PHILADELPHIA (Legal Newsline) – Filing fees taken in at Philadelphia’s Complex Litigation Center increased more than 1,000 percent between 2008 and 2009, from $420,453 to nearly $4.8 million.
The figures provide context to remarks made by Court of Common Pleas Presiding Judge Pamela Dembe, who in March 2009 said she wanted to take business away from other courts by making mass tort courts here more attractive.
By doing so, the court could generate more revenue from filing fees and ease the court’s “budgetary woes,” she said.
Through a “right-to-know” request submitted to the administrative offices of the First Judicial District, Legal Newsline obtained financial information for the CLC, a trial division of the Court of Common Pleas which hears asbestos and product liability cases, among others torts.
The Philadelphia Court of Common Pleas is part of the FJD.
Since the FJD does not ordinarily produce a report that says how much the CLC earns per case, a special report was compiled for this paper indicating how much the division takes in from filing fees.
Even more remarkable than the jump in filing fees collected between 2008 and 2009, was a 2,000 percent increase in filing fees collected between 2008 and 2011.
The CLC in 2011 collected $9.2 million in filing fees.
Put this way, there were 3,650 new cases filed in 2008. In 2009, there were 4,780. In 2010, there were 5,669. And, in 2011, there were 6,038.
Change on the way?
Whether new cases and resulting filing fees decrease at the CLC this year as a result of rule changes established recently by Common Pleas Court Administrative Judge John W. Herron, remains to be seen.
Herron signed an order in February that would permanently eliminate “reverse bifurcation” in asbestos cases. The process, in which trials are separated into two phases –damages first, then liability- was criticized as unfair to defendants.
Herron’s order also contained a shakeup in judicial leadership. Effective May 1, Common Pleas Court Judge Arnold New, currently assigned to the Commerce Program, will be reassigned as a co-coordinating judge of the Complex Litigation Center, joining Judge Sandra Mazer Moss in administrating all programs at the CLC, the order states.
His order included other reforms as noted in a previous article.
Critics say courts should not be profit centers
Critics panned Dembe’s litigation growth strategy as a means of easing budgetary constraints, saying courts should not be concerned with profits.
“What is the judges’ interest in doing this?” said Michelle J. White, professor of economics at the University of California at San Diego.
“Traditionally, judges want to minimize the amount of cases they have.”
White also is a research associate at the National Bureau of Economic Research in Cambridge, Mass., and has done a great deal of research in asbestos litigation and bankruptcy courts.
“The one context in which I have heard of courts trying to attract business is bankruptcy,” White said. “The Southern District of New York court used to get the majority of bankruptcy cases, but Delaware began an effort to have the large bankruptcy cases heard in its court.”
Another critic asked if increased filing fees would come close to covering the costs of operating a courthouse.
Hans von Spakovsky, a senior legal fellow and manager of the civil justice reform program at the Heritage Foundation, in Washington, D.C., said he had a difficult time believing that fees would be even “a fraction” of the costs of running a court system.
“I do not know a county in the country that comes close to running a profitable court system, von Spakovsky said. “I really see no reason why the court would want to attract more litigation.”
Susan Borkowski, Ph.D. is a professor of accounting at LaSalle University in Philadelphia and teaches governmental and nonprofit accounting.
“I have never heard of a court system tracking their expenses to produce an income statement to show that there was a profit,” Borkowski said. “They certainly do it for budgetary purposes. But they do not have a corporate profit-loss statement.”
Borkowski, who also was Vice President Walter Mondale’s staff accountant, noted that the courts are supposed to be charging a reasonable fee to cover their expenses. But no one knows what it costs to conduct a trial on a per unit basis the way a corporation knows what it spends to manufacture a unit of product.
“I am not an expert on the Philadelphia courts, but from what I know about the kind of accounting the city does,” she said, “I really do not think this information would be easily available, if it is available at all. No one is positive if the fee covers the expenses.”
In its ad hoc report to Legal Newsline, the FJD’s Budget and Fiscal office said that the money for operating the Philadelphia Courts is a “mixture of funds from the annual operating budget of the FJD, a portion of cost that is absorbed from the City of Philadelphia and other costs covered through grants from various agencies.”
Additionally, the fiscal office stated that overhead costs are paid for by the City of Philadelphia.
“…[H]ence the Philadelphia Courts do not have any financial documentation in regard to this area of expenses…fringe benefits are a cost covered by the City of Philadelphia, with the exception of the grants that provide specific funds dedicated to that category.”
Since some of the major expenses are paid for by the city of Philadelphia and are not documented by the courts, what Borkowski said may be correct: Courts do not know how much it would cost by trying more cases and therefore do not know if by doing so it would be easing “budgetary woes.”
While the CLC took in 10 times more in filing fees in 2009 than 2008 and took in 20 times more in 2011 than in 2008, Judge Dembe at the time of her statement could only be speculating that court would be able to solve its financial problems by attracting more business– and it remains conjecture.
No one knows for certain if these fee increases were equal to an increase in expenses – or if the increase in cases led to expenses exceeding revenues.
Regarding the CLC specifically, the fiscal office stated that in regard to obtaining information “dedicated to compartmentalized expenses,” it was “unable to gather any solid data in determining the cost for the unit. The cost for operation CLC is included with the Civil Courts Division.”
What the fiscal office did provide were fiscal year 2011 estimates on personnel cost, which it said was $1,509,677, and fringe benefits, which were approximated to 45 percent of the salary cost, or $754,838.50. The fiscal office also determined about $143,782.32 for operating expenses.
This came to a total cost of $2,408,299 for CLC – of which the fiscal office was aware. But, the office also stated that this total did not include the cost of judges’ salaries, fringe benefits and other expenses, as well as the salary for the Deputy Court Administrator for Civil Services as they are costs covered from the Administrative Office of Pennsylvania Courts – the state agency dedicated to Judiciary.
“There ought to be an interest more in justice than profit,” said Douglas Kmiec, a professor of Constitutional law at Pepperdine University in Malibu, Calif.
“Whenever there is an overt expression by a court of encouraging a particular type of case to produce a particular stream of revenue it causes questions about the impartiality of the court. There should be no profit involved.”