Report: Drug maker suing La. AG over outside counsel hiring

Jessica M. Karmasek Jun. 1, 2012, 10:20am


NEW ORLEANS (Legal Newsline) - Drug maker GlaxoSmithKline has reportedly filed a lawsuit against Louisiana Attorney General James "Buddy" Caldwell over his hiring of private attorneys in a case against the company.

Caldwell sued the British drug maker in February 2011, claiming the company hid harmful side effects of Avandia. The drug is used to help control blood sugar levels in people with type 2 diabetes.

The attorney general's suit accused GlaxoSmithKline of illegally marketing, pricing and promoting the drug, and violating the state's consumer protection and unfair trade practices laws.

Now, GlaxoSmithKline is alleging that the outside counsel Caldwell hired to prosecute the case have a "personal financial interest" in its outcome, according to The Associated Press.

In particular, the company claims the counsel's fee agreement with the State violates the Louisiana Constitution and its constitutional rights.

As relief, GlaxoSmithKline wants a judge to prevent the attorney general from using outside counsel on the case, the AP reported.

A spokeswoman for Caldwell's office told the AP on Friday that it has "total confidence in the procedures relied upon."

The drug maker isn't the first to challenge a state's hiring of outside counsel.

A similar case is proceeding in Kentucky federal court. It was filed by Merck Sharp & Dohme Corp.

Merck sued Kentucky Attorney General Jack Conway in August, almost two years after Conway sued Merck over the anti-inflammatory drug Vioxx. The suit seeks penalties as opposed to compensatory relief.

"Such suits can only be prosecuted by the Kentucky Attorney General and only when penalties 'would be in the public interest,'" Merck's attorneys wrote in August.

"Nonetheless... Conway has effectively transferred his enforcement authority to private outside counsel. And unlike the Kentucky AG, whose compensation is fixed and independent of success or failure in litigation, the arrangement with the private outside counsel in this case gives them a significant stake in the outcome: the more penalties they pursue, the bigger their potential take."

Other companies have unsuccessfully made similar claims, arguing that public officials need to be motivated by justice, not money, and that a contingency fee agreement violates that.

- In August 2010, the Pennsylvania Supreme Court ruled that Janssen Pharmaceutica did not have standing to challenge such an agreement. Then-Gov. Ed Rendell had hired Bailey Perrin Bailey, which had donated $91,000 to his campaign, to sue a trio of drug makers.

No party to an action other than the state's agency involved in the action may challenge the authority of the agency's legal representation, the Court ruled. Justice Thomas Saylor dissented.

"(N)ot only does Janssen aver that the Commonwealth's strategic litigation decisions are likely to be distorted to Janssen's detriment by Bailey Perrin's pecuniary interest in the outcome, but its allegations include a suggestion that this particular litigation might not have occurred at all but for the aggressive efforts of Bailey Perrin in seeking to convince state officials to initiate it under a contingent-fee arrangement..." Saylor wrote;

- A month earlier, the California Supreme Court ruled against a group of paint companies that tried to use a previous ruling in a similar, albeit criminal, case from 1985. The case involved the city of Corona hiring a private attorney to bring public nuisance cases against alleged violators of a city ordinance, and the attorney was paid more for successful than actions than unsuccessful ones.

Initially, the companies' argument was successful, but an appellate court reversed the lower court decision and encouraged the Supreme Court to take a look at the issue.

The Supreme Court's opinion drew a difference between the paint suit and the Corona suit. The Corona suit was more of a criminal prosecution, it wrote, adding that private attorneys in civil cases need not be held to the "more stringent disqualification rules applicable to criminal prosecutors.";

- In turning away the state of Rhode Island's public nuisance lawsuit against three paint companies, the state Supreme Court also addressed the issue.

That court ruled that the agreement between the Attorney General's Office and outside counsel -- in this case, the plaintiffs firm Motley Rice -- was appropriate, as long as the attorney general held final decision-making power; and

- The West Virginia Supreme Court twice decided not to hear appeals by companies that argued Attorney General Darrell McGraw unfairly hired private attorneys. The first occurred in 2005 in a case involving Capital One; Chief Deputy Attorney General Fran Hughes said in 2007 the Court was refusing to hear a similar appeal of Janssen.

From Legal Newsline: Reach Jessica Karmasek by email at

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