Jan 132012
 

The Las Vegas Sun recently reported that the state of Nevada will pay a Virginia law firm $6 million in legal fees to defend a $40 million suit brought against the transportation department (NDOT).  The suit relates to an $85 million contract between Ames Construction Company and the NDOT to build a section of freeway in Carson City.  Ames claims that the state caused delays, forcing it to lose money. 

In a recent meeting of the NDOT Board of Directors, several board members were critical of the mounting legal fees related to the actions.  Board member Tom Fransway called the fees “exorbitant” and urged the Board to be “more responsible” in selecting legal counsel in the future.  The Nevada News Bureau reported that Fransway also questioned the desirability of securing legal work through a no-bid process.

Governor Brian Sandoval, the Board’s Chairman, was not critical of the charged rates, which ranged from $295-$340, but did question the amount of time billed by the firm.  He and other board members said that they had not seen such high legal fees for legal challenges in the past.

One board member, Attorney General Catherine Cortex Masto, defended the fee amount. She argued that the fees were not unreasonable and attorney’s rates are often much higher.  Dennis Gallagher, NDOT’s chief legal counsel, also noted that the fees include charges for experts hired to defend the state. Gallagher stated that experts were required because the case against the NDOT was extremely complex. Despite the concerns of several of its members, the board voted to extend the law firm’s contract to take care of a pending case mediation.

The dilemma of the Board brings up a common concern: many times municipalities are faced with seemingly uncontrollable legal costs, even though the hourly rates seem to be in line with local standards. This may be because of the lack of such basic controls as a litigation budget, or guidelines that control ballooning costs incurred through the use of large numbers of associates and paralegals. It is only through the use of such basic controls that situations such this can be avoided.