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News
April 8, 2009

Contingency-Fee Justice

A case study from the Wall Street Journal:

State Attorneys General regularly hire private plaintiffs lawyers on a contingency-fee basis to prosecute cases. The trial bar returns the favor with campaign donations to state office holders. And despite the inherent conflicts of interest and questionable ethics of the practice, corporate defendants have rarely challenged such arrangements. Which is why a motion pending before the Pennsylvania Supreme Court is so remarkable — and deserves more public attention….Under terms of the contingency-fee contract, Bailey Perrin receives up to 15% of any settlement or judgment. Even better for the lawyers, the state is barred from settling for nonmonetary relief “unless the settlement also provides reasonably for the compensation of [Bailey Perrin] by [Janssen] for the services provided by the law firm under this contract.”

State prosecutors are supposed to be motivated by a sense of public responsibility for the interests of justice. Law firms have other motivations, and no-bid contingency-fee deals encourage lawyers with a financial stake in a case to try meritless claims or ask for exorbitant awards. That serves neither taxpayers nor justice…

Already this year we have seen Congress further this disservice to the taxpayer by authorizing state attorneys general to enforce the federal Truth-In-Lending Act with private civil lawsuits and expanding state AG authority to enforce violations of the federal Health Information Privacy and Accountability Act (HIPAA). Not to mention the ongoing CPSIA debate.

In 1999 Former Clinton Secretary of Labor Robert Reich famously wrote: “The era of big government may be over, but the era of regulation through litigation has just begun.*” Through contingency-fee contracts, state attorneys general have found a way to do both.

* It is worth noting that Reich issued this as a statement of praise, not alarm, horror, or scorn.

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