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Did Ed Rendell Sell a "Pay to Play" Contingent Fee Contract?

A Wall Street Journal editorial today profiles a motion by a defendant in a torts case, seeking to invalidate a contingent fee contract on the grounds that it was obtained through corrupt means.

Pennsylvania is suing Janssen Pharmaceuticals to recover the costs of Medicaid expenditures for Janssen's Risperdal, on the grounds that Janssen improperly marketed the drug for uses not approved by the Food and Drug Administration. [So-called "off-label" prescriptions by physicians are legal, common, and arguably necessary for the public health, but manufacturers are not allowed to tout such uses -- they must leave that to word-of-mouth or academic journals. Of course, if Risperdal is in fact effective and safe in its off-label use it's very hard to see how Pennsylvania is damaged ...] Janssen denies the accusation, by the way.

Pennsylvania's suit against Janssen is handled by Bailey, Perrin & Bailey, a Houston firm. Governor Ed Rendell's Office of General Counsel was, it so happens, negotiating this no-bid contingency fee contract with Bailey Perrin at the same time that the firm's founding partner, F. Kenneth Bailey, was making cash contributions and private airplane loans worth well over $100,000 to the Rendell's 2006 re-election campaign.

Bailey, Perrin & Bailey's contingency-fee contract specifies that it will receive up to 15% of any settlement or judgment. It also provides that Pennsylvania is barred from settling for nonmonetary relief "unless the settlement also provides reasonably for the compensation of [Bailey Perrin & Bailey] by [Janssen] for the services provided by the law firm under this contract." Janssen's motion to the Pennsylvania Supreme Court argues that Bailey Perrin & Bailey's contract had to be approved by the legislature, pursuant to the state constitution, and in any case "violates Janssen's rights to due process under the United States and Pennsylvania Constitutions, which guarantee that attorneys representing the Commonwealth, acting in its capacity as sovereign, not have direct financial interest in the outcome." That latter claim is one I and others have made for some time. It is good that it now has a chance to be eventually heard by the United States Supreme Court.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.