Bush bans contingency fee arrangements

By John O'Brien | May 17, 2007

WASHINGTON, D.C. - On Wednesday, President George Bush decided that a ban on hiring attorneys on a contingency fee basis to represent the U.S. government will help ensure the integrity of the legal services business.

Bush signed an executive order that also prohibits expert witnesses being paid on contingency.

"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," says Section 1 of the policy, which is titled "Protecting American Taxpayers From Payment of Contingency Fees".

Only the U.S. Attorney General may give the permission required for contingency payment to attorneys or expert witnesses. He or she must believe any agency's entry into such an agreement is required by law.

The U.S. Chamber of Commerce's Institute for Legal Reform commended the decision and hopes state attorneys general follow suit. The U.S. Chamber owns the West Virginia Record.

A California court has already determined the contingency arrangements present a conflict of interest.

"No lawyer or expert witness should be able to pocket millions of dollars simply because he or she has the government as a client," said Lisa Rickard, President of the ILR. "These contingency fee arrangements create a perverse incentive, by combining the power of the government with the personal financial interest of some plaintiffs' lawyers.

"Too often the result is millions of dollars of a government settlement or judgment going to trial lawyers, instead of victims."

Some attorneys general most known for the use of outside attorneys being paid on a contingency fee basis are Connecticut's Richard Blumenthal and West Virginia's Darrell McGraw.

In the 1998 Tobacco Master Settlement Agreement, the Competitive Enterprise Institute says trial lawyers received $14 billion nationally in attorneys' fees under a $246 billion-plus settlement. The organization also says Blumenthal steered $65 million in fees to his own allies and the associates of former Gov. John Rowland, later convicted of corruption in an unrelated matter.

It adds that Blumenthal went "through the motions" of soliciting letters from firms interested in representing the state in the lawsuit. Of the four he selected, one was his former firm, another's partner was married to a partner in the first firm and a managing partner in the third served as counsel to Rowland.

In 1995, McGraw hired lawyers on a contingency fee to sue tobacco companies even though he was specifically told by the judge handling the lawsuit that it was illegal. The lawyers ended up being paid $33.5 million.

In his 2004 settlement with Purdue Pharma, trial lawyers given state power were paid $2 million of a $10 million settlement.

Also, Rhode Island Attorney General Patrick Lynch is handling a public nuisance lawsuit against companies that manufactured lead-based paint before it was outlawed nearly 30 years ago.

Plaintiffs firm Motley Rice introduced the idea of suing on a public nuisance claim to avoid defenses the businesses could conjure in a products liability claim. Several municipalities and Ohio Attorney General Marc Dann have also filed similar suits.

President Bush's decision comes less than a month after the results of a study conducted by the American Tort Reform Association were released. The results showed that those polled in West Virginia, Ohio, Alabama, California and Wisconsin wanted more transparency from their respective Attorneys' General offices when it came to contingency agreements with outside attorneys.

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