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Thursday, September 19, 2019

CEI paper: Attorneys general abuse power with relationships with trial lawyers

By David Hutton | Feb 23, 2017

WASHINGTON (Legal Newsline) – Dangling the prospect of taking on unpopular industries, trial lawyers are getting state attorneys general to team on cases.

That is the perspective Peggy Little, author of the Competitive Enterprise Institute’s paper “Pirates at the Parchment Gates.” She argues that state attorneys general have abused their office for political purposes while enriching their private attorney allies. These attorneys tend to be large donors, she says.

Peggy Little | Competitive Enterprise Institute

According to Little, the public is in the dark about how lawmaking power has fallen into the hands of an organized sector of the bar and a group of their politically and financially allied state attorneys general.

“The way these cases arise is that trial lawyers approach AGs with a tantalizing prospect – take on an industry that is unpopular and against which we have been unsuccessful in private suits,” she told Legal Newsline. “They say ‘We will fund the litigation for you – or bear part of the costs of prosecution – and if successful, give us a whopping percentage. If the suit is not successful, we bear the risk.’”

Little notes that the ambitious state attorney general gets the immediate publicity and political cachet of “taking on” Big Asbestos, Big Pharma, Big Tobacco, or alleged climate change deniers and he or she portrays this as a win-win situation without any risk to the state – which is not in fact the case, as is argued in detail in the paper.

According to Little, the most lucrative example of this phenomenon occurred in the 1990s when ambitious state attorneys general in Mississippi, Minnesota, West Virginia and Florida brought suits in 1994 against the tobacco industry.  

“The first suit, brought in Mississippi, used millions recovered by the trial bar in similar asbestos suits to finance the costs of this unprecedented suit against the tobacco industry on an untested theory,” she explained. “These AGs saw a political opportunity to ‘take on big tobacco,’ but were reluctant to commit state funds to such a dubious legal theory.”

The trial bar steps forward with its millions recovered in asbestos cases, a litigation that taught them that when the bar is allied with a government official, companies will fork over billions to avoid the costs and risks of years of defending themselves from these powerful political coalitions, she says.

Add in a campaign of public relations vilification, forging political alliances with other state attorneys general, threatening years of litigation on untested legal theories, and going to Wall Street where falling stock prices are sure to bring a defendant to the table, and you get a quick, lucrative deal, she said.

 Little said these are “made-to-settle” suits and that is just what happens.

“The tobacco settlement brought a quarter of a trillion dollars to state treasuries, bloating their governments with unsustainable unbudgeted wealth, and another $20 billion dollars to the trial bar, paid to these lawyer barons annually for the past 20 years and well into the future,” she explained. “And that ball has just kept on rolling.”

Little added that there are some attorneys general who take part in this practice more frequently than others.

“The heyday of this activity was the 1990s when Democrat state AGs embarked on a campaign to wield such regulatory power in concert with the trial bar, often their biggest donors and soon to become a regular source of funding for their political futures,” she said. “Mississippi, Florida, Maryland, West Virginia and California were big players, and continue to this day.”

When it comes down to trial lawyers picking their targets, Little told Legal Newsline that the attorneys general who attract these solicitations are overwhelmingly Democrats, although now, 20 years later, the practice has become so common and accepted that Republicans also are signing on.

“Some AGs courageously resisted the courtship, notably Alabama’s AG Bill Pryor, and Delaware’s AG Jane Brady,” Little said. “Other states have handled such litigation in-house, keeping the state’s representation within constitutional bounds.”

Little said the practice raises a number of ethical issues, on top of the fact that state attorneys general are openly flouting the law.

“The tobacco litigation, some AGs tried and failed to get legislative permission to hire outside counsel on a contingency fee basis, which is a commitment to award a large percentage (usually between 20 percent and 30 percent) of public money to these private law firms,” she explained. “When the legislatures declined to approve such deals, they went ahead and did it anyway, often hiring their own former law firms and political cronies.”

A later effort, testified to by then-Alabama Attorney General and current U.S. Attorney General Jeff Sessions, a Republican, involved these trial lawyers flying around the country to cut “Republican” law firms into the deals as part of a concerted national plan so that no political hay could be made out of what was sizing up to be the heist of the century.

“No member of the executive branch, not even the governor, possesses the power to award 25 percent of a state asset to private parties,” Little said. “And that includes the state AG. The state AGs know this, which is why all of them broke the tobacco contracts with impunity.”

Little pointed out that Florida’s Bob Butterworth admitted that the contingency fee lawyers should have known up front that the contract they signed with the state would require legislative approval.  

“These same state AGs regularly issue opinions prohibiting such diversions of public funds by other public officials and should hold themselves to those same standards,” Little said.

Little also aragues that the second point, which is often missed, is that no private party should ever be paying for the costs of a government investigation or prosecution, an arrangement that violates many laws, constitutional imperatives and ethical provisions.

“Chiefly, it violates constitutional requirements that all funds, goods and services donated to the state must go into the Treasury and may only be accepted and expended by the legislature,” she said. “If you flip the politics and imagine the Koch brothers writing checks to pay for the costs of a government investigation into whether alternative energy companies are misrepresenting their claimed science or environmental benefits, you get the point.”  

As Little explains, this was the constitutional violation that was at the heart of the Iran Contra scandal.

“It violated the separation of powers,” she noted. “Government officials may not divert funds from the sale of arms to Iran to support the Contras without congressional oversight and approval of such use of public money. The same holds true under state constitutions.”

And in addition to these compelling separation of powers issues, any industry targeted in this fashion is being prosecuted by a private firm with a direct, personal financial stake in the outcome, something that is wholly impermissible under long-established legal precedent and the due process clauses of both state and federal constitutions, she says.

The practice also brings with it a number of ramifications, with an industry of law firms that follow a predictable pattern, Little explains. 

“Private lawyers, who scour the news media and public records looking for potential cases in which a state or its consumers have been harmed, approach attorneys general … [who] hire the private firms,” she noted. “While prospecting for contracts, the private lawyers have also donated tens of thousands of dollars to campaigns of individual attorneys general, as well as the party backed organizations they run. The donations often come in large chunks just before or after the firms sign contracts to represent the states.”

To shift the trend, Little said the general public needs to understand the lawless revolution and trampling of constitutional principles that this represents.

Jeremy Bulow, a former Clinton administration FTC official and a longtime critic, has suggested Congressional review and oversight of these matters, an appropriate response to the tobacco or other settlements of “national scope.”

Most important of all, Little said the practice should be stopped.

Incoming attorneys general, whether Democrat or Republican, are likely to recognize the dangers and lawlessness of these practices which came under scathing critique from judges, legal commentators and public health officials, she said.

However, some attorneys general have followed in the footsteps of their predecessors, which Little said is not surprising.

“Any political arrangement that so lucratively rewards both the lawyers and politicians setting up such arrangements out of the public eye, is bound to become a template across party lines,” she said.

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