Measures forbid contingency-fee hiring
During recent legislative hearings, state Rep. Stuart J. Bishop testified that he sponsored a bill to restrict how the state attorney general hired private lawyers because of a concern for transparency.
For questions on the particulars, he referred to two lobbyists for a group with a grass-roots-sounding name that actually was funded by a pharmaceutical industry that had paid about $285 million to settle allegations of fraud in lawsuits handled by Attorney General Buddy Caldwell’s hired lawyers. The outside attorneys in those lawsuits were paid $51.4 million, the state Department of Justice reported to legislators.
State Sen. Dan Claitor, R-Baton Rouge, said he backed the bill to stop Caldwell from funneling a “mind-boggling” amount of the legal fees to his inner circle.
Gov. Bobby Jindal signed the legislation that, starting Monday morning, restricts how Caldwell hires private lawyers to represent taxpayers in lawsuits against corporations.
House Bill 799 basically forbids the state attorney general from hiring lawyers on a “contingency-fee” basis. Basically, such arrangements require the plaintiffs’ lawyers to pay up-front costs in return for a portion of the winnings, if any. Louisiana became the ninth state in the country to adopt those new rules being pushed by the U.S. Chamber of Commerce, a group that lobbies for large corporations.
Caldwell, who had been pilloried by the media and conservative bloggers for the way he hands out contracts, did not agree to repeated requests for an interview over a three-week period.
But during testimony at legislative hearings, Caldwell said HB799 would hamstring the state’s ability to pursue legal actions that could net the state more than $2 billion.
The state hired attorneys in 432 cases, Caldwell testified, to handle litigation involving allegations such as selling pharmaceutical products not approved by the federal government, improperly handling underground storage tanks and selling defective Chinese drywall.
Those lawsuits are being pursued without cost by the lawyers involved, Caldwell testified to a Senate committee in May. Instead, the lawyers are being paid a percentage of the recovery.
For instance, according to documents Caldwell’s office turned over to the Legislature in April, law firms whose members include Caldwell’s campaign treasurer and contributors received part of the $4.03 million in legal fees for a $42.5 million settlement of a case before Judge Janice Clark, of 19th Judicial District Court in Baton Rouge.
Lawyers working for the big corporations being sued by the state are among the best in the world and they get paid thousands of dollars an hour, Caldwell said.
The outside lawyers contracted by the state, Caldwell said, would not be interested in the work unless they are guaranteed a portion of the settlement or winnings awarded by the court.
A group called the Coalition for Common Sense, which describes itself as “companies and individuals committed to ensuring a fair legal climate,” distributed to legislators a calculation of how contingency fees work. Incorporation papers show that the coalition was organized and funded by the pharmaceutical industry and its insurers.
After attorney fees and the federal government’s cut in pharmaceutical litigation, which alleged price fraud at the wholesale level, the state collected only $89.6 million of a $235.7 million settlement, according to the coalition. Attorney fees of $46.6 million amounted to about 19.7 percent of the settlement.
But a significant portion of the settlement had to go to Washington, D.C., to repay the two-thirds of Louisiana’s Medicaid expenses picked up by the federal government. Therefore, the coalition argued, outside attorneys’ fees made up 34.2 percent of the state’s total recovery.
By comparison, the Texas attorney general’s office, which also bans contingency-fee arrangements, collected $138 million from Medicaid fraud in 2012, of which the attorneys kept only about 8.7 percent, according to the coalition.
House Bill 799, now Act 796, also requires paying hired outside counsel an hourly rate of no more than $500 per hour that would vary from case to case; and, among other mandates, puts the Legislature’s Joint Committee on the Budget in charge of approving the payments to the lawyers.
HB799 is the last of a triumvirate of measures aimed at limiting victims’ ability to seek monetary payments to recompense alleged negligence by corporations.
Senate Bill 667 clarified how courts should handle “legacy lawsuits” over environmental damage from long-ago oil and gas drilling and production that was never cleaned up. Senate Bill 469 defined what government agencies could file a lawsuit involving the wetlands — and that new definition does not include the lawsuit filed last year by Southeast Louisiana Flood Protection Authority-East against 97 oil and gas companies.
“These are simply three examples of major pieces of legislation that were passed that confirm the notion that greed will not trump hard work and determination,” said Don Briggs, president of the Louisiana Oil and Gas Association.