NEW ORLEANS -- The Louisiana Legislature has sent Gov. Bobby Jindal a bill that would end Attorney General Buddy Caldwell’s controversial practice of hiring outside lawyers at huge hourly rates or of letting them collect settlement-based legal fees without legislative approval.
The bill by Rep. Stuart Bishop, R-Lafayette, which passed on the next-to-last day of the legislative session, addresses issues raised in WWL-TV reports last year.
In those stories, critics complained that Caldwell had given contracts worth more than $27 million to some of his top political contributors, including to his campaign manager and campaign treasurer; that he was paying exorbitant hourly rates when in-house attorneys would have sufficed; and that he was violating the state constitution by paying those outside attorneys for major pharmaceutical cases on a contingency fee basis.
In a sweeping interview with WWL in May 2013, Caldwell said he had to hire pricey outside attorneys to compete with the even more expensive corporate defense attorneys representing Big Pharma, Big Oil and other adversaries.
“BP’s paying $1,200 an hour to lawyers, so what are you going to do, pay somebody $100 an hour to fight against those giants?” Caldwell said.
He said he was lucky to get an attorney like Allan Kanner at $600 an hour in the BP oil spill case, even while acknowledging that his team probably didn’t need to be in court for some of the trial’s initial stages.
House Bill 799 caps payments to outside lawyers at $500 an hour. A bigger part of the bill targets contingency fee contracts, which were already unconstitutional without legislative approval, and also takes aim at a loophole that critics said Caldwell used to pay those contingency fees without calling them that.
Last year, Caldwell told WWL that another state statute allowed him to hire outside firms so those firms can negotiate their legal fees from the defendants, after the case is over.
He said it was a great way to save money, by getting top law firms to represent the state and pay the up-front costs of litigation, such as depositions and document production, but they only get paid if the state wins.
And he insisted that was, therefore, not a contingency fee.
“I have never let -- will not let -- a contingency fee contract where attorneys get part of the state's recovery,” Caldwell said. “The attorneys get recovery over and above what the state's amount is.”
But Melissa Landry of Louisiana Lawsuit Abuse Watch found a pattern in the cases against pharmaceutical companies, that the payments to law firms worked out to about 20 percent of the state’s total take.
“It’s obvious that their fees are contingent upon the amount that they’re negotiating in terms of the settlement for the state,” Landry said. “So, you can call it a ‘fee-shifting arrangement’ or a work-around, but if the amount the attorneys receive is contingent upon the award that’s provided to the state, then it’s a contingency fee.”
The state collected $238 million from dozens of pharmaceutical companies for overcharging the state’s Medicaid program. Caldwell said the state didn’t pay any legal fees, but Bishop, HB 799’s sponsor, said he and his colleagues later found out the lawyers got $48 million.
Jere Beasley of Beasley Allen, the Alabama-based law firm that handled the cases for Caldwell, said in an online blog post in December that “Louisiana has recovered nearly $300 million when attorneys’ fees and court costs are included,” meaning the fees and costs that went to the lawyers added up to about $60 million, or 20 percent of the total.
“Their argument was, in order for them to handle it in-house it would cost them $4 million to set the department up correctly,” Bishop said. “As a taxpayer, as a legislator, as a citizen of Louisiana, I would much prefer seeing us go to the point where we set up the department, we handle it in the department and we spend $4 million, rather than giving away $48 million.
“Those fees that are being negotiated are being done behind closed doors,” Bishop added. “When the attorney general, who is a statewide elected official – when he's going to hire outside counsel, we should know what the contract is going to entail and it should be public.”
Whether Caldwell’s definition of “contingency fee” contracts is accurate or not, HB 799 seems to take away Caldwell’s work-around by expressly forbidding any third-party from paying fees or anything of value for work performed on the state’s behalf.
Loyola Law Professor Dane Ciolino told WWL last year that such an arrangement was unethical, but Caldwell disagreed.
As for legal fees awarded by the court or taken out of the state’s settlement share, the bill also requires all legal fees to be placed into a state Justice Department legal fund. It says none of those fees can be paid to outside lawyers until the Joint Legislative Committee on the Budget approves it.
The bill also requires the attorney general and other state agencies to give preference to in-state attorneys, apparently in response to Caldwell’s hiring of Beasley Allen and Colorado-based Perkins Coie, which charged Louisiana taxpayers thousands of dollars for its staff’s constant travel back and forth from Denver while working on the contaminated Chinese drywall case.
Caldwell also defended his no-bid selection of 13 law firms whose partners, staff and families had given his political campaigns about a quarter million dollars. Bishop’s legislation did not address that issue, however.