State-Sponsored Lawsuits Are Trial Bar's New Cash Cow
America’s plaintiffs’ bar, which we at the Manhattan Institute have dubbed Trial Lawyers, Inc., has found a new cash cow in state-sponsored litigation parceled out by the nation’s state attorneys general.
Most state AGs are dependent on campaign cash -- 43 of the 50 states elect their attorneys general -- and they have increasingly turned to trial attorneys who profit handsomely by suing for the states.
The funder list for the Democratic Attorneys General Association, which has spent more than $6 million in each of the last two election cycles, reads like a who’s who for Trial Lawyers, Inc.
The biggest donors to DAGA have included securities class-action firms Bernstein Litowitz Berger & Grossmann and Labaton Sucharow & Rudoff, as well as, in the 2008 election cycle, the former law firms of Mississippians Dickie Scruggs and Joey Langston, who funneled hundreds of thousands to help re-elect their state’s attorney general, Jim Hood, before the two private attorneys were disbarred and imprisoned on federal charges stemming from an attempt to bribe a judge.
Despite the oversize role played by DAGA, the relationship between state AGs and the trial bar is hardly a partisan affair and includes numerous Republican state AGs. For example, Utah’s Mark Shurtleff entered into a contract with the Steele & Biggs firm to sue Eli Lilly over its drug Zyprexa after the firm had given $58,000 to his campaign; the firm netted $4 million representing the state in that litigation.
Another Republican, former Alabama Attorney General Troy King, hired the Beasley Allen firm to sue 73 pharmaceutical companies over Medicaid reimbursements; the firm netted millions in state lawsuits after pumping $760,000 into political action committees that spent $240,000 to support King’s campaign.
Such lawsuits against pharmaceutical and other health care companies -- a staple of state-sponsored, privately run litigation -- typically assert that states’ Medicaid health costs have been inflated by some business practice, drawing upon a theory originally pushed by Scruggs and former Mississippi Attorney General Mike Moore in the multistate tobacco lawsuits that resulted in a massive $240 billion settlement in 1997.
Although state AGs’ offices may need to hire outside attorneys because they lack in-house manpower and institutional expertise to handle all legal matters, states’ contracting with such lawyers on a contingency-fee basis -- the common private practice of paying lawyers nothing up front in exchange for a share of the litigation proceeds -- raises hosts of ethical quandaries.
The huge windfall fees generated by state-sponsored litigation bear little relationship to work performed and create at least the appearance of “pay to play” arrangements in which lawyers donate campaign dollars to state officials who return the favor by handing their donors no-bid contracts entitling them to monies that would, assuming the underlying lawsuits have merit, more properly belong to the state’s taxpayers.
Moreover, by avoiding the need for legislative appropriations and undertaking lawsuits with broad regulatory goals, state AGs have often been circumventing legislatures in setting policy. Indeed, the AGs are often essentially delegating such authority to private parties with venal interests, because in many instances the lawsuits do not originate with the state officials but rather the private attorneys who approach them with ideas.
To remedy these problems, 10 states have passed variants of a model bill drafted by the free-market American Legislative Exchange Council, the Private Attorney Retention Sunshine Act, which insists on competitive bidding, legislative oversight and fee standards for state contracts with outside counsel.
Most states, however, have essentially no rules governing state AG’s ability to contract with outside attorneys. Here’s hoping the state legislatures wake up soon and take action to rein in this new and growing form of lawsuit abuse.
This piece originally appeared in Washington Examiner
This piece originally appeared in Washington Examiner