Fee(ding) frenzy

For the past 12 years, Dennis Eichelbaum has served as general counsel for the Dallas Independent School District. But earlier this month the DISD board, apparently displeased with his performance, handed Eichelbaum his walking papers.

The trustees had terminated Eichelbaum's contract as outside legal counsel in June but continued to use him on an interim basis. They recently set March 15 as the deadline for him to leave his district office and hand most of his work over to other lawyers. Despite the dismissal, Eichelbaum remains steadfast in his conviction that he served DISD well.

"I was a bargain," Eichelbaum brags.
That may not be just sour grapes on Eichelbaum's part. Although his firm received $650,000 a year from the district, Eichelbaum's argument that he delivered Wal-Mart-priced legal value becomes more plausible when you consider what DISD has paid other lawyers lately.

In the past 18 months, the district has become a veritable slop trough for fee-hungry lawyers. John Dodd, a board member who has reviewed the legal bills, estimates that by the end of the school year, the district will pay more than $5 million in lawyers' fees. That's more than twice what the district paid for legal services the previous year. It's also almost $3 million more than the district pays annually for textbooks.

The skyrocketing legal costs do indeed stem in part from Eichelbaum's departure. When the board ended his contract in June, trustees began paying hourly rates to Eichelbaum and several other attorneys hired to begin picking up his work. In other words, DISD has paid its lawyers the equivalent of car sticker prices--with no negotiated discounts. Board Secretary Bob Johnston says that trend, "has put the costs through the roof."

These days, DISD typically shells out $150 to $250 an hour to its attorneys, says Johnston. In comparison, at school districts where the boards have negotiated contracted discounts--such as Arlington, Garland, and Plano--the outside lawyers receive $175 or less an hour, a recent survey conducted by DISD administrators shows.

No doubt, since former Superintendent Yvonne Gonzalez pleaded guilty to embezzlement charges, the district has faced more legal problems and become embroiled in more litigation than in the previous years. But Johnston believes that the lack of discounted rates, not an increase in litigation, is more responsible for the jump in legal bills.

The roster of law firms that have benefited from the windfall is long. It's dotted with names of both high-profile minority-controlled firms and establishment downtown law partnerships.

Friedman & Associates received the biggest bounty. Although the board has recently decided to take away most of the firm's work, Larry Friedman and his partners received around $1.2 million in the past 18 months for representing board members in litigation with self-appointed school-district watchdogs Rick Finlan and Don Venable. (Venable was elected to the board in December.)

The board has asked that Carrington Coleman Sloman & Blumenthal, an established downtown Dallas firm, take over the Finlan and Venable-related litigation. So far, the district has paid Carrington Coleman $151,606. Ironically, Finlan and Venable have represented themselves in court--accruing comparatively nothing in the way of legal fees.

"I guess lawyers can be as avaricious as others," says John Martin, a lawyer at Carrington Coleman representing the district. But he adds about his fellow attorneys (and presumably about himself): "I'm sure they are not gouging the district."

Marcos Ronquillo scores as another big winner in the DISD fee frenzy. His firm received $826,210 from the district since September 1996. Former superintendent Gonzalez first hired Ronquillo, and he has the dubious distinction of having negotiated her contract with the district. Once Gonzalez was in office, she asked Ronquillo to investigate corruption at DISD. Ronquillo subsequently tapped Ted Steinke, a former assistant district attorney and a criminal lawyer, to help him with his assignment. So far, Steinke has received $73,762 from the district.

The firm of state Sen. Royce West has received $730,490 over the past 18 months for handling some personnel and other matters.

By comparison, the lawyers who have labored for years on the district federal desegregation case have earned pauper's rates. Edward Cloutman III received $233,000 for his work on the desegregation case in the past 18 months. The downtown establishment firm of Strasburger & Price has also worked on that case and received $241,922 in fees during that period.

Hughes & Luce, another downtown establishment firm, recently joined the fat-fees party. The board hired Hughes & Luce for the relatively narrow task of representing former DISD board member Sandy Kress in the suit filed by his former fellow trustee Dan Peavy. The board also asked Hughes & Luce to represent another of its outside law firms on a conflict issue and to sit in on the interviews for its plans to hire a new outside general counsel. Hughes & Luce charged $125,555.

Those eye-popping numbers don't even reflect all the legal fees that the district now owes.

One significant outstanding bill belongs to Michael Gruber, the lawyer who represented board member Kathleen Leos in her tentatively settled litigation with former district chief financial officer Matthew Harden Jr.

According to trustee Dodd, Gruber has submitted a $350,000 bill to the district for the work he performed on the litigation. The case only began in earnest in late September. Dodd, who calls the Gruber charges "unconscionable," has led the charge to refuse to pay the proposed bill. The trustee has demanded that Gruber produce an itemized breakdown of his bill. Specifically, Dodd wants to know whether Gruber investigated board members. Dodd says he was alerted to those concerns because Gruber has paid for copies of board members' campaign finance reports, including his own.

Gruber insists he is going to get paid in full.
"I'm sorry he feels that way," the lawyer says about Dodd. But he adds, "I didn't work for DISD. I worked for board member Kathleen Leos. The board is just going to have to pay."

Gruber argues that he would have been "negligent" if he had not pursued the campaign finance reports in the face of charges that lawyers representing Harden improperly influenced board members. (Harden's attorney, William Brewer, denies the allegation.)

Dodd also wants to create long-term solutions to the district's galloping legal costs.

"This is my pet project, to stop the hemorrhaging of money," he says.
In the next month, Dodd says, the district plans to replace Eichelbaum with an in-house attorney who is a DISD employee. That lawyer will handle day-to-day personnel matters.

For litigation, the board plans to hire a regular outside counsel. According to Dodd, the trustees are now considering two firms: Austin-based Bickerstaff Heath Smiley Pollen Kever & McDaniel and Dallas-based Vial Hamilton Koch & Knox.

Eichelbaum, however, will not drop out of the picture entirely. He will continue to handle cases that have gone so far that it doesn't make sense to switch lawyers. And he will remain on the district's list of outside lawyers.

It is unlikely, however, that the deal the district struck with Eichelbaum 12 years ago will be repeated.

At the time, district administrator Robby Collins established a $2 million defense fund for potential liabilities for all employees with the Texas Association of School Boards in Austin. TASB administered the fund, but Eichelbaum's firm was scheduled to receive an annual retainer from the interest earned--"a preventive legal retainer," Collins says. Initially, the amount that Eichelbaum received was $100,000 a year. But that figure grew as years passed.

Those annual increases, however, were never reflected in the DISD general budget that the public saw because the payment was made quietly from the TASB account.

At roughly the same time he was establishing the payment scheme for Eichelbaum's firm in 1986, Collins, who now serves as the special assistant to the superintendent on government-relations and security matters, also was pursuing a plan to go into business with the lawyer and his partner.

Records with the Secretary of State's office in Austin reflect that Collins, Eichelbaum, and his partner Leonard Schwartz established a business entitled Casenet Inc. in 1986.

Collins and Eichelbaum say the venture, intended to market an on-line service of information about court and state agency decisions that affected school administrators, never got off the ground. "I never put any money in or took any money out," says Collins.

But Collins concedes that had the business taken off, he could have faced a possible conflict of interest. Collins was the administrator responsible for hiring and overseeing the outside contractor Eichelbaum and Schwartz.

It is unlikely, with the current questions about lawyers' bills, that Collins or anyone else will propose a payment scheme where lawyers receive their money quietly.

"Everything got out of control at DISD," says outside lawyer Martin, "and now they need to fix it.


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