Monday, July 09, 2007

A Deal for the Public: If You Win, You Lose

Published: July 9, 2007

When Oklahoma’s attorney general decided to sue about a dozen poultry companies, saying they had polluted the state’s waterways with chicken manure, he did not turn to lawyers on his staff or hire an outside law firm that would bill in the usual way, by the hour.

Instead, Attorney General W. A. Drew Edmondson went into business with three plaintiffs’ firms, agreeing to pay them as much as half of any money they recovered from the poultry companies.

In courts around the nation, in cases involving tobacco, lead paint and guns, state attorneys general have been outsourcing government power to private lawyers. Business groups hate the development, in part because they would rather not litigate against sophisticated plaintiffs’ lawyers on a level legal playing field.

But the business groups make broader points as well.

“When someone who is exercising the state’s power stands to gain from that, it violates due process,” said Jay T. Jorgensen, a lawyer for one of the chicken companies. “If you got pulled over by a cop and the cop made more money if he gave you a ticket and less if he didn’t, no one would think that was fair.”

There is also the question of whether hiring lawyers by promising them a percentage of what they win — on contingency, in the legal jargon — violates the separation of powers.

It is, after all, the legislature’s job to decide how to spend the state’s money. But an attorney general who promises a percentage of a recovery to a law firm is giving away state money without legislative approval.

“These arrangements rob the legislature of its right to control what is in the public interest,” said Paul M. Pohl, who represents defendants in lead paint suits in which governments are represented by lawyers who will be paid a percentage of what they win. “And the last people you want to have to decide what good public policy in your state is are contingency-fee lawyers from out of state. They’re like groups of locusts looking for the next wheat field.”

That perspective seems to be gaining traction. In May, President Bush issued an executive order forbidding contingency-fee arrangements at the federal level.

On the phone the other day, Mr. Edmondson said that how he paid his lawyers was a distraction from the serious issues in the suit. He controls every aspect of the litigation, he said, and personally argued important motions last month.

Mr. Edmondson added that the state could not afford to address the problem any other way. “We are over $10 million in litigation costs to date,” he said. “We simply lack the resources in the attorney general’s office to handle this.”

Asked if he had given any thought to hiring lawyers by the hour, he said, “With what?”

But Oklahoma is a government, with the power to tax and to borrow, and it does not have to turn to a private business to finance a lawsuit it says is in the public interest.

“We’re not going to ask the taxpayers of the state of Oklahoma to pay the lawyers,” Mr. Edmondson responded. “Our adversaries would like us to ask the legislature to choose between this litigation and increased funding for education, for mental health or for corrections.”

But that is not quite right. The taxpayers may pay either way.

Any recovery in the case belongs to the state’s taxpayers, but Mr. Edmondson has signed a contract to give a big chunk of it away.

It will not be clear whether he made a good deal or a bad one until the case is over. Paying lawyers by the hour can be awfully expensive, too, and that money is lost if the case goes south. But lawyers doing contingent-fee work for state governments have generally made out very well, particularly in tobacco cases.

Only a few courts have addressed the legality of government contingency-fee arrangements, and they have given mixed answers. In 1997, the Louisiana Supreme Court struck down a contingency-fee contract between the state’s attorney general and its lawyers in an environmental case. The next year, Maryland’s highest court upheld a similar contract in a tobacco suit.

The Rhode Island Supreme Court ducked the issue in a lead paint case last year, saying that it was not yet ripe to be decided but noting that it “implicates sensitive questions regarding the separation of powers in this state and the proper role of the constitutional office of the attorney general in relation to the exclusively legislative powers of the general assembly.”

In the chicken manure case, Judge Gregory K. Frizzell turned back a challenge to the contingent-fee contract last month, though he suggested that he might seek the views of the Oklahoma Supreme Court on the matter.

Not all state attorneys general have embraced contingent fees. In a speech to the American Bar Association, William H. Pryor Jr., who was then attorney general of Alabama, said they had an important role — in some cases. Contingent fees, he said, address “the need for poor persons with valid claims to have access to the legal system.”

“Governments do not have this problem,” Mr. Pryor, now a federal appeals court judge, continued. “The use of contingent-fee contracts allows governments to avoid the appropriation process and create the illusion that these lawsuits are being pursued at no cost to the taxpayers. These contracts also create the potential for outrageous windfalls or even outright corruption for political supporters of the officials who negotiated the contracts.”