A Message from the Director
Securities and Finance
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Lawsuits Are Trial Bar's New Cash Cow, James Copland, Washington Examiner, 10-25-11
Obama's CFPB Nominee
Abused Private Attorney Contracting in Ohio, James Copland, Washington Examiner, 10-25-11
Copland on Wall Street Journal Live
He discussed his new report, Trial Lawyers Inc.: Attorneys General on 10-27-11.
James Copland appeared on the following radio programs to discuss his new report, Trial Lawyers Inc.: Attorneys General:
FM News Talk 97.1's "Randy Tobler Show," 10-29-11
WABC's "John Batchelor Show," 10-27-11
WTPL's "Bulldog Live with Brian Tilton," 10-26-11
SBA's "Small Business Advocate with Jim Blasingame," 10-26-11
Honorable Edwin Meese, James Copland, and Professor Lester Brickman discussed
Trial Lawyers Inc: State Attorneys General in a nationwide conference call.
View the event.
IN THE NEWS
Contracts Criticized, Madison County Journal, 10-27-11
Report Details The Ties That
Bind AGs, Trial Lawyers, Forbes, 10-25-11
Miller Denounces Report Ranking Him Among Friendliest To Trial Lawyers' Agenda,
Politics New Report Exposes Cozy
Relationship Between State AGs and Trial Lawyers, The Blaze, 10-25-11
McGraw Criticized in National Report
on State Attorneys General, West Virginia Watch Dog, 10-25-11
Hood Says Political Foe Abused His Office at DPS,
Picayne Item, AP, 10-25-11
Report: Obama Nominee, Some AGs Too
Close To Plaintiffs Bar, Legal News Line, 10-25-11
State Attorneys General Rake in Trial
Lawyer Cash, Dole Out Contracts, Watchdog.org, 10-25-11
A Message from the Director
Personal-injury lawyers, collectively, are among the biggest of big businesses, so much so that we at the Manhattan Institute have dubbed them “Trial Lawyers, Inc.” It’s no secret that this group of attorneys is a powerful political force, exerting pressure on legislators and elected judges alike. Few realize, however, just how in bed the litigation industry is with the very officials we entrust to enforce the law itself—the attorneys general of the various states. In fact, our state attorneys general have become not just allies of the trial bar but, in many cases, indispensable to developing Trial Lawyers, Inc.’s new lines of business. 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. This report tells the story of the questionable bargain between the trial bar and the states’ top law-enforcement officers.
In understanding just how and why state attorneys general work with the trial bar, it’s important to realize that, unlike the U.S. attorney general, who is appointed by and accountable to the president, most state attorneys general are answerable to no higher official, having been chosen by the public at large. The statewide campaigns they wage demand rich war chests. Moreover, winners often use these positions as stepping stones—as in the cases of Rhode Island senator Sheldon Whitehouse; New York’s former governor, Eliot Spitzer; and Connecticut senator Richard Blumenthal —requiring further financial support.
To subsidize their ambition, many state attorneys general have embraced the plaintiffs’ bar over the past two decades in a symbiotic relationship that has enriched each at the expense of the general public and the rule of law. The large-scale trend dates back to 1994, when Mississippi trial lawyer Richard Scruggs reached out to his state’s attorney general, Mike Moore, a fellow native of Scruggs’s hometown of Pascagoula. Scruggs’s idea was to have Mississippi sue the tobacco companies—and retain his own small firm to litigate the case. But that was not the nub of the problem, the dubious merits of the case aside. It lay in the fee arrangement: Scruggs and his firm would not get hourly fees, which would reflect the amount of work they performed—the normal arrangement between governments or companies and the private lawyers they retain. Instead, the Scruggs firm contracted for a share of the proceeds of the suit, through a contingency-fee arrangement roughly parallel to those regularly arranged between plaintiffs’ lawyers and private individuals, who tend to lack the up-front funds to pay lawyers by the hour. States not only have such resources; they have the legal sophistication to determine whether a case under consideration has a chance of prevailing, unlike private citizens, who must turn to self-interested plaintiffs’ lawyers to make that evaluation.
When the smoke cleared, all 50 state AGs signed on to some version of Scruggs’s scheme. The money involved was so great that even AGs from tobacco-growing states felt pressure to come on board, so as to ensure that their citizens got “their share” of the proceeds. And under the contingency-fee arrangement, a significant portion of each state’s share went to the lawyers themselves. Scruggs himself took in over a billion dollars, and though he is now serving time in federal prison for attempting to bribe a judge in an unrelated case, the litigation business model that he developed lives on. Such arrangements undergird many of Trial Lawyers, Inc.’s most lucrative modern business lines, including litigation against pharmaceutical companies and shareholder lawsuits against companies for alleged securities fraud.
While the contracting out of the state’s business to plaintiffs’ lawyers for a share of the proceeds is the most obvious example of the unholy alliance between attorneys general and the trial bar, it is hardly the only way that lawyers benefit from friendly relations with states’ top prosecutors. Even if not contracted out to private lawyers on a contingency basis, civil lawsuits and criminal investigations launched by state AGs can offer handsome rewards to lawyers involved in parallel litigation—as highlighted in the recent firestorm over the huge out-of-state campaign-donation inflow, from tort lawyers and others, received by the nation’s longest-serving state attorney general, Tom Miller of Iowa, after he assumed control of multistate litigation over home foreclosures. Even when state lawsuits ultimately lose, attorneys general can drive up settlement values for private lawsuits alleging wrongdoing by businesses by placing the state government’s imprimatur on the legal theories floated. The ratchet effect that state AGs’ investigations can bring to civil lawsuits was highlighted powerfully in the cooperation between Scruggs and current Mississippi attorney general Jim Hood, who, in the wake of Hurricane Katrina filed lawsuits attacking insurance companies for simply insisting on the terms of their policies.
Notwithstanding the unsavory alliance between trial lawyers and state AGs, the overall civil-litigation landscape in America continues to improve. In 2009, the most recent year for which data are available, tort costs—measured as the sum of all payments in tort litigation paid to individuals and attorneys, plus administrative costs—fell as a percentage of the economy for the sixth consecutive year (see graph). In a series of major decisions, the U.S. Supreme Court recently enforced a federal law upholding mandatory arbitration clauses, found that another federal law preempted state litigation related to injuries attributed to childhood vaccines, found that a federal regulatory scheme preempted state-led “public-nuisance” lawsuits trying to force the adoption of policies intended to combat global warming, and made it more difficult to assert speculative employment-discrimination class actions. In addition, many states have enacted varieties of tort reform that seem to be paying dividends.
Unfortunately, the tort reform record as it relates to reining in abusive state attorneys general is rather limited. Only ten states have enacted reforms similar to the American Legislative Exchange Council’s Private Attorney Retention Sunshine Act, which mandates public disclosure of contractual relationships between private lawyers and states. The degree of transparency of such arrangements in ten other states—Georgia, Idaho, Iowa, Michigan, Mississippi, Nebraska, Rhode Island, Tennessee, Vermont, and West Virginia—received failing grades from the American Tort Reform Association. Clearly, state attorneys general are the outliers in a broad landscape of reform. Here’s hoping that this report can shed light on how state AGs work to further the trial bar’s agenda and how thoughtful reforms might counteract such trends.
James R. Copland
Director, Center for Legal Policy
Manhattan Institute for Policy Research
See Center for Legal Pol’y, Manhattan Inst., Trial Lawyers, Inc.: A Report on the Lawsuit Industry in America 2003, available at http://www.triallawyersinc.com/html/part01.html.
2. See Center for Legal Pol’y, Manhattan Inst., Trial Lawyers, Inc.: K Street, A Report on the Litigation Lobby 2010, available at http://www.triallawyersinc.com/kstreet/kstr01.html.
In all, forty-three of the fifty state attorneys general are elected. Five states—Alaska, Hawaii, New Hampshire, New Jersey, and Wyoming—have attorneys general appointed by the governor. The state legislature elects the attorney general in Maine, and the Supreme Court selects the attorney general in Tennessee.
4. Whitehouse served as Rhode Island’s attorney general from 1999 through 2003 and was elected to the U.S. Senate in 2006. Spitzer served as New York’s attorney general from 1996 through 2006, when he was elected governor. Serving as Connecticut’s attorney general from 1991 through 2011, Blumenthal was elected to the U.S. Senate in 2010.
See generally Jere Nash, Andy Taggart & John Grisham, Mississippi Politics: The Struggle for Power, 1976-2008 (2d ed. 2010).
See U.S. Congressional Research Service, Attorneys’ Fees in the State Tobacco Litigation Cases (97-883A, Sept. 23, 1997), by John Contrubis, available at http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/97-883_A.pdf (analyzing the fee agreements that the states have contracted with private counsel to pursue tobacco litigation); see also Barry Meier & Jill Abramson, Tobacco War’s New Front: Lawyers Fight for Big Fees, N.Y. Times, June 9, 1998, http://www.nytimes.com/1998/06/09/us/tobacco-war-s-new-front-lawyers-fight-for-big-fees.html (“Nationwide, about 100 law firms were retained, although just a handful of lawyers dominated the cases. For example, the law firm headed by Mr. Scruggs represented Mississippi, the first state to sue, and was later hired by 29 other states.”).
See Victor E. Schwartz et al., Federal Courts Should Decide Interstate Class Actions: A Call for Federal Class Action Diversity Jurisdiction Reform, 37 Harv. J. on Legis. 483, 499 (2000) (“Plaintiffs’ lawyer Richard Scruggs, who made a reported $1 billion for coordinating some of the government tobacco suits”) (citing Eddie Curran, A Class Action Prescription, Mobile Reg., Dec. 30, 1999, at 10A).
8. See Abha Bhattarai, Class-Action Lawyer Gets 5 Years in Bribery Case, N.Y. Times, June 28, 2008, http://www.nytimes.com/2008/06/28/business/28tort.html.
9. See Kevin McNellis, Iowa Attorney General Tom Miller Campaign Contributions Rise When Foreclosure Investigation Begins, STOPFroclosureFraud.com (April 20, 2011), http://stopforeclosurefraud.com/2011/04/21/iowa-attorney-general-tom-miller-campaign-contributions-rise-when-foreclosure-investigation-begins/.
10.See Towers Watson, 2010 Update on U.S. Tort Cost Trends 3, http://www.towerswatson.com/assets/pdf/3424/Towers-Watson-Tort-Report-1.pdf.
See AT&T v. Concepcion, 131 S. Ct. 1740 (2011) (applying Federal Arbitration Act to consumer class actions); Bruesewitz v. Wyeth, 131 S. Ct. 1068 (2011) (holding state common law design-defect claims preempted by National Childhood Vaccine Injury Act); AEP v. Connecticut, 131 S. Ct. 2527 (2011) (holding federal common law of public nuisance as applied to carbon emissions displaced by Clean Air Act); Wal-Mart v. Dukes, 131 S. Ct. 254 (2011) (rejecting class certification of gender-discrimination lawsuit filed on behalf of over one million female Wal-Mart employees).
See generally ATRA, Tort Reform Record (June 30, 2011), available at http://www.atra.org/files.cgi/8608_record_7-1-11.pdf; Lawrence J. McQuillan & Hovannes Abramyan, U.S. Tort Liability Index: 2008 Report (Pacific Research Inst. 2008), available at http://www.pacificresearch.org/publications/id.3709/pub_detail.asp.
The states adopting these reforms are Arizona, Colorado, Connecticut, Florida, Indiana, Kansas, Minnesota, North Dakota, Texas, and Virginia. See ALEC, State Contracts with Private Attorneys: A Call for Sunshine, http://www.alec.org/AM/Template.cfm?Section=PARSA&Template=/CM/HTMLDisplay.cfm&ContentID=15289 (last visited Sept. 29, 2011).
See ATRA, Setting the Course: Establishing Best Practices for Attorney General Use of Outside Counsel 6 (2010), http://www.agwatch.org/settingthecourse.pdf.