Not just AGs sicking outside counsel on big business

John O'Brien Jul. 22, 2008, 2:15pm



PHILADELPHIA (Legal Newsline) - Attorneys for Janssen Pharmaceutica, fighting a collection of suits over the company's antipsychotic drug Risperdal, are trying to make sure a major Houston-based plaintiffs firm isn't steering the Governor's office in Pennsylvania.

Bailey Perrin Bailey has made the same claim of marketing violations against Janssen, a subsidiary of Johnson & Johnson, in at least six other states, including Arkansas and Louisiana. State Medicaid programs, it is alleged, are harmed by Janssen's off-label marketing and failure to disclose side effects.

When Pennsylvania Gov. Ed Rendell decided to file his own suit, it was Bailey Perrin Bailey and a Pennsylvania firm acting as co-counsel submitting the complaint instead of Republican state Attorney General Tom Corbett. Rendell, a Democrat, hired BPB on a contingent-fee basis that Janssen is challenging in the Philadelphia Court of Common Pleas.

"No attorney from the (Governor's Office of General Counsel) ... has entered an appearance in this action," says Janssen's June 9 Motion to Disqualify Counsel, signed by Ed Posner of Drinker Biddle & Reath. "The Complaint was not verified by any Commonwealth officer or employee.

"The verification attached to the Complaint -- attesting that the signatory is 'in a better position than any individual officer or employee of the agencies of the Commonwealth Plaintiff to present this verification' -- was signed by (a BPB attorney)."

It's a similar argument to the one recently made in Rhode Island -- that plaintiffs firm Motley Rice's agreement with state Attorney General Patrick Lynch to sue the former manufacturers of lead paint should have been grounds to dismiss the case.

The Rhode Island Supreme Court unanimously sided with the paint companies' argument that they should not be held liable for the presence of lead paint in the state, but the Court also affirmed Lynch's right to hire counsel on a contingent basis, as long as Lynch was the one in control of the suit.

Janssen's attorneys say those who filed the suit must not have a financial or personal interest in the outcome. BPB's obvious financial interest (15 percent of any monetary recovery) will affect the actions of a public office.

The Due Process Clause requires Rendell to be guided by the sense of public responsibility for the attainment of justice, Janssen says.

"The risk that Bailey Perrin's financial stake in the outcome will affect government decision-making in connection with this action is real and serious," the motion says.

"Indeed, the role of the Governor's General Counsel in the retention of Bailey Perrin, the timing and amounts of Mr. Bailey's campaign contributions (see related story), the terms of the contingent fee agreement, and the involvement of Bailey Perrin in other Risperdal-related litigation that might be affected by this lawsuit combined to give rise to a manifest appearance of impropriety -- the impression that the government's prosecutorial decisions have already been infected by impermissible considerations."

In its answer, BPB says Janssen has it all wrong. Final decision-making and ultimate control stays with Rendell's office.

"The contract relegates the Commonwealth's outside counsel, Bailey Perrin Bailey, to 'advis(ing), counsel(ing) and recommend(ing) actions to the OGC' and to 'carry(ing) out to the best of its ability (the OGC's) directions.

"Further, Bailey Perrin Bailey is 'responsible directly to the General Counsel ... on all matters of strategy and tactics,' and must consult and cooperate with the OGC regarding the same."

BPB says it has assumed the risks of litigation and will have to stand behind any decisions made by Rendell's general counsel. Relinquishing control was a must.

"(N)othing in the contract restricts the OGC from negotiating any amount of monetary settlement with Janssen, or even abandoning the litigation altogether, a result which would result in no financial harm to the Commonwealth and no compensation to Bailey Perrin Bailey," the answer says.

BPB also wrote that the Philadelphia court may be the only court in the country to rule against the contingent-fee issue if it did. A California Superior Court had ruled the County of Santa Clara could not retain contingent fee counsel in its case against former lead paint makers in April 2007, but it was reversed by an appellate court a year later.

That ruling is being appealed to the state Supreme Court.

A separate issue involving the separation of powers is also being debated. Janssen says any settlement funds or jury award -- including attorneys fees -- should be appropriated by the state's legislature. BPB says those funds would come directly from Janssen, and attorneys fees are always deducted before lawmakers get their hands on any money.

BPB obviously is looking forward to that day. A contingent fee agreement with no monetary recovery would be, well, a nightmare for the firm.

The contingency issue has long been argued by tort reformers and plaintiffs attorneys. Former Nebraska Attorney General Don Stenberg never entered into a contingency agreement during his 12 years in office, writing, "When a contingent fee agreement is entered into, the Attorney General's authority to control the state's litigation and appoint outside counsel collides with the Legislature's authority to control the purse."

Other attorneys general feel it is necessary to seek outside help to check large corporations that can afford the expense of high-profile defense firms and years-long litigation.

Janssen challenged West Virginia Attorney General Darrell McGraw's right to hire private firms in 2006. McGraw and top aide Fran Hughes have a taxpayer-supported staff of about 200 in the office.

A case against a large corporation costs more per year than the office is budgeted, and without hiring outside counsel, "the office would be unable to hold huge corporations accountable for violations of the law," Hughes has said.

The trial judge sided with McGraw, and the state Supreme Court voted 4-1 in January 2007 not to hear Janssen's appeal.

The largest of all recent cases, the one in which 46 states and six territories joined in a $246 billion settlement with tobacco companies, was initiated and negotiated by private practice attorneys who gambled on a big payday. BPB founder Kenneth Bailey was one of them.

After nine years of work, Motley Rice, whose founder Ron Motley was also one of those tobacco lawyers, wasn't so lucky in Rhode Island. BPB says that is deterrent enough to refrain from filing baseless lawsuits with state power.

And that a measure of anxiety may be born from relinquishing control.

"Janssen, of course, neglects to mention the fact that Bailey Perrin Bailey must advance all costs of the litigation, and if there is no recovery, stands to lose millions as the result of undertaking the Commonwealth's case," BPB's answer says.

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