The Center for Legal Policy at the Manhattan Institute released a troubling report Tuesday on the unholy alliance between individual state attorneys general across the country and the plaintiffs' bar. CLP Director James Copland writes of the troubling findings in the "Trial Lawyers Inc." report:
"State AGs make possible the payment of windfall fees to their allies in the plaintiffs’ bar, whose lawyers in turn gratefully fill the officials’ campaign coffers with a share of their easily obtained cash."
The study chronicles questionable bargains between the trial bar and the states' top law-enforcement officials. In a phone conference with press to unveil the report Monday, Copland said that the trial industry operates like a business, and the Center therefore analyzes the industry like one. Hence the label "Trial Lawyers Inc."
Copland noted that the relationship of patronage that the study calls attention to operates like an Iron Triangle. Plaintiffs' lawyers approach state AGs with litigation theories. State AGs contract with private attorneys on a contingency-fee basis. Private attorneys in turn funnel campaign donations to the campaign of the state AG, and round and round the crooked triangle spins. The study notes that the textbook example of this practice, and where the trend really picked up steam, was in the 1994 interactions of trial lawyer Richard "Dickie" Scruggs and Mississippi Attorney General Mike Moore during the massive tobacco ssettlement case.
Hailing from the same hometown as Moore, Scruggs approached the attorney general with the idea of contracting his law firm to sue tobacco companies on behalf of Mississippi. By the 1990s strong evidence had already piled up that linked smoking to serious illness, but tobacco companies remained elusive in court from suing diseased individuals. Scruggs proposed the idea that tobacco companies were obliged to compensate the state for Medicaid expenses stemming from smoking-related injuries, and that the state should hire outside counsel paid by contingency fees. Those fees would translate to much higher paydays for outside lawyers that had usually been paid at an hourly rate. The result of the Scruggs/Moore scheme:
"In the tobacco suits, several states’ settlements reimbursed lawyers at an effective rate of over $10,000 per hour—up to $92,000 in Texas-- with over $30 billion going to private attorneys overall, and a reported $1.4 billion flowing to Scruggs individually.
Such unprecedented sums represent simply the enormous size of the settlements, rather than the volume of work performed. The opportunity to score political points by taking on a reviled industry and to fill strained state coffers made followers of top state prosecutors nationwide: eventually, all 50 states signed on to the litigation and entered into a settlement agreement with cigarette manufacturers."
In the election after 1994, some of the money awarded in these enormous settlements went from the private lawyers to the campaign expenses of the state attorney general who hired them. The study notes that since the tobacco litigation, this contingency-fee arrangement, where portions of settlements ending up back in campaign funds, has become standard practice in the relationship between state AGs and the trial bar.
The CLP study goes on to note other major targets of this relationship in recent years, including raids on pharmaceutical makers, the financial sector and insurance companies. In addition to the shady practice’s operation, the study identifies which current state AGs receive the biggest campaign donations from private law groups, including Jim Hood of Mississippi, Mark Shurtleff of Utah, and the President's new appointee to the Consumer Financial Protection Bureau, Richard Cordray of Ohio.
The study backs their claim with statistics, showing growth in "Trial Lawyers, Inc." contributions to the Democratic Attorneys General Association and the campaigns of a few Republican state AGs who are most willing to make such back backdoor deals:
In addition, it notes that many politicians use the hardly-regulated state AGs position as a stepping-stone and vector to make deals with the plaintiffs' bar to build up their campaign war chest in order to foster further political ambitions. To Illustrate this point, it points to the careers of Rhode Island's Sheldon Whitehouse, New York's Eliot Spitzer and Richard Blumenthal of Connecticut. All three have recently ascended from state AGs to higher statewide office.
While the report's findings may be troubling, Copland notes that in 2009, the most recent year for which data are available, tort costs fell as a percentage of the economy for the sixth consecutive year, showing an improvement in the overall civil-litigation landscape in America. Reform of these practices by state AGs could come from recent Supreme Court actions, as well as the passage of the American Legislative Exchange Council's Private Attorney Retention Sunshine Act. Already passed in ten states, the Sunshine Act mandates public disclosure of contractual relationships between private lawyers and states.
The report has been commended by Edwin Meese III, U.S. Attorney General during the Reagan Administration.
“The 2011 Report on the Alliance Between State Attorneys General and the Plaintiffs Bar, published by the Manhattan Institute’s Center for Legal Policy, demonstrates how the collusion between these groups can foster corruption, unjust enrichment, diversion of money belonging to the tax payers, and cause the degradation of the civil justice system," he said. "The Report exposes the unsavory relationship which cries out for correction by the states involved.”
More information, and the full report, can be found at www.triallawyersinc.com.