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FEATURED DISCUSSION
Trial Lawyers Inc.: State Attorneys General


Trial Lawyers Inc.: State Attorneys General

James R. Copland

Throughout its history, Point of Law has been examining the relationship between state attorneys general and the trial bar. On October 25, the Center for Legal Policy at the Manhattan Institute, our site sponsor, released the sixteenth edition of its Trial Lawyers, Inc. series focusing on just this topic. To react to the report and address the subject in more detail, we have brought together a fascinating group of practitioners, journalists, and tort-reform activists to discuss the issue in this featured discussion. In alphabetical order:

John Beisner is co-head of the Mass Torts and Insurance Litigation Group at Skadden, Arps, Slate, Meagher & Flom LLP. He focuses on the defense of purported class actions, mass tort matters and other complex civil litigation in both federal and state courts.

John H. Fund is a senior editor of The American Spectator and author of the Stealing Elections (Encounter Books).

Sherman "Tiger" Joyce is president of the American Tort Reform Association (ATRA), the leading national organization dedicated exclusively to civil justice reform.

Amy Kjose is the director of the Civil Justice Task Force for the American Legislative Exchange Council (ALEC) serving also as a liaison for legal reform groups nationwide to promote legal reform efforts.

Lisa A. Rickard is the president of the U.S. Chamber Institute for Legal Reform (ILR) providing strategic leadership to ILR's comprehensive program aimed at changing the nation's legal culture.

Victor Schwartz is a partner in the Washington, D.C., office of the Kansas City-based law firm of Shook, Hardy & Bacon L.L.P., and chairs its Public Policy Group which seeks to be the vanguard of developing public policy issues that will help improve our civil justice system.

State Government Usage of Contingency-Fee Counsel

John Beisner

The Manhattan Institute's new Report about state government usage of contingency- fee counsel offers an insightful history of the questionable financial relationships between certain state attorneys general and members of the plaintiffs' bar. The Report is important reading because the subject has been seriously under-reported by the media, particularly by local and state news services that are missing the obvious headlines.

Two aspects of this topic warrant further emphasis:

First, I applaud the MI Report's observations about the non-universality of the phenomenon. Some state attorneys general have expressed adamant opposition to the use of contingency-fee counsel. Other AGs, without significant public comment, have simply concluded not to take that path. Importantly, there is no evidence that law-enforcement imperatives are better served in states that regularly use contingency-fee counsel. To the contrary, some of the nation's most successful state attorneys general have eschewed the outside-counsel option. This is not surprising. Contingency-fee counsel rarely handle the cases about which an AG campaigned for election; almost invariably, the topics an AG publicly identifies as a state's most important enforcement priorities are entrusted to the AG's own staff. In contrast, the lawsuits turned over to contingency-fee counsel are generally conceived by plaintiffs' counsel with profit (not policy) motives and then "pitched" to the AG. In other words, contingency-fee counsel normally are not needed to achieve a state's basic law-enforcement objectives. Instead, the contingency-fee counsel option is nothing more than a "perk" indulged in by some attorneys general.

Second, special attention should be given to the increasing use of contingency-fee counsel in "penalties only" cases. Some AGs are authorizing outside counsel to bring lawsuits seeking only quasi-criminal penalties, promising to put a substantial portion of those penalties in counsel's own pockets if they succeed. These cases are the most extreme example of AGs ceding prosecutorial discretion to private counsel with a vested financial interest in the outcome. Litigation of this sort raises serious due-process concerns because private counsel with a pecuniary motive are making policy decisions about quasi-criminal lawsuits. Defendants are entitled to have prosecutorial judgments regarding quasi-criminal charges made by financially disinterested officials -not profit-motivated private lawyers.

Shedding Light on State AG-Private Attorney Contracts

Amy Kjose

Since the onset of the tobacco litigation in the late 1990's when state attorneys general and private attorneys teamed up to sue the tobacco industry, back-door partnerships have become increasingly more common between power-yielding state AGs and profit-rather-than-citizen-motivated private attorneys. The Manhattan Institute's new Trial Lawyers Inc. report acutely zeros in on the potential for improper relationships and perceptively highlights the likely prime offenders, while fairly noting that not all attorneys general fall under this category.

To lessen at least the appearance of impropriety and to shed light on these lucrative and possibly nepotistic contracts, the American Legislative Exchange Council has developed its model Private Attorney Retention Sunshine Act, which is referenced in the Report. This model legislation owes its popularity to its use of the good government principles of transparency, disclosure and oversight to safeguard these large-dollar contracts against improper quid pro quo.

2011 saw the introduction of sunshine legislation in ten states, with the end of the year bringing the total number of states with similar laws on the books to ten. With the increase in AG-private-attorney litigation--particularly over state pension funds,-- state legislators and the public should be ever more interested in keeping an eye on the relations between state attorneys general and their campaign-donating attorney friends to protect state awards from excessively high legal fees. 2012 is shaping up to be another year during which state legislatures around the country will look to transparency to promote good governance and safeguard taxpayer dollars.

Re: Roping in State Attorneys General Delegating Their Power to Contingency Fee Lawyers

Victor Schwartz

Fortunately, the practice of state attorneys general hiring contingency fee lawyers is on the decline. There is an old saying that "nothing cleans better than sunlight." Through good work of the Manhattan Institute's Center for Policy Research, the U.S. Chamber of Commerce's Institute for Legal Reform, the American Tort Reform Association, the Heritage Foundation, and other groups interested in civil justice reform, the unsound public policy surrounding state attorneys general hiring of contingency fee counsel has received attention from the media, legislatures, courts, and the public. In that regard, state attorneys general have a duty to the people of their state to protect the public interest. Personal injury lawyers have a different concept of their duties, which include maximizing profit and moving tort law to its most pro-plaintiff extreme. There is nothing inherently wrong with those goals; they are perfectly compatible with our capitalist system. The problem is that the goals of plaintiffs' lawyers often conflict with a state official's duty to protect the public interest.

There has been effort, through amicus or "friend of the court" briefs, to explain to state supreme courts how state attorney general delegation of responsibilities to contingency fee lawyers runs counter to the public interest. For instance, the Supreme Court of Rhode Island was quite clear in requiring that contingent fee agreements between the state and private lawyers must include "exacting limitations" that ensure that the Office of Attorney General "retains absolute and total control over all critical decision-making" and that the case-management authority of the Attorney General is "final, sole and unreviewable." Rhode Island v. Lead Indus. Ass'n, 951 A.2d 428, 475-76 (R.I. 2008).

There have also been efforts by state legislatures through the Private Attorney Retention Sunshine Act (PARSA), Transparency in Private Attorney Contracting Act (TIPAC), and similar legislation to place sunlight on state attorney generals' hiring practices. Such legislation helps to assure that if contingency fee lawyers are employed, the process takes place in the open with competitive bidding, and the agreement does not delegate too great of authority to the private counsel or result in their excessive profiteering. In the past two years, Arizona, Florida, and Indiana have enacted laws that help fulfill these goals.

A final important, and sometimes overlooked, area with respect to state attorney general delegations of authority occurs in federal legislation. Congress, in enacted legislation such as the Consumer Product Safety Improvement Act and financial reform act, and in pending legislation such as the Personal Data Privacy and Security Act of 2011, has empowered state attorneys general to enforce federal law. This process brings with it two very unsound public policy repercussions: first, this empowerment is often not accompanied by adequate supervision at the federal level to assure consistent state enforcement of federal law throughout the United States, and, second, Congress has not restricted attorneys general from delegating this newfound power to private contingency fee lawyers. What is ironic in Congress's action is that the Executive Branch of the federal government is prohibited, through Executive Order 13433, for reasons of public policy, from hiring contingency fee lawyers. Thus, Congress empowers state attorneys general to hire contingency fee lawyers where the Attorney General of the United States would be prohibited from doing so.

More sunlight needs to be placed on Congress to stop this inappropriate delegation of federal enforcement power to totally private interests. When this has occurred in the past, it should be changed by federal law. While advancements have been made to curb this unsound practice, continued efforts are needed to protect the public. The Manhattan Institute's Center for Legal Policy is to be commended for continuing the spotlight on this important issue.

The Need for Transparency in the AG-Trial Bar Relationship

Lisa A. Rickard

State Attorneys General (AGs) often receive financial and other political support from fellow attorneys. Generally, that makes sense - AG candidates often are well-known among the legal community, and lawyers as a group tend to be highly engaged in politics. Public confidence in government can be undermined, however, when private lawyers are hired to pursue claims on behalf of the state by AGs to whom they have made substantial campaign contributions. Such arrangements look particularly bad when work is awarded on a no-bid basis or involves a contingency fee arrangement in which the private attorney stands to recover a share of a multi-million award pursued on behalf of the state and its citizens.

An Increasingly Common Practice or Exception to the Norm?

AGs increasingly have turned to outside counsel to supplement their limited staff and resources, and this trend has made more prominent those instances in which lawyers who contributed to an AG's campaign later have been hired to pursue claims on behalf of the state. For example, in a recent five-year span, one AG's office retained 27 law firms to represent the state in 20 separate lawsuits after partners at those firms contributed more than $500,000 to the AG's reelection campaigns. Another AG received $50,000 in campaign contributions from a particular law firm, and within two years had extended the law firm's contract to represent the state in litigation against a pharmaceutical company without soliciting any bids. Yet another AG hired outside counsel who had contributed to his campaigns on a contingency fee basis for a 2001 lawsuit against a pharmaceutical company, resulting in more than one-third of a $10 million settlement going to the private attorneys.

It may be the case that these examples are exceptions, and it further may be the case that hiring private lawyers in these instances was, in fact, the AG's best means of pursuing the interests of his or her respective state and constituents. But AGs play a unique role and have a unique responsibility in our legal and political system - they must balance effective law enforcement and the interest of their respective states with preserving public confidence in the integrity of their offices. Accordingly, the potential that public trust might be undermined when an AG hires a donor to serve as plaintiff's counsel for the state requires that safeguards be put in place to preserve fairness and faith in the rule of law.

The Need for More Standards and Disclosure

To ensure that AGs exercise their power in a manner that is consistent and fair, the standards and policies that guide AGs' conduct should be clearly articulated and transparent. In 2007, the U.S. Chamber Institute for Legal Reform (ILR) identified a set of "best practices" for AGs in the form of a proposed Code of Conduct, the goal of which is to enhance transparency, consistency, predictability, and fairness in the activities of an AG's office. The guide covers the gamut of issues facing AGs, from public statements concerning pending investigations or litigation, to conflicts of interest, to multi-state activities. Key among the issues addressed in ILR's best practices is AGs hiring private counsel they hire to pursue claims on their states' behalf. As pointed out by the Wall Street Journal:

"State prosecutors are supposed to be motivated by a sense of public responsibility for the interests of justice. Law firms have other motivations, and no-bid contingency fee deals encourage lawyers with a financial stake in a case to try meritless claims or ask for exorbitant awards. That serves neither taxpayers nor justice..." Wall Street Journal, "The State Lawsuit Racket," April 8, 2009.

Notably, a bipartisan group of four AGs released an important report in December 2010 to serve as guidance for newly-elected AGs. The report, Practical Considerations For Approaching Key Issues in the Office of Attorney General - A Publication for New Attorneys General, incorporated many of the concepts advanced in ILR's Code of Conduct, including best practices for hiring private counsel to pursue claims on behalf of the state.

In some states, legislators have taken it upon themselves to implement by statute measures to promote transparency when the AG hires private attorneys to pursue claims on the state's behalf, particularly on a contingency fee basis. A prime example of such legislation is the Florida Transparency in Private Attorney Contracting Act, which passed with the support of then-AG Bill McCollum in 2010. This law, as well as several others passed in 2011, requires that arrangements between an AG and private counsel retained by the state must be in the public interest, be transparent and open to competitive bidding, and include reasonable limitations on fees - either flat fee or contingency-based - that private counsel may recover.

It is critical for AGs to recognize the importance of and lend their support to such guidelines and state legislation. As an increasing number of attorneys solicit AGs and other government officials to allow them to bring cases on behalf of the state, laws and procedures must be in place to make sure that these arrangements are fair and do not compromise public trust in government. Even AGs who do not use outside counsel can still appreciate the value in establishing good governance for their successors.

Turning up the Heat on AGs and their Personal Injury Lawyer Political Patrons

Tiger Joyce

Kudos to Jim Copland and all our allies at the Manhattan Institute's Center for Legal Policy. Their latest edition of Trial Lawyers Inc. (TLI) appropriately turns up the heat on certain state attorneys general (AGs), whose mutually beneficial relationships with private sector personal injury lawyers raise serious ethical questions and blur the line between self-interest and the public interest.

With increasing regularity, some AGs are hiring personal injury lawyers - often by way of a cozy, no-bid agreement — to prosecute lawsuits on behalf of their states against deep-pocketed defendants. Resulting contingency fees can sometimes be worth hundreds of millions of dollars in state funds. TLI continues the important work of documenting these arrangements, which the Wall Street Journal and others have characterized as "pay to play," wherein outside counsel express their thanks for the lucrative legal work with generous campaign contributions to the AGs who hired them.

My organization, the American Tort Reform Association also seeks to educate policymakers and the taxpaying public about these unsavory AG-outside counsel relationships and the need for standards of public accountability. In 2007, ATRA published its Transparency Code for AGs, comprising the following good-government principles:

DISCLOSURE All contracts with outside counsel to perform legal work in the name of the state should be posted on the Internet for public inspection.

VALUE In every instance, the attorney general should seek to provide the highest quality services at the best value to state citizens when contracting with outside counsel. Unless an extraordinary situation requires assistance from a specific legal expert with technical or scientific experience not generally available, every effort should be made to competitively bid contracts for outside counsel.

OVERSIGHT Given that contingent fee-based contracts are often used when attorneys general are pursuing litigation that potentially has a significant public policy or regulatory impact, such contracts should be subject to review by the Legislature.

REPORTING Outside counsel providing services to the attorney general on behalf of a state's citizens and taxpayers on a contingent fee basis shall be required to disclose detailed information on the hours worked, services performed, and fees received from the state, as long as this reporting does not undermine the attorney-client privilege.

ACCOUNTABILITY All monies recovered by the attorney general in excess of $250,000 as a result of lawsuits won or settled by the state should be deposited in the state treasury for appropriation by the legislature unless a settlement with the attorney general's office stipulates that the funds shall be allocated to a specific entity. At no time, shall an attorney general enter into a settlement that allows the office of the attorney general to disseminate funds at its discretion.

A number of states have already incorporated some or all of these important principles into law, including Arizona, Indiana and Missouri just this year. And with help from the Manhattan Institute, the American Legislative Exchange Council and others, ATRA will continue to urge additional states to do the same.


 

 

 

FEATURED DISCUSSION ARCHIVE:


Obamacare Decision: Reactions, July 2012
Law School Faculty Diversity, May-June 2012
Class Actions, May 2012
Constitutionality of Individual Mandate, March 2012
Human Rights and International Law, February-March 2012
The constitutionality of President Obama's recess appointments, January 2012
Do caps on medical malpractice damages hurt consumers?, December 2011
Trial Lawyers Inc.: State Attorneys General, October 2011
Wal-Mart v. Dukes, April 2011
Kagan Supreme Court nomination, May-June 2010
Election roundtable, November-December 2006
Who's the boss, September 2006
Medical judgement, July 2006
Lawyer Licensing, May 2006
Contingent claims, April 2006
Smoking guns, July 2004

Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.