Tag: contingency fee attorneys

Secretary Solis, Tell Us About the Contingency Attorneys

Labor Secretary Hilda Solis testifies Wednesday before the House Education and Workforce Committee, a hearing entitled “Policies and Priorities at the U.S. Department of Labor.”

One useful line of inquiry might pursue the Department of Labor’s deal with the American Bar Association to farm out employee complaints that come to the Department to contingency-fee attorneys. Questions might include:

  • President Obama has left in force President Bush’s Executive Order No. 13433, “Protecting American Taxpayers From Payment of Contingency Fees.” That order specified that “no agency shall enter into a contingency fee agreement for legal or expert witness services.” Can you please explain to me why this new arrangement does not violate that executive order. Should the president repeal that executive order?
  • Explain, if you would, how exactly the attorneys are selected for this referral service. What percentage fee of the awards will the attorneys be working for?  Please provide me a list of the attorneys who are serving in this capacity. Do you intend for their arrangements with clients to be subject to the Freedom of Information Act?
  • How does it improve the business climate or encourage employers to hire new workers if the Department of Labor refers lawsuits against business to outside, contingency-fee attorneys? Can you understand why employers might be upset that your agency is serving as a referral service for trial lawyers?


We wrote about the White House’s embrace of this trial lawyer referral service last week in two posts, “What about the Executive Order Barring Contingency Fee Lawyers?” and “Department of Labor: Working the Phones for Contingency Lawyers.”

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What about the Executive Order Barring Contingency Fee Lawyers?

In the post below, “Department of Labor: Working the Phones for Contingency Lawyers,” we report on the recent Department of Labor alliance with the American Bar Association to farm out phone complaints from workers to contingency-fee lawyers who can sue businesses on the employees’ behalf.

This Department of Labor program flies in the face of the spirit, if not the letter, of an Executive Order that specifically bars federal agencies from hiring contingency fee lawyers.

Vice President Joe Biden announced the program at a White House event on Nov. 19, 2010, associated with a meeting of the White House Middle Class Task Force:

[The] Department of Labor (DOL) and the American Bar Association (ABA) are launching a new partnership to help workers resolve complaints received by DOL’s Wage and Hour Division, such as not getting paid the minimum wage or overtime, or being wrongfully denied family medical leave. DOL resolves more than 20,000 of these complaints every year, but because of limited resources, there are thousands more they are unable to pursue. Starting next month, people whose cases cannot be pursued will be provided with a newly created toll-free number that will connect them with an ABA-approved attorney referral service so they can find a qualified lawyer to help with their claims.

In his remarks, the vice president hailed the contingency-fee arrangement as a benefit to hard-pressed workers.

Most of it — and the average person will say, well, what do you mean by affordable? Most of all of this will be contingency — it’s on the back end. So they’re going to be in a position where the folks doesn’t have to — they don’t have to reach into pocket and come out of pocket money — out of pocket with the money to get the case started, which many are not in a position to be able to do.

The Obama Administration has let stand President George W. Bush’s May 16, 2007, Executive Order No. 13433, “Protecting American Taxpayers From Payment of Contingency Fees.” That order specifies:

(b) After the date of this order, no agency shall enter into a contingency fee agreement for legal or expert witness services addressed by section 1 of this order,  unless the Attorney General has determined that the  agency’s entry into the agreement is required by law.

The order was based on sound public policy grounds:

To help ensure the integrity and effective supervision of the legal and expert witness services provided to or on behalf of the United States, it is the policy of the United States that organizations or individuals that provide such services to or on behalf of the United States shall be compensated in amounts that are reasonable, not contingent upon the outcome of litigation or other proceedings, and established according to criteria set in advance of performance of the services, except when otherwise required by law.

The Department of Labor program violates those principles.

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Department of Labor: Working the Phones for Contingency Lawyers

We thought the White House Middle Class Task Force was a platform for the Obama Adminstration and organized labor to make common cause, with Vice President Joe Biden carrying the flag. Turns out the trial lawyers have a piece of the action, too.

From Fox Business News, Feb. 4, “Hate Your Boss? Call the Government“:

In an unprecedented and controversial move, the White House has launched a new program at the Department of Labor which will refer workers who have complaints about their bosses to a toll free number at the American Bar Association, where they can get a lawyer to work on their case on a contingency fee basis….

And since Vice President Joe Biden says the lawyers will be working on a contingency fee basis, and not pro bono, doesn’t that pretty much guarantee that the lawyers will be more apt to earn those fees via lawsuits against businesses? 

The program was actually announced back on Nov. 19, 2010, by the Vice President. From the White House blog, “Helping Middle-Class Families Pursue Justice.”

[The] Department of Labor (DOL) and the American Bar Association (ABA) are launching a new partnership to help workers resolve complaints received by DOL’s Wage and Hour Division, such as not getting paid the minimum wage or overtime, or being wrongfully denied family medical leave.  DOL resolves more than 20,000 of these complaints every year, but because of limited resources, there are thousands more they are unable to pursue.  Starting next month, people whose cases cannot be pursued will be provided with a newly created toll-free number that will connect them with an ABA-approved attorney referral service so they can find a qualified lawyer to help with their claims.

We anxiously await the TV ads, “Need a lawyer? Your boss messing with you? Call 1-800-etc.”

Hat tip to the American Tort Reform Association and its president, Sherman “Tiger” Joyce, who observes, “Members of the plaintiffs bar, one of Washington’s most influential special interests, are the only ones who benefit from lawsuit-spurring policies such as this.”

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Santa Clara County’s Excess Didn’t Just Start With Happy Meals

Santa Clara County’s Board of Supervisors has been in the news lately because of its foolish meddling in areas outside a county government’s purview, that is, whether restaurants should be able to offer toys with meals. The three supervisors who voted to ban the toys decided their county was equipped to fight the scourge of child obesity, its budget crisis notwithstanding. The county is running a $223 million deficit, and its governing board is worried about toys in fast food meals?

Yet self-aggrandizing, anti-business posturing is a recurring theme for the Santa Clara supervisors. Today, the California Supreme Court will hear oral arguments in one such case, County of Santa Clara et al. v. Superior Court of Santa Clara Co. (S163681)

From The San Jose Mercury News, “State Supreme Court to rule on counties’ use of private attorneys“:

When Santa Clara County decided a decade ago to take on chemical companies for the cost of removing lead paint from public buildings, officials knew they would need extra legal muscle to carry the case through the courts. So they hired several law firms to handle an expected slugfest with the companies and their law firms.

Santa Clara County’s decision has turned into a legal free-for-all that has now reached the California Supreme Court. The justices will hear arguments today in a case that tests whether local governments such as Santa Clara County can hire private lawyers under contingency fee deals to press lawsuits under California’s public nuisance laws.

To “take on chemical companies” … “they would need extra legal muscle”… It sure reads as if the reporter accepts the county’s premise, that a lawsuit against the chemical companies was warranted and now it’s just the process that’s at issue.  That’s disputable. The National Association of Manufacturers regarded the lawsuit as an attempt to pervert well-established public nuisance law, creating a far-ranging new type of product liability law. Like the various and ultimately unsuccessful public nuisance lawsuits against paint manufacturers (Rhode Island, Ohio) for lead paint in buildings, the litigation was just an attempt to increase county revenues by shaking down businesses.

At issue in today’s oral arguments, however, is the question of the county hiring contingency fee lawyers to carry out its litigation. The NAM has long opposed this farming out of lawsuits to private trial lawyers,  whose pecuniary interests are inherently at odds with those of the governments and citizens they claim to represent.  

In the case of County of Santa Clara v. Superior Court, the NAM joined with the Coalition for Public Nuisance Fairness, the American Chemistry Council, and the Property Casualty Insurers Association of America in filing an amicus brief challenging the power of cities and counties to hire trial lawyers on a contingency-fee basis. As the entry in the NAM’s Manufacturing Law Center summarizes:

The NAM and the other amici support the argument that the private interests of contingent-fee counsel conflict with the public interest. Government attorneys owe a duty of neutrality to the public, and allowing them the potential to earn huge profits “creates a powerful incentive for private attorneys wielding the power of government to make decisions based on their own pecuniary interests, rather than the interest of justice.” The combination of temptations raised by extraordinary potential rewards with extraordinary power raise obvious appearances of impropriety.

In addition, the California legislature has already addressed lead poisoning, and the legislature is likely to strike a fairer and more effective balance between competing interests because it considers all pertinent issues in their entirety, rather than in the truncated form presented by litigants in court.

Here is the NAM brief filed in April 2009. The California Supreme Court also posts briefs from the parties directly involved in the litigation, which we’ve linked to below.

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Contingency Fee Attorneys, Scrutiny, Politics and Accountability

An editorial in today’s Wall Street Journal, “Pay to Sue on the Docket,” approvingly reports the Pennsylvania Supreme Court’s decision to hear a legal challenge to Gov. Ed Rendell’s decision to hire contingency lawyers to sue a pharmaceutical company on behalf of the state.

Government use of contingency attorneys — mostly by ambitious or crusading state attorneys general — raises a basic conflict of interest: Are the private lawyers handling the case in the interests of a state’s citizens or are they putting their pecuniary interests first? The possibility of a big payday down the road could discourage consideration of a reasonable settlement or keep a lost cause alive contrary to the best interests of the state. (The Rhode Island attorney generals’ [Sheldon Whitehouse, Patrick Lynch] reliance on contingency attorneys to mount a legally suspect “public nuisance” suit against paint manufacturers comes to mind. The state Supreme Court rejected the arguments.)

Then there’s the political self-interest of the official who does the hiring. As the Journal notes:

The lawsuit—which we first wrote about in April—concerns Bailey Perrin & Bailey, a Houston law firm tapped by the Rendell administration to prosecute Janssen Phamarceuticals over the marketing of its antipsychotic drug Risperdal. When states lack the resources or expertise to bring certain suits, it’s not uncommon for them to seek help from private lawyers. But in this case, it appears as if pay-to-sue politics was involved in the choice of Bailey Perrin.

While F. Kenneth Bailey, the law firm’s founding partner, was negotiating a potentially lucrative no-bid contingency fee contract with the Governor’s office, he was also making political donations totaling more than $90,000 to Mr. Rendell’s 2006 re-election campaign.

The state Supreme Court has indicated it will consider “whether Bailey Perrin Bailey, LLP, should be disqualified because the due process guarantees of the United States and Pennsylvania Constitutions prohibit the Commonwealth from with a direct contingent financial interest in the outcome of the litigation.”

Good question.

The Drug and Device Law Blog, aka Beck and Herrmann, has a copy of Janssen’s plea for extraordinary relief here. The U.S. Chamber has submitted a friend of the court brief on the issue of contingency fee attorneys.

The issue is also prominent in Oklahoma Attorney General Drew Edmondson’s lawsuit against chicken producers in neighboring states, complicated by the legal status of Indian Country.
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Sure, We’ll Sue for You, But We Want a Cut, a BIG Cut

The National Association of Manufacturers this week joined other business and insurance groups in filing an amicus brief with the California Supreme Court in the nation’s most prominent case involving the government hiring of contingent fee attorneys to sue business, Superior Court of Santa Clara County v. Atlantic Richfield.  

As the NAM’s Legal Beagle summarizes, 10 cities and counties in California retained Motley Rice and three other law firms to bring a lead pigment public nuisance action against a group of manufacturers. The retainer agreement specified that the government would “retain final authority over all aspects” of the litigation, but the trial court ruled that a previous ruling in the Clancy case precluded the government from hiring lawyers on a contingency-fee basis.  The California Court of Appeal ruled otherwise, holding that the “control” language in the retainer agreements means that the outside lawyers are merely “assisting” the government in a subordinate role and lack any decision-making authority or control over the case. It’s quite a lengthy brief – which you can read here – that covers a number of critical arguments. We’ll cut to the conclusion, a statement of principle.

When the pursuit of public justice is tainted by the pursuit of personal gain, or even the appearance or possibility of such a taint is presented, our nation’s most precious political asset – the confidence of its people in their government’s absolute devotion to their interests – is compromised. When that occurs, every citizen’s liberty is imperiled. More than ever before, courts must not abandon traditional ethical guarantees and replace them with exceptions that merely promise justice in “extraordinary circumstances”, especially when those exceptions primarily arise from economic considerations, as opposed to historical jurisprudence.

The other amici curiae are the Public Nuisance Fairness Coalition, American Chemistry Council, and Property Casualty Insurance Association.

By coincidence, the Wall Street Journal today publishes an editorial on contingency attorneys, quite a generous group of people when it comes to making campaign contributions. “Mr. King and His Courtiers” covers New Mexico Attorney General Gary King’s hiring of Bailey Perrin to sue Janssen Pharmaceuticals; the Journal previous editorialized on Pennsylvania Governor Ed Rendell’s similar approach to suing Janssen, “The Pay to Sue Business.”

In the New Mexico case, what’s interesting is that the contingency contract between the AG’s office and Bailey Perrin  lapsed for a five-month period in 2008 – when the suit was actually served upon Janssen. The Journal observes: “It’s possible that the lapsed contract was an innocent mistake that happened to go unnoticed until late November of 2008. Then again, it’s also possible that Mr. King didn’t want to renew the contract earlier because Bailey Perrin might have been required to disclose Mr. Bailey’s generous campaign contributions to Mr. King back in 2006. A New Mexico law says that prospective contractors with the state must disclose political donations above $250 made in the previous two years. We can see how Mr. King would prefer to have that law firm-contractor gift kept under wraps.”

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Executive Orders and Contingency-Fee Attorneys

Below we note the issue of state attorneys general hiring private attorneys to take a flyer on product liability lawsuits, allowing trial lawyers to wield the state’s authority in the interest of personal gain. It’s an abuse of due process.

Now imagine if the federal government followed the same practice, handing out the equivalent of letters of legal marque to buccaneering law firms to do the work of the Justice Department. Every so often the trial lawyers would strike it rich, extorting billions from a company and industry, with a certain (not predetermined, merely thanks to like-mindedness) amount of the money returning to favored candidates in the form of campaign contributions. (For a good, quick discussion of how that game is played, see the American Tort Reform Association’s latest “Judicial Hellholes” report, the chapter, “Dangerous Liaisons.”

To his great credit, President Bush specifically prohibited such arrangements by executive branch agencies with his May 16, 2007, Executive Order 14433, “Protecting American Taxpayers From Payment of Contingency Fees.” Excerpt:

Section 1. Policy. To help ensure the integrity and effective supervision of the legal and expert witness services provided to or on behalf of the United States, it is the policy of the United States that organizations or individuals that provide such services to or on behalf of the United States shall be compensated in amounts that are reasonable, not contingent upon the outcome of litigation or other proceedings, and established according to criteria set in advance of performance of the services, except when otherwise required by law.

Sec. 2. Duties of Agency Heads. (a) Heads of agencies shall implement within their respective agencies the policy set forth in section 1, consistent with such instructions as the Attorney General may prescribe.

(b) After the date of this order, no agency shall enter into a contingency fee agreement for legal or expert witness services addressed by section 1 of this order, unless the Attorney General has determined that the agency’s entry into the agreement is required by law.

We now move into the realm of pure political speculation and merely observe the following: The revocation of this executive order by the next President of the United States would be a very revealing signal about his perception of the legal process and the trial lawyer lobby.

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