U.S. Cuts Legal Tab in Half

Lawsuits payouts last year came to $1.7B

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HUDSON CRASH: The pilot’s widow recovered $14.2 million—the largest individual payout.
HUDSON CRASH: The pilot’s widow recovered $14.2 million—the largest individual payout.

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For Uncle Sam's lawyers, 2013 was a relatively good year. The federal government spent about half as much to resolve lawsuits as it did during 2012, doling out $1.7 billion from the Judgment Fund — an open-ended account that the Treasury Department uses to pay legal judgments and settlements.

In 2012, by contrast, the feds spent about $4 billion on lawsuits and in 2011 just more than $3 billion, a National Law Journal review of thousands of records in the fund's database shows.

The big reason for the steep drop in 2013? There were no billion-dollar-plus payouts for giant class actions, such as Indian trust fund mismanagement cases in 2012 or a discrimination suit by black farmers in 2011.What's left are thousands of smaller payments, each one telling the story of a mistake or failure by the government — the prison officials in Pennsylvania who sickened hundreds of federal prisoners by serving spoiled chicken (406 individual suits, average payment $1,750 per inmate); the Customs and Border Protection agent who hacked into the email account of a Mexican citizen detained while trying to enter the country legally ($50,000 penalty); the white male Department of Labor supervisor who dubbed a female Asian-American lawyer there "the Chinker" ($295,000 penalty).

Created by Congress in 1956 to make it easier for agencies to pay for lawsuits, the fund increasingly has been criticized for its lack of transparency and accountability. "For far too long, billions of dollars have been awarded in lawsuits by the federal government, with almost no information available to the public regarding the nature of the lawsuits," Sen. Deb Fisher (R-Neb.) said in a written statement.

In August, she introduced the Judgment Fund Trans­parency Act, which would make it easier for people "to see exactly how their tax dollars are being spent on litigation costs." A similar bill by Rep. Cory Gardner (R-Colo.) is pending in the House.

The fund now operates with minimal oversight. It has "no fiscal year limitations, and there is no need for Congress to appropriate funds to it annually or otherwise," the fund's website says. Its payments don't come out of the agencies' budgets, and fund administrators don't review or evaluate the merits of the requests. They simply cut checks and record the payments in a massive and often cryptic database in which connecting expenditures to court cases can be difficult or impossible.

EXTENSIVE ANALYSIS

An extensive analysis of fund records by The National Law Journal (see chart) shows that the Department of Energy in 2013 ran up the biggest legal bills, spending $644 million, primarily on breach-of-contract suits brought by utilities for failing to accept storage of spent nuclear fuel. That actually was a decline from the previous two years, when the tabs for similar actions topped $1 billion each year.

Morgan, Lewis & Bockius partner Brad Fagg was singularly successful in these legal actions, securing more than $200 million in payments for his clients last year, including $70 million for Portland General Electric Co.; $50 million for Constellation Generation Group; $41 million for Entergy Nuclear Vermont Yankee; $33 million for Cleveland Electric Illuminating Co., Pennsylvania Power Co. and Toledo Edison Co.; and $12 million for Luminant Generation Co.

The U.S. government enjoys sovereign immunity, but certain statutes allow lawsuits for official wrongdoing. They include the Tucker Act, which covers breach-of-contract claims such as those involving spent nuclear fuel; and the Federal Tort Claims Act, applied when a federal worker harms somebody.

The No. 1 reason people sue the government, records show, is for traffic ­accidents caused by on-duty federal workers. FBI agents are particularly accident-prone, with 205 payments ranging from $1,500 to $110,000 for accidents last year.

The departments of Interior and Treasury in 2013 continued to settle lawsuits stemming from their failure to properly account, and manage assets held in trust, for Native Americans since 1820 — a line of cases that began with a class action filed by Blackfeet Tribe member Elouise Cobell in 1996.

Last year, the government paid $188 million to the Yakama Nation, represented by John Ogan and Josh Newton of Karnopp Petersen in Bend, Ore.; Emily Schilling of Holland & Hart; and Julio Carranza of the Yakama Nation Office of Legal Counsel. The Cheyenne River Sioux Tribe settled for $38.5 million, turning for counsel to Thomas Girardi of Girardi Keese, Brian Leinbach of Engstrom, Lipscomb & Lack and Los Angeles solo practitioner Gregory Yates.

The Department of the Army chalked up another one of the year's major settlements, paying $50 million to Apptricity Corp. to settle a copyright infringement suit. Represented by Wilmer Cutler Pickering Hale and Dorr special counsels D. Joe Smith and Gregory Petkoff and partner Todd Steggerda, the Texas company claimed the Army illegally installed Apptricity's logistics software on 98 servers and 9,063 devices for which it did not hold licenses.

There was no real dispute that copying occurred, Smith said. The main issue was damages. The company initially wanted $200 million, but "we knew we had litigation risks and the government knew it had litigation risks, too." The parties turned to mediation. "We were all trying to reach a fair and just result," Smith said, describing opposing counsel Devin Wolak and Scott Slater from the Justice Department's commercial litigation branch as "very, very professional."

TRACKS TO TRAILS

The government issued another sizable payment in a class settlement between the Surface Transportation Board and 250 South Carolina property owners. They claimed the government owed them money for converting unused railroad tracks that ran across their land into trails for biking and hiking.

The government paid $33.5 million, including $11 million in attorney fees to Baker Sterchi Cowden & Rice in Kansas City, Mo.

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    Excellent reporting. You have done a great job of extracting and organizing information from this obscure, and apparently opaque, data base.

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    Excellent reporting. You have done a great job of extracting and organizing information from this obscure, and apparently opaque, data base.

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