WASHINGTON (Legal Newsline) – Dangling the prospect of taking on unpopular industries,
trial lawyers are getting state attorneys general to team on cases.
Peggy Little | Competitive Enterprise Institute
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.
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
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,
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
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
“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
Most important of all, Little said the practice should be
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.