Dragging Cities into Court

Generous jury awards are draining municipal treasuries

Paw Paw, W. Va. (pop. 650), is a small town with a big problem. The trouble began in 1978 when the town's lone police officer pulled a speeding truck driver over to the side of the road. The driver said that when he refused to cooperate, the policeman smashed his windows and tried to spray Mace inside. The startled driver put his truck in gear and drove off as the officer shot at the tires. A federal jury concluded that the patrolman had gone overboard and ordered Paw Paw to pay the truck driver $10,500. That would have been a financial catastrophe for a town with a budget of $25,500 and no insurance. Fortunately, the plaintiff has agreed to take $3,000, and the town hopes to raise the necessary cash by throwing a benefit rock concert later this month.

Paw Paw is not the only community hamstrung by litigation. Once protected by "sovereign immunity," a derivative of the rule that "the King can do no wrong," municipalities have become increasingly vulnerable to lawsuits in recent years. In 1978 the Supreme Court ruled that local governments were liable for civil rights violations. Two years later the court eliminated the common defense that a city, or its employee, had acted in "good faith." Says Barton Russell, executive director of the National Association of Towns and Townships: "It's a whole new world, and it's an expensive world."

Most of the suits involve police brutality or personal injuries resulting from municipal carelessness: a faulty traffic light, a poorly marked curve, a dangerous sidewalk. South Tucson, Ariz. (pop. 6,500), may have to disincorporate because of a $3.6 million judgment in a suit brought by a man who was paralyzed from the waist down after being mistakenly shot by a policeman. Cashion, Okla. (pop. 550), faces bankruptcy because of a $157,000 award to family members injured in a sewer gas explosion. Mound Bayou, Miss. (pop. 2,900), was hit with a $59,000 judgment for injuries suffered by a woman who fell into a hole outside city hall.

Big cities are being stung too. "The number of lawsuits has been growing astronomically," says a spokeswoman for the National League of Cities. Even if the plaintiff wins nothing, the cost of mounting a defense can strain an already taut budget. All told, federal court claims pending against towns and cities are a numbing $7 billion. Says Kenneth Courtney, finance director of Troy, Mich., which is trying to pay a $5.75 million award: "Everybody and his brother is suing the city. They feel that they are going to get easy money."

Municipalities are usually ill prepared for the whopping awards. In South Tucson only $100,000 of the $3.6 million judgment was covered by insurance. Now premiums are rising, and many budget makers are finding that they cannot afford the protection they need. One partial solution is a policy purchased jointly with neighboring towns; it spreads the risk and thus costs less. Another is a statutory limit on the amount plaintiffs can recover, like the $300,000 cap imposed in Utah.

Many lawyers welcome the shift away from sovereign immunity for municipalities. Argues Detroit Attorney Robert Dinges: "A city is no different from General Motors. If it commits a wrong, it should be just as liable as anyone else." Other lawyers, however, fear that the legal gains are outweighed by the losses. "A city is not like General Motors," says William Dietrich, Detroit's assistant corporate counsel. "If GM gets hit with a $1 million claim, it raises the price of its cars. When the city gets hit with $1 million, it lays off ten policemen. The people are going to lose." Some municipalities, especially small ones, have to raise taxes. Troy intends to hike property taxes an average of $200 per household. Concedes Steven Berry, the winning lawyer in the Troy suit: "Citizens can end up footing the bill for mistakes by people they have either elected or hired to act competently. There is a problem there."

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