When State AGs Abuse Their Power
In recent years, several states have seen their attorneys general mired in some kind of scandal. Pennsylvania is the most recent example. This trend, while disturbing, is not surprising: The role of the state attorney general has evolved over the past 20 years from mere law enforcer to general policymaker. Today, both Democratic and Republican AGs use litigation and the powers of the office to regulate. But with this new responsibility comes new opportunities to breach the public trust.
A particularly alarming development is AGs' increasing use of private law firms to sue companies under no-bid contracts where the firms get percentages of the settlements or awards. These arrangements were born out of tobacco litigation in the 1990s and have spread to all sorts of actions, leading to several scandals over the connections between AGs and the firms they hire.
A key reform states can enact is the Transparency in Private Attorney Contract (TiPAC) Act. More than a third of the states, often with broad bipartisan support, have enacted TiPAC or similar bills. These laws do not outright ban contracts with private law firms, but they subject the contracts to commonsense regulations. For example, they mandate public bidding, require the posting of contracts on websites, limit attorney's fees, demand that firms keep appropriate records, and mandate complete control of the litigation by the government.
Proponents of these arrangements say that states do not have the budget to pursue many of these actions and counsel is paid only when there is a recovery. However, when private attorneys have direct financial stakes in law enforcement, the pursuit of businesses is often no longer about pursuing justice or using prosecutorial judgment, but maximizing contingency-fee profits. This is why private attorneys are not allowed to be retained under a contingency fee to pursue criminal cases. Indeed, it is now common for private lawyers to pitch litigation to attorneys general, rather than wait for there to be an actual problem that states need to resolve.
Nursing-home lawsuits are prototypical examples of such prepackaged litigation and problems they can cause. One firm reportedly contributed more than $70,000 to 16 state AGs in campaigns across the country and, among other projects, specifically pitched nursing-home litigation. According to reports, this firm received $7 million for work in Mississippi alone and stands to amass some $21 million in "law enforcement" actions around the country.
Other examples of questionable behavior under contingency-fee contracts are extensive. For instance, in Texas, a former AG was sentenced to four years in federal prison for attempting to funnel millions of dollars' worth of legal fees to a longtime friend. In Michigan, attorneys were awarded $450 million in fees through a contingency-fee contract, equaling an hourly rate of $22,500. Attorneys in New York saw big payouts through contingency-fee contracts when they received roughly $13,000 per hour in a settlement for the state. Pennsylvania reportedly has four active contingency-fee contracts with firms that donated to AG campaigns.
State courts have expressed discomfort with these types of arrangements. The Louisiana Supreme Court, in striking down the use of a contingency-fee contract by the state attorney general in an environmental-damages case, held that neither the state constitution nor the legislature had granted the AG the power to enter into the contract at issue. The United States Supreme Court has also acknowledged the potential for a conflict of interest when the government is represented by counsel who holds a financial interest in the outcome of a case, but it has yet to establish a bright-line rule.
An aggressive way to address the politicization of the state AG is to have the AG selected by the governor, rather than through a popular election where he or she must raise campaign funds. The states that select their chief law enforcement officers this way have seen fewer scandals. For now, though, states should adopt legislation such as TiPAC to ensure that law-enforcement actions brought on behalf of the state put the public good above private profits.
Phil Goldberg is a partner in the Washington, D.C., office of Shook Hardy & Bacon, LLP, and director of the Progressive Policy Institute's Civil Justice Center.