Legal Claims Add to New York City's Budget Woes

Spiraling settlement costs add to New York City’s budget woes
The Big Apple expects to pay record legal claims this year, probably led by cases of alleged medical malpractice and police abuse Apples: Getty Images(2)

If you walk into a Manhattan bodega and buy a ticket, your odds of winning the Mega Millions jackpot are 1 in 175,711,536, according to the New York Lottery. If on your way home the New York Police Department violates your civil rights, your chances of a payday get much better.

New York City plans to spend a record $735 million on settlements or court awards in thousands of the personal injury, property damage, and contract dispute lawsuits it’s facing in the fiscal year ending next June. The state has no cap on municipal liability or civil damages, and the legal tab continues to rise even as Mayor Michael Bloomberg weighs job and service cuts to plug a $3.5 billion hole in next year’s $72 billion budget. The mayor (the founder of Bloomberg LP, owner of Bloomberg Businessweek) called on state and federal lawmakers to “reform tort law” at a Sept. 4 news briefing. “A lot of times we just make a business decision to settle, rather than run the risk of a much greater tort judgment against us,” he said.

By 2016, the city estimates, its legal claims costs will rise to $815 million, more than the annual price to run the Parks and Recreation Department, according to budget documents. New York’s Law Department has asked Albany to enact laws that would cut interest rates on unpaid settlements held in escrow, limit municipal liability when the plaintiff is partly at fault, and restrict jury trials, says Fay Leoussis, head of the Law Department’s tort division.

In the last several years, one of the biggest sources of court payouts has been the NYPD, with settlements and judgments soaring 46 percent between 2006 and 2010, the year plaintiffs filed a record 8,104 claims against the police. “It’s a cottage industry, suing the department,” Deputy Commissioner Paul Browne says. In fiscal 2011, the most recent year for which data is available, the city wrote checks for $664 million, including $119 million for alleged police misconduct and civil rights violations, according to the Law Department. In February the city paid $15 million, its largest settlement in fiscal 2012, to end a class action against the police on behalf of 22,000 New Yorkers charged with loitering from 1983 to 2011 in violation of a law declared unconstitutional in 1992.

Another high-value settlement went to four gainfully employed men in their mid- to late thirties who sued after being arrested for prostitution—that is, for allegedly being prostitutes—in an adult video store and a spa. The charges were dismissed; their cases cost the city a total of $335,000, including legal fees. Attorney Michael Spiegel calls the busts “ludicrous.” One plaintiff was in the store “merely to buy condoms and lube,” he says. “The city wouldn’t have settled for the money they did if the cases weren’t bogus.”

Christopher Dunn, associate legal director for the New York Civil Liberties Union, says his organization prefers court-ordered changes in police training and procedures to money awards in civil rights cases. “Most people would be disappointed when they see how little reform takes place, even when large amounts get paid out,” he says. Leoussis, the Law Department torts head, says city lawyers already meet with and train police. Paul Chevigny, a New York University criminal law professor and author of the 1995 book Edge of the Knife: Police Violence in the Americas, says New York can do more. “The problem is,” he says, “city officials pretend that there’s nothing to be learned from the information contained in these claims.”


    The bottom line: While New York City struggles to close a $3.5 billion budget deficit, an explosion of legal claims is widening the gap.

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