Last December, Fort Worth schools trustee Ann Sutherland, worried that the district was about to lose its chance to protest the drilling of a gas well within 200 feet of T.A. Sims Elementary School, filled out a one-page document online and filed it with the Texas Railroad Commission. It took her about 10 minutes.
As it turned out, one of the outside law firms that the district uses was on the case. An attorney with the Cantey Hanger firm filed the same appeal notice before the deadline passed. That one cost the district $2,068.
In the last 28 months, the school district has paid more than $1.7 million to two dozen outside law firms such as Cantey Hanger, although the district has two attorneys and two legal assistants on staff. According to documents released to Fort Worth Weekly under an open-records request, approximately $1.1 million of that was spent during fiscal 2009-2010 and through February 2011. That works out to about $13.80 per student — pretty close to the per-student average, during the same time frame, of the Austin school district, with an enrollment comparable to Fort Worth’s. In the 10 months previous to that period, however, Fort Worth’s costs were about $7.70 per student.
That increase in legal costs is worrisome to some trustees, especially when the district is struggling with a $30 million budget gap and may have to lay off hundreds of employees.
Ironically, some think the key to reducing legal costs is to hire more people — in-house attorneys, that is, who would be paid much less than outside lawyers who draw $235 to $350 an hour.
“It’s something we need to talk about,” Sutherland said.
But for now, she said, she wants to know “why we are paying outside firms these huge hourly fees when we have staffers who could do the same work for $68 or less.” That’s about what veteran school district counsel Bertha Whatley’s $137,000-plus salary would work out to for a 40-hour week. The legal department includes a second attorney who makes about $91,000 and two administrative assistants, for a total department cost of $302,000.
“This is a terrible waste of the district’s resources when the district is firing employees. … It’s outrageous,” Sutherland said.
Austin’s legal department, by comparison, employs one general counsel, a school law attorney, and three legal assistants at costs of about $500,000. However, according to documents released to the Weekly by Austin spokesperson Melissa Sabatino, the general counsel also “performs administrative duties outside the legal arena for the district.”
The Weekly left messages with Whatley and other district officials, seeking responses to questions raised by the trustees and others, but no one in the administration responded.
Northside trustee Carlos Vasquez is also angry and looking for answers. “I have been asking Superintendent Melody Johnson why we are paying such high legal fees with no answers given,” he wrote in a recent e-mail. “I am not sure what Ms. Whatley and the other attorney do.”
Vasquez may never get his question answered — or at least not by Johnson. In a surprise announcement last week, she tendered her resignation, effective Sept. 19. Johnson, who has headed the district for six years, has come under fire in the past year from Sutherland, Vasquez, and fellow trustee Juan Rangel, for what they say have been a series of management fiascos, from attendance fraud at Arlington Heights High School, revealed during the 2009-2010 school year, to the purchase of a $6.7 million software program in 2008 that still does not work properly.
Now these same board members are raising questions about the outside legal fees. “The bottom line on this is simple,” Rangel said. “We need to be spending this kind of money in the classroom, not in the courtroom.”
Ten years ago, then-State Comptroller Carol Keeton Strayhorn gave the Fort Worth district an A for its reliance on an in-house attorney. Strayhorn said Whatley, then newly hired, “helps reduce the need for more expensive outside legal services,” thus helping keep the per-student cost for such services below $10. That year the district paid $523,133 to five firms, according to a report by Strayhorn’s office on the district’s overall financial and academic health. District enrollment was about the same as it is today, around 80,000.
In her report Strayhorn wrote, “By continuing to use a staff attorney and reducing legal work outsourced to private sector attorneys, [the district] decreased legal fees for fiscal year 2001 by approximately $75,000 from fiscal year 1999.”
Strayhorn said Whatley’s duties at first included “direct legal support and advice to administrators,” to which were added personnel issues, employment contracts, and open record requests. Eventually the job also included handling student discipline hearings, special education matters, and workman’s compensation cases.
These days, the law firms doing business with the school district include some of the most prestigious in Fort Worth; others are from Dallas, Austin, Houston, and Irving.
McDonald Sanders, a Fort Worth firm since 1951, received the highest payments during the recent 28-month period: $549,105, primarily for property acquisitions related to the current bond program, work that is about to be completed.
A Houston firm, Thompson & Horton, is on a $40,000 retainer for services related to the current school board redistricting plan, an issue that comes around once every 10 years following the census. The most recent census showed a large increased population among Latino groups, meaning that Fort Worth will have to redraw the current map in order to add one or possibly two new minority districts.
Another law firm near the top of the legal fees list is the prestigious local firm of Cantey Hanger LLP, whose ranks include former city council members David Chappell and Carter Burdette and State Sen. Wendy Davis. Cantey Hanger collected more than $462,000 during the 28-month period, about half of it for reviewing fewer than a dozen oil and gas lease agreements. And the firm was paid more than $17,000 for its work in helping to block a liquor license for a bar near an elementary school. The rest went for representing the district in 19 employee grievance cases.
Before joining Cantey Hanger, Chappell had his own law firm, which did the majority of the district’s outside legal work for several years beginning in the late 1990s. A former partner in Chappell’s firm, Bob Johnson, was hired as an in-house attorney for the district during that same time period.
Sutherland is still steamed about the bill the district got for the one-page filing by Cantey Hanger with the Railroad Commission.
The document was a notice of protest against Chesapeake Energy’s attempt, during the Christmas holidays, to use a loophole in the law that would have allowed it to drill gas wells within 200 feet of an elementary school in spite of district policy that prohibits drilling closer than 1,200 feet to any of its schools.
Cantey Hanger billed the district for seven hours and 20 minutes of work, at $283 per hour, to file the self-explanatory form. Just hours before Cantey Hanger made its filing, Sutherland had filed her own, because she feared the district was about to miss a deadline.
“It took me less than 10 minutes,” she said. “It was quite simple. … Either one of our two staff attorneys should have been able to do it.”
Fort Worth trustees are not alone in their concerns over the growth in public-school legal bills. Waco attorney Angela Tekell, who serves on the Waco school district’s Education Foundation as well as several educational advisory boards and committees, wrote in an e-mail that even though Fort Worth’s outside legal fees sound excessive, she couldn’t judge without knowing more about the litigation handled by the firms.
“I will say, however, that districts across the state are looking at these costs closer,” she said.
The Brownsville school district, with an enrollment of about 49,000, recently fired the Houston-based firm of Walsh, Anderson, Brown, Gallegos, and Green as its outside law firm, when costs rose to more than $15 per student. The firm, which is handling a highly controversial case for Fort Worth schools, had also received public criticism for violating the law by releasing the names of Brownsville special education students whose parents were fighting that district over their children’s rights under the Americans with Disabilities Act.
A 2010 report by the Texas School Performance Review Board found that reducing outside legal costs by only 10 percent would save one “medium-sized Central Texas district” more than $6,000 annually. By that calculation, Fort Worth could save around $100,000 — enough to pay a couple of teachers’ salaries. The review board was established in 1990 by the Texas Legislature to review the “effectiveness and efficiency of the budgets and operations of school districts.”
Addressing the increased dependence of school districts on outside law firms, the board recommended that districts begin to review contracts on an annual basis, carefully assessing the need for outside attorneys and establishing “specific hourly rates for services.”
The Texas Government Code exempts professional services from the usual competitive bidding process that state and local governments normally use. The code does require governments to make such selections based on “demonstrated competence” for a “far and reasonable price” that does not “exceed any maximum required by law.”
However, Assistant Attorney General Tom Kelley said there are no maximum fees set out in the law. He said an appellate court ruled, in a 2001 case involving the City of Denton and a private accounting firm, that a fee of $350 an hour was excessive under the statute.
The other part of the school district’s legal bill equation, beyond law firms’ rates, is the amount of outside representation the district needs. The work ranges from complex property acquisitions to dealing with gas lease questions, defending the district in a number of ongoing lawsuits, and handling requests for information under the state’s open records act.
Some matters, like that one-page form filed with the Railroad Commission and the open records work, seems straightforward. But with three whistleblower lawsuits currently headed for court dates, two racial discrimination lawsuits that were settled only a few weeks ago, and the district engaged in many questions regarding gas drilling on or near its property, the need for help from outside attorneys expert in certain fields seems clear.
However, it does appear that some of the work that outside firms billed for could have been handled by the district’s own staff.
Take one key lawsuit, filed by fired assistant principal Joe Palazzolo, formerly of Arlington Heights High School, alleging that he was wrongfully terminated. During the 28-month period, from October 2008 to early February 2011 (the period for which the district provided records), the Walsh, Anderson firm was paid $350,000 for its handling of the Palazzolo-related work and four other personnel cases. It’s not clear how much of that sum was due to which case.
Included were fees for routine matters like submitting open records requests to various government agencies for information on Palazzolo’s past employment. The attorneys who did that work were paid $255 and $235 an hour. In one example, Walsh was paid $1,551 for a little less than seven hours research by attorney Sandi Tarski to find the “appropriate departments to submit military requests for information” and submitting “Freedom of Information Act requests to the Department of Labor, the General Services Administration, and the United States Army,” where Palazzolo had previously been employed.
The highest single payment to any of the firms in the 28-month period was $78,000 to Walsh in March, a few weeks after the appeal of Palazzolo’s firing was tried before a hearing examiner. The school district provided no invoices to show what the individual payments to law firms covered, although the Weekly had requested copies of such records.
Sutherland said that she does not recall any legal bills ever being submitted to the school board for approval.
Sutherland voted against Palazzolo’s firing, as did Vasquez and Rangel. The Walsh attorneys did not return calls asking for comment for this story.
There is at least one indication that district officials made the right call in hiring outside counsel on the case. At Palazzolo’s second grievance hearing, last August, Walsh attorney Sandra Carpenter appeared for the first time to represent the district, along with assistant superintendent Cecelia Speer. Professional mediator Linda LaBeau was present as Palazzolo’s representative.
Carpenter is the district’s lead attorney in the case. But in this instance, LaBeau recalled, “We had to reconstruct all events for Ms. Carpenter. Ms. Carpenter pulled Cecelia [Speer] out of the room at one point because she [Carpenter] became visibly disgusted with the poor organization of the documentation by the district.”
Palazzolo had filed the grievance following his demotion to a lesser position at a much smaller school after he had taken his complaints about wrongdoing at Arlington Heights to district investigators. His grievances were not upheld, and the district proceeded to fire him within four months. Palazzolo appealed the firing, but the school board’s action was upheld by Texas Education Agency hearing examiner Jess “Rick” Rickman.
The records on legal billings released by the school district end in early March. But the Palazzolo case, and its cost to the district, continues, and the legal issues are getting more complicated.
On May 10, the TEA commissioner overruled Rickman and sent Palazzolo’s case back for rehearing by a new examiner based on the fact that Rickman had requested and received from the district an $18,000 overpayment for his services. The commissioner ruled that such an overpayment was not only illegal but that it was a “procedural irregularity that could lead to an erroneous decision.” The appeal of Palazzolo’s firing, he wrote, was granted.
The former assistant principal and his attorney, Jason Smith, interpret the commissioner’s ruling to mean that Palazzolo is once again an employee of the district, on administrative leave as he was prior to the hearing, until new hearings are held and a new ruling obtained.
In a letter to Tarski on May 17, Smith asked that Palazzolo be reinstated and paid his salary pending a new trial. Tarski refused, claiming that Palazzolo is still fired.
The next step in this long process, Palazzolo said, will be a motion asking the commissioner to order Johnson to enforce the ruling.
Asked by the Weekly to clarify Palazzolo’s status, TEA spokeswoman DeEtta Culbertson wrote in an e-mail that the commissioner could not comment because the case could come before him for final determination.
There’s also another front in the fight. Before the commissioner made his ruling, Palazzolo had been approved for unemployment payments by the Texas Workforce Commission, whose examiner told Palazzolo that the district did not provide documentation that showed his firing was justified. The district appealed that decision as well, and a hearing on the appeal was set for May 25.
Palazzolo said that the TWC has told him that the commissioner’s ruling means that he is back on the district’s payroll. He is no longer eligible for unemployment compensation, which would appear to make the appeal hearing moot. Still, Tarski informed Smith that the district intends to go forward with it.
The school district has been on the losing end of several employee lawsuits over the last year. A whistleblower suit brought by former teacher Sandra Brody was settled last year for around $50,000.
In May, the school board approved settling two discrimination lawsuits for a total of $100,000, according to persons close to the case. Those two former employees worked in Enterprise Resource Planning, part of the finance department. Johnson created the planning division to help implement the new payroll software that the district purchased from Tyler Technologies in 2008 as part of a $6.7 million package that also included the troubled Connects student records program. Both programs failed in their initial implementations. Latonia Hill and Debra Ware, both African-Americans, were let go when Johnson eliminated the department. All of the white employees in the department were transferred to other jobs, but no jobs were found for Hill or Ware, who claimed they were fired because of their race.
The district is still paying outside law firms to defend it in two whistleblower suits in addition to Palazzolo’s. Suits by former employees Aracely Chavez and Raul Duran are headed for state district court sometime this year, according to the plaintiffs, both of whom said they will insist on airing their cases before juries rather than settling.
Chavez, who also worked with Hill and Ware in Enterprise Resource Planning, was let go when no job could be found for her. She filed a whistleblower lawsuit against the district last year, charging that she had warned the administration that the system was not ready to “go live.” Johnson implemented it anyway in January 2009.
For months after that, the program was a disaster, overpaying more than 2,000 employees and ex-employees a total of about $1.5 million. The fiasco also engendered several other lawsuits that are making their way through the legal system, filed by the district against former employees who have not returned their excess payments. An internal audit confirmed that the warnings by Chavez and others were accurate.
The Brody, Ware, Hill, and Chavez cases have been handled for the district by Walsh Anderson.
In the Duran case, the district is being represented by Thomas P. Brandt of Fanning, Harper, Martinson, Brandt, and Kutchin, a Dallas firm that was paid $8,882 for its work between August 2010 and February 2011. Duran, who is Hispanic, is alleging that he was repeatedly passed over for promotions and job openings based on his race and the fact that he “blew the whistle” on what he said is the district’s long-time discrimination against Latinos.
Brody, Palazzolo, Chavez, and Duran are represented by Jason Smith of the Art Brender firm, which is known for its successes in government whistleblower and discrimination cases.
There’s one other arena where legal problems may continue to bedevil the district and its checkbook for a while. After Rickman, the TEA examiner and Dallas lawyer, heard Palazzolo’s appeal of his firing, Rickman submitted a bill for $26,000 to the district for his work. That’s more than three times the maximum charge allowed by the Texas Education Code and in fact is the only reason the commissioner reversed Rickman’s ruling and sent the case back to be heard by a new examiner. (Because he was sending the case back for a new hearing, the commissioner wrote, he did not make a “substantial evidence review.”)
Under the state code, the maximum that hearing examiners may be paid is $125 an hour with a maximum of $8,000 for cases such as Palazzolo’s.
No one from the school district administration responded to the Weekly’s question about who approved the excess payment to Rickman. In four other cases where hearing examiners were used by the district in the past two years, the most the district paid was $2,857.
“No documentation nor explanation has been reported to the board regarding Mr. Rickman’s pay,” Sutherland said.
Sutherland said she believes the Walsh, Anderson attorneys should have advised the district against the payment to Rickman, another point that has angered her. “These are very high-paid attorneys,” she pointed out. “We are paying them to know the law.”