John O'Brien May 14, 2013, 2:24pm

CHARLESTON, W.Va. (Legal Newsline) - Companies that have been sued by private lawyers hired by the State of West Virginia will have their chance to argue against the agreements on May 15.

That's when the state Supreme Court is scheduled to hear appeals filed by companies that claim the West Virginia Attorney General's Office should not be allowed to contract work out to private lawyers working on a contingency fee.

Defendants in former Attorney General Darrell McGraw's lawsuit over credit card payment protection plans are appealing a ruling by Mason County Circuit Court Judge David W. Nibert.

In a related case, the pharmaceutical manufacturer GlaxoSmithKline, sued over the drug Avandia, is appealing a ruling by Wayne County Circuit Court Judge James H. Young Jr. It is challenging an agreement between McGraw and private lawyers that says the lawyers will be paid out of attorneys fees paid by the defendant.

His use of outside counsel was a main talking point for critics of McGraw and led new Attorney General Patrick Morrisey to campaign on reforming the way the State hires private attorneys.

"In the past two decades, supreme courts in other states have written multiple opinions addressing the legality of similar arrangements; academics and the media have widely criticized the practice; and the Auditor of the West Virginia Legislature has seriously questioned its propriety," the brief filed by the credit card companies says.

"(The Supreme Court), however, has never addressed whether these arrangements are legal. This court should take up the question now, and make clear that the use of outside counsel on these terms is not permitted.

"Until this court resolves the matter, defendants statewide will be subject to civil prosecutions by the AG that are tainted by at least three violations of West Virginia law."

State supreme courts that have ruled on the issue in recent years as a result of litigation over lead paint include California's and Rhode Island's.

In California, the court was faced with its own 1985 decision involving a city that hired a private attorney to bring criminal public nuisance allegations against alleged violators of a city ordinance. The attorney was paid more for successful actions than unsuccessful ones.

The California Supreme Court ruled the agreement was unconstitutional because a government attorney must remain neutral. A financial incentive, it said, prevented that.

However, in 2010, the court found a difference between the Clancy case and the lead paint case.

[N]eutrality is a critical concern in criminal prosecutions because of the important constitutional liberties at stake. On the other hand, in ordinary civil cases, we do not require neutrality when the government acts as an ordinary party to a controversy, simply enforcing its own contract and property rights against individuals and entities that allegedly have infringed upon those interests," the court wrote.

Two years earlier, the Rhode Island Supreme Court ruled the Attorney General's Office could hire private attorneys as long as it exhibited final decision-making power over the litigation.

Nibert's opinion in the credit card case noted that former chief deputy Fran Hughes' name appeared on all filings in the case.

"The court finds that the Attorney General's Office is apprised of any and all action taken in the cases, that the Attorney General's Office controls tactics and strategy, and that no case could be settled without the oversight and approval of the Attorney General's Office," Nibert wrote.

The credit card companies are arguing the agreements are illegal in three ways:

-They violated the West Virginia Government Ethics Act, which prohibits a public employee from "knowingly and intentionally using his or her office... for his or her own private gain";

-The West Virginia Rules of Professional Conduct bar lawyers from representing clients when the lawyer's own interests may conflict with the client's interest; and

-The attorney general is exceeding his statutory authority because the Legislature has expressly limited him to paying assistants exclusively from legislative appropriations.

In 2007, Johnson & Johnson asked the Supreme Court to hear its appeal of a Brooke County order denying its motion to disqualify McGraw's private attorneys. The only justice who voted to hear the appeal was current Chief Justice Brent Benjamin.

The credit card companies - Bank of America, JPMorgan Chase, Citibank, Discover Financial Services, GE Money Bank, World Financial Network Bank and HSBC Bank Nevada - claim Johnson & Johnson was alleging its due process rights were being violated, and that they have not made that claim.

Firms hired by McGraw to sue the credit card companies are: Bucci Bailey & Javins in Charleston; the Law Offices of Druckman & Estep in Charleston; Golomb & Honik of Philadelphia; and Baron & Budd of Dallas.

Representing the State in the case against GSK are Baron & Budd; Heard Robins Cloud & Black of Texas and New Mexico; and Greene Ketchum Bailey Walker Farrell & Tweel of Huntington.

Greene Ketchum is the former firm of current Justice Menis Ketchum, who has disqualified himself from both cases. In his place is Senior Status Judge Fred L. Fox II.

A response to the credit card companies' petition was filed by Morrisey and chief counsel Dan Greear on March 7. It says the issue is a policy question that properly rests with the Legislature.

"By their own admission, Petitioners are asking this court to wade into a policy debate among 'academics and the media' over the wisdom of using private counsel in government consumer-protection actions under certain non-hourly fee agreements," it says.

"Furthermore, in doing so, they seek to have this court interfere with the attorney general's prosecution of consumer-protection cases, and choose winners and losers among the lawyers who seek to assist the Office of the Attorney General in representing the State in such cases."

The response adds that there is no basis to seek disqualification as there is no evidence of impropriety, conflicts of interest or undue influence.

In March, Morrisey introduced a new policy for hiring outside counsel that puts in place a competitive bidding process and a page on Morrisey's website that will allow the public to view information regarding outside counsel agreements.

The West Virginia Chamber of Commerce filed an amicus brief in the credit card companies' case.

"Without question, the private lawyers involved have a financial interest in the agreement to provide legal services in return for compensation based on the amounts recovered in the action, and they are intricately involved in making decisions regarding litigation strategy and settlement," it says.

"Such arrangements are antithetical to West Virginia Ethics Act and sound public policy."

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