COLUMBIA, S.C. (Legal Newsline) - A nonprofit organization can challenge South Carolina Attorney General Alan Wilson’s transfer of $75 million in contingency fees to outside lawyers, the state’s highest court ruled, saying it was “an issue of public importance” because the AG may make several other such transfers including fees associated with a $300 million settlement of opioid claims.
The South Carolina Public Interest Foundation sued AG Wilson after he transferred 12.5% of a $600 million legal settlement with the Energy Department to lawyers at Willoughby & Hoefer and Davidson, Wren & DeMasters. Wilson hired the outside attorneys to represent the suit in a lawsuit over DOE’s storage of weapons-grade plutonium at the Savannah River site in Aiken, S.C.
Wilson transferred the money three days after reaching settlement and after SCPIF sued to block the transaction. The public interest group cited Section 1-7-150(B) of the South Carolina Code, which requires all money “except investigative costs of litigation awarded by court order or settlement” to be deposited in the general fund. SCPIF argued no court awarded fees and $75 million was excessive, given the outside law firms lost in court and the settlement was the result of political negotiations.
“We think this money belongs to the citizens of South Carolina,” said Jim Carpenter, attorney for SCPIF. “These lawyers are the happy beneficiaries of the politicians’ deal.”
A trial judge dismissed the case, ruling the organization lacked standing. But the South Carolina Supreme Court disagreed, reinstating the suit in a brief Sept. 14 decision based on the state’s judge-made doctrine granting standing to litigants if they demonstrate their case involves an issue of great public interest.
“By claiming Wilson improperly disbursed state settlement funds, appellants indisputably allege an issue of public importance,” the court wrote.
Without offering an opinion on the merits of the case, the court said the lawsuit “presents a threshold issue of the Attorney General's statutory authority to enter contingency fee agreements with private law firms.”
“This issue will inevitably arise again in the future because Wilson has seven other litigation retention agreements with private attorneys,” the court said. Those include one with Motley Rice, Thurmond Kirchner & Timbes and James E. Smith for opioid litigation. Based on the fee schedule in that agreement, the law firms could collect more than $20 million out of the state’s $300 million share of a national settlement with distributors.
The South Carolina Supreme Court rejected a multimillion-dollar contingency fee in a 2008 decision involving lawsuits by state employees, finding it produced a rate of more than $6,000 an hour and was unreasonable. The court ordered a “lodestar” analysis based on hours worked plus a premium for the riskiness of the case.
Wilson, a Republican, joins several other Republicans in hiring outside lawyers, many with political connections, to handle lucrative, high-profile cases. Some AGs have argued they don’t have to comply with laws requiring all settlement money to be deposited with the state treasurer, claiming legal fees were paid by the defendant. Since defendants consider the entire cost of settlement, including fees, when negotiating an agreement this argument has little economic relevance and critics say it also flouts basic the basic legal principle that all settlement proceeds belong to the plaintiff. In this case, Carpenter said, the settlement required each side to pay their own legal expenses.
Florida AG Ashley Moody, also a Republican, has entered into several opioid settlements that suggests outside lawyers will far exceed that state’s $50 million cap on contingency fees. Her office has declined to explain the discrepancy.