Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Legislation / Politics

Fee Agreement Issues in Opioid Litigation in Some Texas Counties

August 23, 2018

A recent Forbes story by Daniel Fisher, “Lawyers for Texas Counties in Opioid Cases May Not Have Valid Contracts, reports that a number of Texas counties including Montgomery County, a sprawling suburb north of Houston, may have invalid contracts with their outside lawyers because they haven’t been approved by the Texas Comptroller as required under state law.  More than a dozen counties represented by the law firms Haley & Olson and Harrison Davis Steakley Morrison Jones filed suit without first obtaining the Comptroller’s approval for their contingency fee contracts.  Months later, those contracts still haven’t been approved, possibly putting the suits in peril.

In a 2012 decision involving similar litigation by counties over the mortgage crisis, a federal court stated the requirements under Texas law “must be satisfied before a Texas county can retain outside counsel on a contingency fee basis.”  In another decision that year, a Texas state court judge declared the contract between Harris County and its contingency fee lawyers void because it hadn’t been approved.

Texas passed extensive reforms to its rules on hiring outside lawyers starting in 1999, after private attorneys caused a political uproar by collecting $3.3 billion in fees for representing the state in its lawsuit against the tobacco industry.  Former Texas Attorney General Dan Morales ultimately went to prison for illegally attempting to divert $500 million of those fees to a friend.

The new rules in Texas included a maximum contingency fee of 35%, strict requirements for keeping time and expense records, and a hybrid method of calculating fees that includes a “base fee” determined by actual hours worked times a multiplier of up to four to reflect the risk of taking on the case.  The final fee charged to the government must be the lower of the percentage of the award or the base fee and multiplier, and the fee can only reflect work done by partners and employees of the contracting firms.

Texas legislators were concerned about the possibility of excessive fees and political payoffs in the wake of the scandals surrounding the tobacco litigation and Morales’ criminal trial, said Charles Silver, a professor at the University of Texas Law School and prominent legal affairs expert.  Most trial lawyers in Texas are Democrats and the governor at the time was George W. Bush, a Republican.  “The legislature was dominated by Bush and the Republicans, and they just didn’t want to be supporting plaintiff attorneys who were supporting the Democratic party,” Silver said.

Regardless of the motivating factors, comptroller approval and billing records are the law in Texas, and even considered public records.  Montgomery County’s lawyers seem to agree: The contract says they will comply with Section 2254.104(a) of the Texas Government Code, including maintaining “current and complete written time and expense records” that will be available to county or state officials “at any time upon request.”

Despite this requirement, Montgomery County Assistant District Attorney John J. McKinney, in an Aug. 14 letter, said “no documents exist that are responsive” to a request for billing records.  It’s not surprising counties might balk at complying with the recordkeeping requirements of Section 2254, Silver said.  “Lawyers don’t like others knowing how much time and effort they’re expending, whether on the plaintiff or defense side,” he said.

The hours compiled to calculate the base fee could be an issue in opioid litigation, however.  Unlike many lawsuits in which a law firm represents a single government entity suing over a single claim, opioids law firms have bundled large numbers of municipal clients and are working closely with national law firms that control the federal multidistrict litigation in the court of U.S. District Judge Dan Aaron Polster in Ohio.

One sign of the cooperation among law firms is Montgomery County’s lawsuit, filed Dec. 13 in federal court in Houston.  It is an almost word-for-word copy of the lawsuit filed by three different law firms, including Dallas-based Simon Greenstone, on behalf of Bowie County more than two months before.

A close examination of the billing records might reveal how much time Montgomery County’s lawyers spent in the early stages of the litigation, and whether that is justified given evidence they used a borrowed complaint.  The other 12 counties might also want to compare their base fee calculations with each other to make sure their lawyers aren’t double-billing hours across the entire group.

Other Texas counties including Dallas and Harris have obtained Comptroller approval of their contracts.  And an attorney retained by Clay County (another client of Haley & Olson and Harrison Davis Steakley Morrison Jones) said they would submit the contract to the state during a January meeting when Clay County Commissioners Court approved hiring the firms. Clay County’s contract has not yet been approved.

The stakes for the counties could be high if defendant companies challenge the status of their representation.  When private lawyers representing several Texas counties attempted to assemble a statewide class action in litigation against Merscorp, a mortgage registry, the federal judge who examined Texas law said it wasn’t possible because each county needed the Comptroller’s approval before joining the class.  Under the law of the Fifth Circuit, which includes Texas, so-called “opt-in” class actions aren’t allowed under Rule 23 of the Federal Rules of Civil Procedure.

The Texas judge who declared Harris County’s contract with private lawyers void nevertheless allowed the case to proceed because the complaint was also signed by the county attorney’s office. Montgomery County’s complaint is signed only by the private lawyers.

Kentucky Legislation Would Limit Attorney Fees to Outside Counsel

March 27, 2018

A recent AP story by Bruce Schreiner, “Bill Advances to Limit Fees to Outside Attorneys,” reports that over objections from Kentucky’s Democratic attorney general, GOP lawmakers took another step Thursday toward limiting how much outside attorneys can earn when hired by the state.

Supporters said the bill aims to maximize the amount from a settlement or judgment that benefits those hurt by a transgressor's actions. Attorney General Andy Beshear's office said the limits could hamper recruiting outside attorneys whose expertise can help win large awards for the state. In those cases, the contingency fees would be a good tradeoff, a top Beshear aide said.

"If we're going big, 75 percent, 80 percent of big is way better than 100 percent of nothing," said Deputy Attorney General J. Michael Brown. "And we need the ability to win these cases."

The measure was advanced by Republicans on the Senate Judiciary Committee. Its chairman, Sen. Whitney Westerfield, lost to Beshear in a close election in 2015. Westerfield, who plans to run again for attorney general next year, said he's comfortable with the measure.

The bill would set limits on contingency fees paid to outside lawyers. Those attorneys don't get paid unless they win the lawsuit. They sign a contract with the Attorney General's office that guarantees them a certain percentage from a settlement or judgment.

The proposal would apply to future contracts. If it becomes law, those fees would be capped at 20 percent of a settlement or judgment up to $10 million. Fee percentages would shrink for amounts above $10 million.

Those cases can yield potentially lucrative judgments, but often pit the state against corporations with vast resources and high-powered legal teams. So attorneys general sometimes hire outside lawyers to help with big cases, as Beshear has done in suing pharmaceutical distributors he accuses of inundating Kentucky with dangerously addictive opioid painkillers.

Beshear's office says the bill would restrict its ability to recruit outside lawyers, pointing to its legal fight with opioid distributors. Nemes dismissed the criticism as "pure demagoguery," noting Beshear's office has received bids from outside lawyers that complied with the bill's terms.

The bill, which already passed the House, would require the attorney general, the governor's office or any another constitutional office to show that hiring outside counsel is needed.

But the focus has been on the attorney general's office, and has been a politically charged issue as Beshear has feuded with Gov. Matt Bevin over the Republican's use of executive authority.

Rep. Jason Nemes said his bill aims to make sure hiring outside counsel is necessary, that the contracts are transparent and injured Kentuckians are the biggest beneficiaries of awards.

"That's what we're trying to do with this bill, get as much money as possible to go to injured citizens," the Louisville Republican said.

In complex cases, Brown said, some wrongdoers aren't exposed until attorneys dig deep into a case. He said fee limits could deter outside lawyers from pursuing all potential defendants.

The Senate panel amended the bill to give the legislature or state Finance Cabinet oversight of contingency fee agreements. Beshear said in a statement that the amendment was "another power grab" and could "hamstring" his efforts to pursuit lawsuits against drug companies.

If the bill passes the Senate with the change, it would go back to the GOP-led House.

The bill also would require all records — including expenses — associated with the hiring of outside lawyers be made public.

The legislation is House Bill 198.

Delaware Governor Seeks Fee Reduction in State Court Party Balance Case

January 12, 2018

A recent Delaware Law Weekly story by Tom McParland, “Carney Asks for Fee Reduction in Case Striking State Court Party Balance Mandate” reports that attorneys for Governor John Carney are asking a federal judge in Wilmington to slash a request for attorney fees in the case of a New Castle County lawyer who successfully challenged a provision of the Delaware Constitution requiring political balance on the state’s courts.

Carney, who has appealed the decision said that a ruling on James R. Adams’ fee request should be tabled until the U.S. Court of Appeals for the Third Circuit can weigh in.  But the governor also argued that any award the court grants should be reduced by 40 percent because Adams had only achieved partial success.

Adams, who is represented by Finger & Slanina partner David L. Finger, last month requested $22,900 to cover the cost of litigating the case through summary judgment.  U.S. Chief Magistrate Judge Mary Pat Thynge of the District of Delaware on Dec. 6, 2017, ruled in favor of Adams, a graduate of Widener University Delaware Law School, who argued the 120-year-old requirement violated the First Amendment of the U.S. Constitution by restricting government employment based on party affiliation.

Carney, who is responsible for nominating judges, did not dispute that Adams had prevailed in the case.  However, Carney challenged Adams’ assertion that he had secured a “complete victory,” saying that Thynge’s ruling did not specifically address constitutional provisions preventing one political party from being represented by more than a “bare majority” of the judges on Delaware’s courts.

“Because plaintiff did not achieve success in challenging the constitutional provisions relating to the Family Court and the Court of Common Pleas, or in challenging the bare majority provisions for the Delaware Supreme Court, the Superior Court or the Court of Chancery, defendant requests a 40 percent reduction in any award the court may choose to grant, as such a reduction would reflect plaintiff’s partial success in challenging Delaware’s constitutional provisions governing the composition of its courts” Carney’s Young Conaway Stargatt & Taylor attorneys wrote in an 8-page brief.

Finger, meanwhile, said in an interview that reduction of attorney fees was not warranted in any case where a plaintiff has won “substantial” relief from the court.  “We won a very substantial issue,” he said. “Moreover, the issue [of party balance] will apply to Family Court and the Court of Common Pleas because the bare majority requirement still requires making political party a determining factor [in nominating judges],” Finger said.

Adams, a registered independent, said he’s been prevented in the past from applying for judgeships because of the constitutional mandate that judicial seats be split between Republicans and Democrats.

Proponents of the provision—codified in Article IV, Section 3 of the state constitution—have said it safeguards a fair, independent and impartial judiciary that attracts talent to serve in its ranks.  But Adams and others have argued the mandate improperly boxes out independents and creates the impression the state’s judiciary is tinged with political bias.

Governor Cuomo Signs Attorney Fee FOIL Bill

December 13, 2017

A recent Times Union story by Brendan J. Lyons, “Cuomo Signs Bill Strengthening FOIL Law,” reports that Gov. Andrew Cuomo signed a bill that will require judges to award attorneys' fees to litigants who "substantially prevail" in Freedom of Information Law (FOIL) cases.

The governor acknowledged the legislation is important but said it falls far short of comprehensively reforming the state's antiquated Freedom of Information Law, including not requiring greater transparency from the Legislature that sent the bill to his desk.

"The bill before me continues to perpetuate a fractured and inequitable system of transparency by only applying to the executive (branch), and intentionally excluding other branches of government," Cuomo said in a memo filed in support of the measure.  "Notably, current law already provides courts with discretion to award attorney's fees in such situations, but they are not required to do so."

Still, advocates for more transparency in government have hailed the legislation as necessary to prevent agencies at all levels of New York government from deliberately withholding public records or delaying responses unnecessarily.

Cuomo vetoed similar legislation two years ago that stated courts must award attorney's fees when an agency denies access to FOIL requests in "material violation" of the law.  The governor said the earlier bill did not define the term "material violation," which could have created confusion for judges who could reach different conclusions on what the term means.

The bill requires that courts "shall" assess reasonable legal costs in FOIL cases in which a person "substantially prevailed" and the court finds there was no reasonable basis for denying access to a record.  Courts have sparsely awarded attorney's fees in FOIL cases.  But not always.

New Jersey Legislation Would Mandate Fee Retainers

August 23, 2017

A recent New Jersey Law Journal story by Michael Booth, “Bill, Spurred by Wray Representation, Would Mandate Retainers,” reports that one of Gov. Chris Christie's most persistent critics in the state Legislature is sponsoring a bill that effectively would have barred Christie's apparent hiring of high-profile lawyer Christopher Wray—now the FBI director—without a written retainer fee agreement.

Assembly Deputy Speaker John Wisniewski, D-Middlesex, has introduced A-5179, which would require retainer fee agreements between any state agency and private counsel to be memorialized in writing within 30 days of the attorney's retention.  The bill, which has not yet been assigned to a committee, would prohibit a firm from being paid with public funds if the 30-day requirement is not met.

Wray, according to reports, was Christie's personal attorney for 11 months during the Bridgegate investigation, and while Christie was gearing up to run for the Republican nomination for president—before Wray and the administration signed a retainer agreement.

Wray, then of the Washington, D.C., office of King & Spalding, began representing Christie in September 2014 but did not sign a retainer agreement until August of the following year.  Ultimately, Wray and other lawyers at the firm, which charged a blended rate of $340 an hour, racked up about $2 million in fees and costs, reports said.

New York public radio station WNYC first reported the arrangement between Wray and Christie on July 24.  A day later, Wisniewski voiced his concern about the lack of a retainer agreement, which he pointed out would have been a document available to the press and public.

"This is highly unusual and raises questions about whether Gov. Christie was trying to hide this cost and legal representation from the public," Wisniewski said in a statement at the time.  "Mr. Wray and his colleagues ended up costing taxpayers $2 million, yet the governor did not even take basic steps to provide public transparency and uphold ethics standards.