of the plan submitted, and cost
(i.e., both firms proposed to continue charging a $150 per hour partner rate). Goldman,
Magdalin & Krikes and Stacey Tokunaga closely followed Armstrong and Sigel and
SJC &C in ranking. Both firms have extensive public sector experience, came highly
recommended, and submitted well thought -out plans for resolving claims quickly and
efficiently. However, their proposed hourly rates, while competitive, were marginally
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higher than SJC &C and Armstrong and Sigel. Goldman, Magdalin & Krikes proposed a
partner rate of $160 per hour; Stacey Tokunaga proposed a partner rate of $175 per
hour. Samuelson, Gonzales, Valenzuela & Brown received the lowest ranking from the
panel due to lack of experience with public entities.
Based on the above noted rankings, the panel recommends the City pursue five -year
retainer agreements with the two existing defense firms, as well as, two new defense
firms, the Law Offices of Stacey Tokunaga'and Goldman, Magdalin & Krikes. Retaining
two additional law firms is not necessary to address increased claim volume -- both
Armstrong and Sigel and SJC &C are adequately staffed to handle the City's caseload.
Rather, the panel felt that expanding the number of firms would provide the City with an
opportunity to create more depth in its litigation program and better prepare for possible
retirements and /or turnover of the key lawyers assigned to the City's files.
It is important to emphasize that the City Attorney will continue to annually evaluate the
cost- effectiveness of using private law firms to defend the City's litigated workers'
compensation. claims. Further, entering into multi -year retainer agreements will not
restrict the City's options should the City Attorney determine this practice is no longer
financially and /or operationally beneficial. Rather, if the City opts to change course, the
retainer agreements can be terminated at any time over the next five years.
Financial Impacts & Budget Actions
Based on historical expenditures and litigated claim volume, staff estimates the cost of
workers' compensation legal defense services could range from a low of $3.3 million to
a high of $4 million over the next five years. Ideally, current and future initiatives to
lower claim volume will keep these costs at $3.3 million. However, given the number of
variables impacting legal fee costs, it is more prudent to budget at the $4 million level
over the five -year period, and allow unused funds to fall to fund balance in the Workers'
Compensation Self Insurance Fund. To that end, funds in the amount of $800,000 are
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available in the FY 2014 -15 budget in cost center 59235. The agreements will be
charged to account 59235.522010. Future year funding will be contingent on Council
budget approval.
Prepared by: Deb Hossli, Risk Manager
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Marsha Joh s Moutrie�,
City�Attorh#y
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Gig[ Decavalles H es
Director of Finance
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Forwarded to Council:
Rod Gould
City Manager
Reference:
Agreement Nos. 10010 —10012
(CCS)
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Agreement No. 10018
(CCS)