Los Angeles is facing a significant fiscal challenge as legal settlements and jury verdicts paid out by the city have escalated dramatically, becoming a major contributor to a projected budget shortfall.
In the current fiscal year, 2024, the city disbursed $289 million in legal payouts. This represents a substantial increase compared to just $91.3 million paid two years prior, highlighting a rapid acceleration in the city’s liability costs.
The Escalating Financial Burden
The trend of rising legal payments is not new but has seen a steepening trajectory. Annually, these payments have surged from approximately $64 million a decade ago to $254 million last year (implying 2023) and now $289 million this fiscal year (2024). This increasing burden directly impacts the city’s ability to fund services and operations.
Primary Drivers of Payouts
A breakdown of payouts over the past five years reveals the primary areas driving these costs. The largest portion, accounting for 32%, stemmed from “dangerous conditions” related to faulty infrastructure, such as aging sidewalks. Civil rights violations and unlawful uses of force, including police misconduct, represented the second largest category at 18%, closely followed by traffic collisions involving city vehicles, also at 18%.
The rise in costs within specific categories has been particularly sharp. Payouts related to police misconduct, for example, jumped from $15 million in 2020 to $50 million in 2024. Similarly, cases involving dangerous conditions saw their costs rise from approximately $41 million in 2020 to $84 million in 2024.
Factors Fueling the Surge
City officials and legal experts point to several factors contributing to this surge in legal expenditures. These include the city’s aging infrastructure, which leads to more claims related to hazardous conditions, and potentially larger jury awards in recent years. Shifts in the City Attorney’s legal strategy, as well as a simple increase in the overall number of lawsuits filed against the city, are also cited as contributing elements.
City Attorney Hydee Feldstein Soto, who assumed office in December 2022 and heads the office responsible for defending the city, highlighted additional challenges. She noted a backlog of cases exacerbated by the COVID-19 pandemic and described some juries as “antagonistic” towards the city, potentially leading to higher damage awards.
Impact on the City Budget
The escalating legal costs have been identified by city officials as a significant factor contributing to a projected nearly $1-billion budget shortfall for fiscal year 2025-26. This considerable gap has already necessitated difficult measures, including employee layoffs and other spending cuts across various city departments.
Recognizing the growing financial risk posed by these liabilities, the city has substantially increased the allocation for legal payouts in its proposed $14-billion budget for fiscal year 2025-26, raising it from about $87 million to $187 million. This revised allocation reflects the anticipated continued high level of legal costs.
Trends in Litigation
The volume of litigation against the city has been on an upward trend. The number of lawsuits filed yearly has increased consistently from 1,131 in 2021 to 1,560 in 2024. This rise in filings, combined with higher average payouts, drives the overall cost increase.
Furthermore, the average payout per case has seen a dramatic increase, rising from under $50,000 in 2022 to $132,180 in 2024. The number of cases resulting in substantial payouts of at least $1 million has also climbed significantly, from 17 in 2022 to 39 in 2024.
Recent notable payouts underscore the scale of individual cases. These include a $21 million sum for lawsuits stemming from a botched Los Angeles Police Department (LAPD) bomb squad fireworks detonation and a $17.7 million jury verdict related to a man killed by an off-duty LAPD officer.
Conclusion
The dramatic increase in legal settlements and jury verdicts presents a formidable fiscal challenge for Los Angeles, straining its budget and forcing difficult financial decisions. Addressing the root causes of these claims, from infrastructure maintenance to litigation management strategies, will be crucial for the city’s financial stability in the years ahead.
