Cashing in

The state paid more than $100 million in settlements and judgments since 2005, but officials are tight-lipped about why.

CommonWealth has obtained all settlement and judgment payouts by the State Comptroller from Fiscal Year 2005 though the second quarter of Fiscal 2014. Click here for the data, which includes the name of the agency against which the claim was made, the amount paid, and the recipient.

Every year, the Massachusetts Legislature sets aside about $5 million for legal claims against the state, and every year the state ends up paying out a lot more, sometimes double and triple that amount. Since 2005, the state has coughed up more than $100 million, an average of about $11.5 million a year. The figure would probably be much higher but for legislatively imposed caps on what the state can pay out in many settlements and judgments.

The numbers are essentially a tally of what the state has had to pay for its mistakes. One would think the numbers would be scrutinized closely in an attempt to learn from those mistakes. But that doesn’t always happen. No one in state government reports on the payouts. They don’t show up on the government’s open checkbook website.

State law requires agencies, particularly those that make a lot of litigation payouts year in and year out, to develop risk reduction plans. Financial incentives are even offered to state employees who come up with ideas on how to pare back claims. Yet interviews with officials at a number of the state agencies that regularly make big litigation payouts turned up no risk reduction plans. The mandatory annual reports on settlements and judgments filed by the Office of the State Comptroller also contain nothing. It’s as if the money is paid out and then everyone moves on.

Until a Suffolk Superior Court judge’s ruling last summer, the state wouldn’t even identify the people or companies to whom it was paying settlements and judgments. Now the state releases most of the names, but nothing else. There is no explanation of what the claim is for or what prompted it. The comptroller’s office refers inquiries about the payments to the agencies responsible for them and the agencies often refer the inquiries back to the comptroller.

The data indicate nearly two-thirds of the money goes to lawyers or law firms. The agencies making the payments tend to be involved with law enforcement, including the State Police, the Department of Correction, sheriffs’ offices, and the attorney general. The state’s human services agencies are sued by groups trying to force changes in state policies instead of trying to win monetary judgments. But the human services suits often trigger substantial payments for legal fees; one case, for example, resulted in a payment of $7.1 million in legal fees to a single firm.

Lawrence Friedman, a former attorney at Choate, Hall & Stewart who is now a professor at New England Law | Boston, says everyone needs to keep in mind that the settlements are being paid with tax dollars. “We in essence are funding these settlements,” he says. “One would think the people would have an interest in making sure there is an effort to reduce liability. Some will say paying out the settlements is just the cost of doing business, but in the public sector, when there are tight economic times, every penny counts. And when it is our money, when it’s tax dollars, that’s even more important.”

Getting the records

Sunlight is the best disinfectant, according to the well-known saying. When it comes to payouts for settlements and judgments, however, state officials don’t seem to want to let the information see the light of day, despite a judge’s recent ruling.

Several news organizations, including CommonWealth, have attempted to obtain settlement and judgment payments from the state for years. While the total amount of payouts was considered a public record, details on who received the money, how much they received, and the reason for the payments were not because the parties had signed confidentiality agreements.

Available records indicate 60 percent of the state’s litigation payments, or about $54m since 2005, go to lawyers or law firms. Last summer, the Boston Globe won an order from a Suffolk Superior Court judge requiring the state to release the names of recipients of settlements involving public money. After a failed bid by the state to amend the judge’s order, the comptroller’s office released a list showing who received checks from the state’s settlements and judgments fund and when. But nothing more. The comptroller says specific information about the nature of the claims must come from the departments. Many of the departments, though, either did not respond to requests (State Police), responded but failed to provide the information (Attorney General Martha Coakley’s office), or referred the inquires back to the comptroller’s office.

Some 35 payments made by the governor’s office to the law firm of Ropes & Gray illustrate the state’s pass-the-buck approach to the records. Initially, the comptroller said any information about what the payments were for would have to come from the governor’s staff. Meghan Kelly, a spokeswoman for the Executive Office of Administration and Finance, which is required to sign off on any judgments in excess of $20,000, responded that the information had to come from the comptroller. The comptroller’s office countered that it couldn’t say anything.

In the end, an administration official who did not want to be identified said Ropes & Gray was hired in 2007, just before Deval Patrick became governor, to represent outgoing Gov. Mitt Romney and some of his aides in a wrongful termination suit brought by the former head of the Civil Service Commission. Ropes & Gray earned more than $836,000 in fees over four years before a judge ruled in Romney’s favor.

The Department of Correction was a bit more forthcoming about the causes of some of the cases it was involved in during 2012, offering a brief description of what prompted the case—a slip and fall, for example, or a personal injury lawsuit. But any inmate who received a judgment or a settlement was not identified under an exemption designed to protect inmates at state prisons and county houses of correction from being shaken down by other inmates.

“The Supreme Judicial Court recognized the legitimacy of DOC’s concerns that there is a strong-arming potential presented in inmates knowing that other inmates have access to financial resources,” DOC spokesman Darren Duarte wrote in an email.

Who pays and who collects?

Since fiscal 2005, the state has paid more than 2,200 individual and group claims. The number of claims rose from a low of 126 in 2005 to a high of 345 in 2008 and has remained in the 200 to 300 range ever since. During the first two quarters of this fiscal year, the number of claims totaled 192, a pace that would put the state on track to set a new record.

Of all state agencies, the Massachusetts State Police paid out the most in connection with litigation, more than $12 million since 2005. The State Police released no information about the agency’s payments, but some clues could be gleaned by researching the names of the recipients. One payment, for $2.3 million, went to a New Hampshire Superfund site where the agency dumped old munitions. Another payment, for $200,000, went in 2010 to the estate of Preston Johnson, a Fitchburg resident who was pulled over in 2005 for drunk driving by Trooper Donald Gray and then shot in the back of the head when Gray claimed his life was in danger as Johnson tried to drive away.

A judge’s inquest recommended Gray should face criminal charges for “wanton and reckless” actions, but a Worcester County grand jury did not indict him. CommonWealth recently detailed the case (“Clearing the cops,” Winter ’14) and, in an interview for that story, State Police Colonel Timothy Alben defended the trooper’s action, saying Gray exercised the proper use of force. Alben did not mention any payment to Johnson’s estate. Comptroller records indicate the State Police apparently paid $45,000 in legal fees in connection with the Johnson settlement.

The attorney general’s office ranks second in claims paid at $9.1 million, with more than $8 million going to at least 15 people wrongfully convicted of crimes. (Clarification: The vast majority of wrongful convictions were in Superior Court trials prosecuted by district attorneys, not the attorney general’s office. The settlements were paid out through the attorney general’s office on behalf of the state.) The Department of Correction has among the highest claims in both numbers and dollars, with more than 540 individual and group claims totaling more than $8.9 million since 2005. Included in that total is about $2.3 million paid to inmates whose names were redacted.

The available records indicate at least 60 percent of the state’s litigation payments, or about $54.3 million since 2005, go to lawyers or law firms. In some cases, the lawyers are being paid legal fees directly by the state. In other cases, the lawyers merely serve as a conduit funneling money to their clients after taking their fee, which is generally about 30 percent of the total. In those instances, it’s nearly impossible to trace what the litigation payment went for unless the attorney divulges the information.

By their comments, several state officials indicated they were unfamiliar with the nature of most legal claims against the state. Several spokesmen for agencies said the bulk of the state’s litigation payments are for employment claims—workplace disputes involving individual state workers often settled in arbitration. But a review of the comptroller’s records and the amounts withheld in payroll taxes, an indicator of an employment claim, suggest only a fifth of the litigation payments are employment related. The rest appear to be broader negligence, tort, and civil rights claims.

In fiscal 2012, for instance, the comptroller’s office issued checks for 78 claims totaling $2.1 against the Department of Correction. DOC records indicate all but 12 were for employment actions and most were for several hundred dollars. But, all told, employment actions accounted for about one-fifth of the total dollar value—roughly $460,000—while the dozen civil rights and tort complaints cost the state $1.7 million, or about 80 percent of the total.

The state’s settlement and judgments fund also appears to be a source of last resort for some agencies to make payments that should have been paid from other budget accounts. In 2009, the advertising firm of Hill Holiday Connors was paid more than $95,000 from the settlements fund for services to the state Lottery. A spokesman for state Treasurer Steven Grossman, who took office in 2011, says the bill was supposed to be paid in the prior fiscal year and when it wasn’t the Lottery was forbidden from carrying over payments to subsequent fiscal years. A claim was filed with the threat of suit and a check was then issued 10 days into the new fiscal year.

The state in 2009 also sent a check to the federal government for more than $1.5 million to satisfy a complaint about nonpayment of withholding taxes for legislators. For years, lawmakers have received a $7,200 annual expense stipend doled out in monthly payments at the beginning of each month. No taxes were withheld and legislators were issued a 1099 form at the end of each year for tax filing. Because the stipend did not require submitting receipts for reimbursement, the Internal Revenue Service determined the payments were income. Since few lawmakers were claiming the stipend as income on their tax filings, the treasurer’s office agreed to make a $1.5 million payment to the IRS and withhold taxes in the future. Lawmakers never had to pay anything.

Legal fees rising

Michelle Kosilek is the poster girl for lawsuits against the state. The convicted killer, who as Robert Kosilek strangled his wife to death and was sent to prison, for more than a decade has been pushing the courts—successfully —to order prison officials to help him become a woman.

Since 2002, Kosilek’s court-appointed attorneys have argued her constitutional rights were being violated by corrections officials who have refused to pay for a sex change operation that experts testified was medically necessary. Kosilek won her case in 2012 and US District Judge Mark Wolf ruled the state had to pay more than $700,000 in attorney’s fees for her court-appointed lawyers. The attorneys, from the Boston firm of Bingham McCutchen, said in court filings they would waive their award if the state would abandon the case and approve the surgery. The state refused, seeking to avoid a precedent, and is pushing ahead with an appeal.

Michelle Kosilek is one of three inmates who have won cases seeking
sex-change operations.

The case illustrates how legal fees can spiral out of control and how the state sometimes pursues legal action even when the likelihood of success is slim. The state has challenged sex change operations for two other inmates and lost both cases. Legal fees paid out in the two cases currently total about $1.3 million and the meter is still running since the state hasn’t ordered the sex change operations yet. Federal Judge Joseph Tauro, who ruled against the state in one case, said “the record before the court indicates that the DOC’s pattern of obstruction and delay is likely to continue in the future.”

The state has also paid big legal fees fighting challenges to its social service policies by the Northampton-based Center for Public Representation. The center, which advocates for poor, disabled people who need state services, has received $10.9 million in fees and expenses since 2005.

Cathy Costanza, executive director of the center, says some cases have been settled, but there have been others where the state refused to cut a deal and went to trial. “That’s where a huge amount of time and expense goes into these cases,” she says. “They opted not to do it. They were very aggressive in defending the cases.”

One of the cases, Rosie D. v Patrick, initially filed in 2001, became a well-known battle on behalf of needy children. The center sued the state on behalf of low-income children with behavioral and disability issues to force the state to provide needed services closer to their homes rather than forcing them to travel great distances—sometimes hundreds of miles—for those services.

The case was eventually decided in favor of the plaintiffs by a federal judge in 2007, who ordered the state to provide the services beginning in July 2009. The state estimated the cost of compliance would be nearly $500 million, but that amount did not include attorney fees and expenses of $7.1 million. The state finally paid the attorney fees, with interest, in 2011.

Steven Schwartz, the former executive director of the center and the lead attorney in the case, says Massachusetts could have saved millions by agreeing to a settlement years before. Federal law, while allowing public interest lawyers to collect “reasonable” and “market-area” hourly rates if they prevail in court, bars payments if the case is settled prior to going to court.

“Before we ever bring the case, we go to whoever the defendant is and we say, ‘This is the case, these are the issues,’” Schwartz says. “If you don’t settle and you have to bring a lawsuit and we prevail, it costs exponentially more than if they had settled with us early on.”

Schwartz, whose fee total in the Rosie D. case came to $1.5 million, says if the state stepped up to its obligations, his fee would not have been necessary. “Steven Schwartz never sees a dime,” says Schwartz, when asked if he’s merely profiting at taxpayer expense. “It all goes to the center to fund the next case. I’m asking the taxpayers first to instruct their public officials to comply with the law.”

Should state be paying more?

Even though Massachusetts is currently doling out millions of dollars each year in payments related to litigation, some attorneys and lawmakers say it should be paying out more and making it easier for people to recover damages. The hurdles in suing the state include the liability cap of $100,000, which often makes it difficult to find a lawyer willing to handle the case; defenses not available to private individuals or companies; and the Legislature’s annual underfunding of the settlement and judgments fund. The underfunding means a court victory is often delayed until the state can appropriate more money for paying claims.

“There’s a lot of difficulties in suing the state,” says Frederic Ellis, whose Boston firm Ellis & Rapacki has never sued the state. “Not only is there the $100,000 [liability cap], but the defenses the state grants itself are pretty impermeable.”

Another attorney who has taken on the state says the attorney general’s delay tactics can cause people with legitimate claims to give up because of the roadblocks put in their way. It can also work against the state, she says.

“It’s been surprising to us how difficult it is, how seriously the Commonwealth pursues the litigation,” says Shannon Liss-Riordan, whose firms have received more than $1.4 million since 2005 for settlements and judgments. “They paid much more later on than if they settled a little earlier. It doesn’t seem the Commonwealth should treat these litigations the way private businesses do.”

Like the English crown’s claim of sovereign immunity, the federal government and most states long held their actions were shielded from legal claims. But over time, officials and the courts acknowledged the unfairness of such a doctrine, eventually setting a cap for most negligence claims of $100,000 in 1978. In the mid-1990s, prompted by a Supreme Judicial Court ruling, lawmakers made it easier to bring claims against the state by easing defenses the state could use and recognizing that state negligence, intentional or not, comes with a cost to citizens.

The changes in the mid-1990s seem to have had an impact on claims filed. Between 1993 and 1995, the state paid a little more than $687,000 for 22 claims against the Department of Social Services, now the Department of Children and Families. A decade later, from 2005-2007, the state paid out 33 claims for $1.1 million.

Rep. Denise Andrews of Orange, who is co-sponsor of a bill awaiting a hearing in the Legislature’s Judiciary Committee that would remove the $100,000 cap on state liability, says the state has to step up to the plate when it makes mistakes and make people whole. Andrews says her bill would allow claimants suing in state court to recover their real damages. She says her bill was prompted by a constituent whose house was ruined when a sewer pipe exploded inside while construction was being done on the road outside her home. Andrews said the house was uninhabitable but the $100,000 cap prevented the woman from repairing it to its original state.

“The intent is to have reasonable damages covered,” she says. “Today, $100,000 isn’t as much as it was in [1978] when it was first passed. Houses now are worth three and four times that. It’s not for me to incentivize lawyers to be doing what they’re doing. This is to ensure citizens have reasonable compensation for their losses.”

But Andrews recognizes that any move to lift the cap needs to be accompanied by efforts to reduce claims overall, partly by bringing greater transparency to the entire process and by learning from the state’s mistakes so they aren’t repeated in the future.

Meet the Author

Jack Sullivan

Senior Investigative Reporter, CommonWealth

About Jack Sullivan

Jack Sullivan is now retired. A veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

About Jack Sullivan

Jack Sullivan is now retired. A veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

“It’s $100 million of taxpayer money spent. That’s a lot of money,” says the second-term Democrat. “I would like to know why it was spent. What are we paying every day in our operational budgets to make sure people in state government do what we are supposed to do? We should not have to be paying those settlements, but we probably earned them.”

CommonWealth has obtained all settlement and judgment payouts by the State Comptroller from Fiscal Year 2005 though the second quarter of Fiscal 2014. Click here for the data, which includes the name of the agency against which the claim was made, the amount paid, and the recipient.