Trial Lawyers Inc. K Street
   A Report on the Litigation Lobby, 2010

Trial Lawyers Inc.

STATE GOVERNMENT RELATIONS

STATE SHENANIGANS

State by State, the Litigation Industry Works to Establish New Lines of Business


In America’s federal system, common law is state law. The litigation industry spends heavily on state elections to protect itself. Over the last decade, lawyers and law firms have given almost $725 million to state political campaigns (see graph).

 

Whereas trial lawyers’ giving at the federal level tends to focus on Congress, at the state level the money is spread among all three branches of government. Because state judiciaries make most tort law—and have the power to invalidate statutory tort reforms as unconstitutional—the plaintiffs’ bar has long concentrated on getting its allies onto the state bench (see box "Justice For Sale"). State legislatures, as the source of statutory tort reform, are another arena of interest: any state legislator who tries to advance tort-reform legislation immediately becomes a target of the trial bar and can expect a very expensive reelection campaign. The litigation industry has even begun to turn its attention to the executive branch, since state attorneys general can farm out representation of the state’s civil lawsuits to attorneys in private practice, and state treasurers and comptrollers, who control public-employee pension funds, can hire outside lawyers to initiate securities-fraud lawsuits (see box "Suing for the State"). Such litigation can make plaintiffs’ lawyers millions of dollars through contingent-fee contracts, as it has already done in actions against tobacco and pharmaceutical companies.[101]

 


JUSTICE FOR SALE

Twenty-one states have popularly elected supreme courts, and thirty-nine states elect judges at some level.[144] Since most tort law reposes in judicial decisions, not legislative enactments, Trial Lawyers, Inc. has long understood state judiciaries to be essential to its business, and has accordingly spent big bucks on judicial races to ensure that its favorite sons join or remain on the bench. Inevitably, the business lobby started fighting back, and expensive—and often ugly—campaigns were the result. Just as inevitably, conflicts of interest have arisen between judges’ role as neutral interpreters of the law and their status as elected officials with a need to fund-raise for campaigns.

 

In the 1980s, Texas emerged as a hotbed of political activity in judicial races, and the home of the first million-dollar campaigns. After “business” scored a win over “lawyers” in the 1988 elections, plaintiffs’ lawyer Pat Maloney defiantly asserted: “We are resilient, and we will bounce back.”[145] In 1990, another trial lawyer brazenly told Forbes magazine: “[U]ntil last year the plaintiff bar owned and controlled the Texas Supreme Court.”[146]

 

Both sides continue to struggle for dominance, in Texas and elsewhere. From the 1990s to the past decade, campaign contributions to judicial races nationwide doubled, and judges raised over $200 million in the decade leading up to the 2008 elections.[147] In many states, multimillion-dollar judicial elections have become the norm (see graph). In some hotly contested races, expenditures of independent interest groups on television commercials have exceeded the entire spending of the campaigns themselves.[148]

 

In the 2009 elections, the judicial race to watch was the Pennsylvania Supreme Court contest between Democratic incumbent Jack Panella and Republican Joan Orie Melvin.[149] Melvin won the race, but not before being outspent by Panella more than two to one.[150] Panella’s $1.85 million campaign war chest received hundreds of thousands of dollars in contributions from the plaintiffs’ bar, including $500,000 from the Philadelphia Trial Lawyers Association alone.[151]

 

Although it failed to get Panella reelected, Trial Lawyers, Inc., in concert with the Michigan Democratic Party, did succeed at its top priority of the previous year: defeating Michigan Supreme Court Chief Justice Cliff Taylor, who had presided over a divided court.[152] Taylor was a highly respected jurist—the author of the state’s definitive, three-volume text on Michigan personal-injury law, he was endorsed by the generally left-leaning Detroit Free Press—but was undone in part by a late “dirty tricks” television commercial that accused him of sleeping on the bench.[153]

 

The unseemly nature of high-dollar state supreme court elections drew the attention of the U.S. Supreme Court in Caperton v. A.T. Massey Coal Co.,[154] which was decided last year. A divided court determined that Caperton’s constitutional due-process rights had been violated when West Virginia Supreme Court Justice Brent Benjamin heard his case after receiving over $3 million in campaign contributions from the chairman of the coal company opposite Caperton in the legal dispute.[155] The facts of Caperton tested the outer bounds of propriety, but the conflict of interest they posed was hardly isolated; as Chief Justice Roberts noted, “‘Consumers for Justice’—an independent group that received large contributions from the plaintiffs’ bar—spent approximately $2 million” on the same judicial campaign.[156]

 

Caperton notwithstanding, it is unlikely that the courts will venture often or more deeply into such a thorny thicket. Judicial elections compromise impartiality, or at least cast suspicion upon it, but there are no easy solutions. Judicial appointment systems can be highly political themselves—witness the federal nomination and confirmation process—and in states with judicial “nominating boards,” the plaintiffs’ bar has often worked to stack such committees with its allies.[157] In 2009, the U.S. Chamber of Commerce Institute for Legal Reform—a major player in state judicial campaigns—published a report on such bodies, with an eye toward developing “best practices” that would curb political influence.[158]

 

 

Federalism and Litigation

Though federal courts can hear cross-state disputes, they must be guided by each state’s underlying substantive legal rules,[102] and tight limits on federal courts’ jurisdiction enable clever plaintiffs’ lawyers to keep many of their cases within state judicial systems. For Trial Lawyers, Inc., the federal system creates a powerful “race to the bottom” effect. Lawyers can shop their case to a favorable court—seeking out a county judge who is an ally of the plaintiffs’ bar, or a locality that has a jury pool with a proven propensity for awarding big verdicts. The odds are low that a defendant will succeed in getting its case removed to federal court;[103] so once the local court allows the case to proceed, the plaintiffs’ attorney will happily find himself playing on home turf.[104]

 

Even if a state improves the quality of its elected and appointed officials or enacts legislation that levels the playing field, the federal system allows many plaintiffs to move their cases to some other, more sympathetic state. When the judicial leadership in Madison County, Illinois, for example, decided to combat the county’s reputation as the nation’s worst “judicial hellhole,”[105] a powerhouse local law firm then known as Simmons Cooper started shifting its caseload to Delaware.[106] After tort reforms in Texas made its asbestos cases less profitable, Dallas plaintiffs’ giant Baron & Budd began directing its cases to California.[107] Reforming the tort system state by state is thus very similar to a game of Whack-a-Mole: when trial lawyers are knocked down in one place, they inevitably pop back up somewhere else.

 


SUING FOR THE STATE

Increasingly, Trial Lawyers, Inc. is profiting from its government-relations efforts in the executive branches of state governments. In 1994, asbestos lawyer Dickie Scruggs of Mississippi joined forces with Mississippi attorney general Mike Moore to sue tobacco companies for any additional Medicaid costs that the state had incurred as the result of health problems of its citizens induced by tobacco use.[129] Though he was representing the state government, Scruggs did his work on the basis of a fee arrangement that promised him a share of any eventual proceeds.[130] Scruggs later brought in veteran South Carolina trial attorney Ron Motley to assist, and Moore won the cooperation of the attorneys general of other states.[131] Eventually, all fifty states became participants in the litigation, and the private attorneys they retained profited handsomely from the contingent fees they scored on the states’ behalf, netting as much as $30 billion from settlements reached in 1998 with the major tobacco businesses.[132]

 

In the years since Scruggs, Motley, and other attorneys in the tobacco litigation pocketed those windfalls, plaintiffs’ attorneys around the country have worked to secure similar arrangements with state attorneys general, who collect hefty campaign donations from lawyers to whom they later farm out the state’s work. While some states have adopted ethics rules to govern such contingent-fee contracts, including ones requiring competitive bidding and disclosure of contract terms, others have put off doing so.[133] Darrell McGraw, West Virginia’s attorney general since 1992, was criticized by a judge and the state auditor for the contracting out of state legal business in the tobacco litigation;[134] but in recent years, he has given no-bid contracts to private lawyers designated “special assistant attorneys general.”[135] In 2001, McGraw hired four private firms that had given $47,500 to his reelection campaigns to sue Oxycontin manufacturer Purdue Pharma; the $10 million settlement the firms secured netted them $3 million in fees.[136]

 

In addition to these collaborations with state attorneys general, trial lawyers are working with state treasurers and comptrollers, who control public-employee pension funds, either directly or as ex officio board members, and are therefore in a position to initiate lawsuits on the funds’ behalf. Because the 1995 Private Securities Litigation Reform Act (PSLRA)[137] specified that the “lead plaintiffs” in securities class actions should be those “most capable of adequately representing the interests of class members”[138]—that is, they should be the members of the class with the “largest financial interest” in the litigation —pension funds, as the largest investors in the market, especially those based in populous states such as California and New York, typically control such litigation. After the PSLRA became law, Trial Lawyers, Inc. set its sights on influencing the public officials who control such funds by donating generously to their campaigns.

 

Investing in officials with control over public pensions has proved to be profitable indeed for firms practicing securities law. In New York, for example, two law firms gave a combined $121,800 in campaign funds to Alan Hevesi,[139] who, as state comptroller, was the sole trustee and manager of its public pension funds.[140] Hevesi subsequently asked the same firms to handle the state pension funds’ lawsuits against Citigroup stemming from the collapse of MCI WorldCom.[141] The attorneys collected over $300 million in contingent fees when the case settled in 2004.[142] This sort of success has been repeated in other states, such as Louisiana, three of whose public-employee pension funds are among the five most active lead plaintiffs in securities lawsuits around the United States.[143]

 

 

An Aggressive Legislative Agenda

Historically, the trial bar’s political efforts vis-à-vis state legislatures were defensive. The courts, not the legislatures, took the major steps in expanding liability (see box). In state assemblies, the trial-lawyer lobby largely contented itself with blocking legislative reforms, depending on state supreme courts to invalidate, on constitutional grounds, those that somehow achieved enactment.[108]

 

Over time, while heightened political competition has lowered the litigation industry’s ability to determine the composition of state judiciaries (see box "Justice For Sale"), shifting political trends have produced or increased majorities of trial-lawyer-friendly Democrats in state legislatures.[109] In turn, Trial Lawyers, Inc. has worked to increase its profits by encouraging legislators to draft statutes that generate more lawsuits, increase recoverable damages, or weaken or eliminate statutes of limitation and legal defenses.

 

Some of the bills and enactments pushed by Trial Lawyers, Inc. at the state level in recent years include:

 

  • Authorizing lead-paint litigation. One of the litigation industry’s new business lines involves suing paint manufacturers over the “public nuisance” of having to eliminate lead-based paint from homes—paint that the manufacturers stopped producing over thirty years ago.[110] In Maryland—where asbestos lawyer Peter Angelos, owner of the Baltimore Orioles, pioneered such litigation[111]—a legislature historically beholden to Angelos’s interests continues to flirt with legislation that would authorize such suits.[112]
  • Expanding consumer-fraud litigation. In response to the enactment of tort reforms, trial lawyers have resorted to the private-enforcement mechanisms of many state consumer-protection acts, which often require no showing of actual injury for plaintiffs to recover.[113] Iowa, the last holdout against this tide, finally relented, in 2009, under pressure from trial lawyers.[114] Washington broadened its consumer-fraud statutes last year.[115] And lawyers have tried, unsuccessfully, to broaden consumer-fraud laws in Michigan and New Hampshire.[116]
  • Expanding securities litigation. In New York, a group of legislators tried to add a private right to sue to the state’s Martin Act[117]—the state’s securities-fraud statute that Eliot Spitzer, as attorney general, controversially used to reshape the nation’s finance and insurance industries.[118] In 2009, the American Tort Reform Association gave the amendment its Silver Award for being that year’s worst civil-justice bill;[119] the award is named, ironically, for New York Assembly Speaker Sheldon Silver, who moonlights as “of counsel” for the mammoth plaintiffs’ asbestos firm Weitz and Luxenberg. [120]
  • Authorizing new whistle-blower lawsuits. In recent years, New Mexico, New Jersey, and Oklahoma have all adopted new qui tam statutes, which deputize plaintiffs’ lawyers as “private attorneys general” (see box, page 17).[121] Many other state legislatures have considered whistle-blower bills without (yet) passing them.[122]
  • Expanding recovery of noneconomic damages. Lawyers have worked aggressively to overturn various state limitations on recovery of noneconomic damages. In 2007, Illinois passed a law permitting recovery for “grief, sorrow, and mental suffering.”[123] Also in 2007, Iowa extended recovery for “loss of consortium” from parents of minor children to parents of adult offspring.[124] In New Jersey, an effort to create the new damage categories of “mental anguish, emotional pain and suffering, and loss of companionship” passed the legislature but was defeated by a pocket veto.[125]
  • Increasing damage caps. In 2009, Oregon raised its limitations on recoverable damages against the state.[126] Trial lawyers have tried to get other states to raise damage limits, albeit without significant success.[127]
  • Eliminating or extending statutes of limitation. Many state legislatures have attempted to eliminate or lengthen the time limits within which plaintiffs must file tort claims. In California last year, only a gubernatorial veto stopped a bill that would have allowed “fair pay” employment claims to be filed, regardless of how much time had passed since the matter in question occurred.[128]

 

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101. See, e.g., Robert A. Levy, The Great Tobacco Robbery: Lawyers Grab Billions, Mar. 6, 1999, http://www.cato.org/dailys/03-06-99.html; text accompanying note 136.
102. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
103. See 28 U.S.C. §§ 1441, 1446 (2008) (defining removal jurisdiction).
104. Plaintiffs’ home turf can be quite favorable. Plaintiffs’ lawyer Dickie Scruggs once candidly admitted that there are “magic jurisdiction[s]” in which “the judiciary is elected with verdict money,” and he noted that “it’s almost impossible to get a fair trial if you’re a defendant in some of these places.” Richard Scruggs, Asbestos for Lunch, Prudential Securities Financial Research and Regulatory Conference (May 9, 2002) (on file with author).
105. Every year, the American Tort Reform Foundation (ATRF) publishes a study listing the nation’s worst jurisdictions for being a civil defendant—venues it calls “judicial hellholes”—such as Madison County, Illinois. American Tort Reform Foundation, Judicial Hellholes (2009-2010). Madison County has improved its legal climate in recent years. See id.
106. See Allen Adomite, Watch Out Delaware: We’re Chasing Them Out of Illinois (July 18, 2005), http://www.legalreforminthenews.com/Op-Ed/Op_Ed-ICJL-SimmonsCooper.html; Steve Korris, Asbestos Shift to Delaware Is Sign of Distinction for Madison County, Madison-St. Clair Rec., July 7, 2005.
107. Telephone Interview, In-House Counsel of Defendant Industry (Mar. 31, 2008) (notes on file with author).
108. See Victor E. Schwartz, Judicial Nullification of Tort Reform: Ignoring History, Logic, and Fundamentals of Constitutional Law, 31 Seton Hall. L. Rev. 688 (2001).
109. Cf. 2008 Post-Election Partisan Composition of State Legislatures, http://www.ksefocus.com/pdf/2008Post-ElectionChart.pdf.
110. See CPSC Rel. 77-096 (Sept. 2, 1977) (banning lead-based paint).
111. See Peter G. Angelos Web Page, http://www.angeloslaw.com/pga.htm (last visited Jan. 13, 2010) (noting that Angelos “made history . . . when he became one of the first to move against the [paint] industry . . . . ” Recently, Angelos’s firm withdrew from participation in individual suits against paint manufacturers. See Posting of Jane Genova to Law and More, http://lawandmore.typepad.com/law_and_more/2009/03/another-lead-paint-war-over-this-one-endured-10-years.html (Mar. 13, 2009, 2:11 EST).
112. See Baltimore City Lead Poisoning Recovery Act of 2009, H.B. 1156, 2009 Sess. (Md. 2009); see also Daniel LeDuc & Michael E. Ruane, Orioles Owner Masters Political Clout, Wash. Post, Mar. 28, 1999, at C1.
113. See American Tort Reform Foundation, Private Consumer Protection Lawsuit Abuse (2006), available at http://www.atra.org/reports/consumers/consumer_protection.pdf.
114. See Press Release, Office of the Attorney General, Consumer “Private Right of Action”: What Consumers Need to Know (July 1, 2009), available at http://www.iowa.gov/government/ag/latest_news/releases/july_2009/private_right_of_action.html.
115. See S.S.B. 5531, 61st Legis., Gen. Sess. (Wash. 2009) (codified as amended Rev. Code Wash. 19.86).
116. See Tiger Joyce, “Defensive Efforts” Largely Successful but Litigation Industry Lobbying Will Remain Relentless, Metro. Corp. Couns., Aug. 2009, available at http://www.metrocorpcounsel.com/pdf/2009/August/11.pdf.
117. See A. 8646, 230th Legis. Sess. (N.Y. 2009); cf. N.Y. Gen. Bus. L. § 352-c.
118. See James R. Copland, Spitzer’s Sins in the Spotlight, Nat’l Rev. Online, Mar. 11, 2008, http://www.manhattan-institute.org/html/miarticle.htm?id=5267.
119. See Press Release, American Tort Reform Association, ATRA Awards Medals for “Best” and “Worst” State Civil Justice Legislation in 2009 (Sept. 1, 2009), http://www.atra.org/newsroom/releases.php?id=8408.
120. See Scott, supra note 43.
121. See A. 3428, 212th Legis., Reg. Sess. (N.J. 2008) (enacted Jan. 15, 2008); S.B. 889, 51st Legis., 1st. Sess. (Okla. 2007) (enacted Apr. 25, 2007); H.B. 770, 48th Legis., Reg. Sess. (N.M. 2007) (enacted Mar. 15, 2007).
122. See, e.g., H.B. 2600, 86th Gen. Assem., Reg. Sess. (Ark. 2007); H.B. 1144, 66th Gen. Assem., 1st Reg. Sess. (Colo. 2007); H.B. 551, 149th Gen. Assem. (Ga. 2007); H.B. 631, 82nd Gen. Assem., 1st Sess. (Iowa 2007); H.B. 483, 85th Legis. Sess. (Minn. 2007); S.B. 1244, 93rd Gen. Assem., 2d Reg. Sess. (Mo. 2006); A.B. 4308, 230th Legis. Sess. (N.Y. 2007); S.B. 179, 2007 Gen. Assem. (N.C. 2007); S.B. 2126, 60th Legis. Assem. (N.D. 2007); H.B. 329, 190th Gen. Assem., Reg. Sess. (Pa. 2007); S.B. 82, 117th Gen. Assem., 1st Reg. Sess. (S.C. 2006); S.B. 1309, 80th Legis. (Tex. 2007).
123. H.B. 1798, 96th Gen. Assem., Reg. Sess. (Ill. 2007) (codified as amended 740 Ill. Comp. Stat. 180/2 (2008)).
124. See S.F. 538, 82nd Legis., 1st Sess. (Iowa 2007) (enacted May 9, 2007).
125. See A. 1511, 212th Legis., Reg. Sess. (N.J. 2007).
126. See S.B. 311, 75th Legis., Reg. Sess. (Ore. 2009) (enacted Apr. 15, 2009).
127. See, e.g., S.B. 5815, 60th Legis., Reg. Sess. (Wash. 2007) (calling for increase in maximum damages in consumer-protection lawsuits).
128. See A.B. 793, Reg. Sess. (Calif. 2009) (vetoed Oct. 11, 2009: “as drafted, this measure is far more expansive than the federal law and could pose unreasonable and unlimited liability for California employers”).
129. For a thorough account of the state tobacco litigation, see Walter Olson, The Rule of Layyers: How the New Litigation Elite Threatens America’s Rule of Law 25-72 (2003).
130. See id.
131. See id.
132. See Levy, supra note 101.
133. See Jeffrey S. Nielsen & Jeffrey P. Yushchak, Report on Policies and Practices of State Attorneys General in Initiating and Conducting Investigations and Litigation (2007), available at http://www.instituteforlegalreform.com/component/ilr_issues/29/item/AAG.html.
134. See McGraw v. American Tobacco Co., No. 94-C-1707 (W. Va. Cir. Ct. Nov. 29, 1995) (holding that a contingent-fee arrangement is an unlawful appropriation of state funds); Phil Kabler, Legislative Audit Questions Attorney General’s Authority, Charleston Gazette, Jan. 8, 2002, at 5A.
135. Chris Dickerson, AG’s Practices Questioned by House Committee, W. Va. Rec., Feb. 2, 2007.
136. See West Virginia Citizens Against Lawsuit Abuse, Special Report: Flaunting [sic] Laws You Are Charged to Protect—A Critical Look at Fourteen Years in the Office of Attorney General Darrell McGraw 6 (June 2007), available at http://www.wvrecord.com/content/img/f196361/CALAreport.pdf; Lawyer Receives $3.85 Million; Attorney Was Only Briefly Involved in Tobacco Lawsuit, Charleston Daily Mail, June 27, 2002.
137. Private Securities Litigation Reform Act, Pub. L. No. 104-67, 109 Stat. 737 (1995).
138. See id. at § 27(a)(3)(B)(iii)(I)(bb).
139. See Editorial, Hevesi vs. the Holdouts, N.Y. Sun, July 26, 2004, available at http://www.nysun.com/editorials/hevesi-vs-the-holdouts/78541/. Note that although Hevesi subsequently pleaded guilty to a felony relating to his conduct in public office, see Michael Cooper, Hevesi Pleads Guilty to a Felony and Resigns, N.Y. Times, Dec. 23, 2006, the allegations of wrongdoing leading to that guilty plea are unrelated to his handling of the MCI WorldCom litigation.
140. See New York State Retirement Fund Web Page, http://www.osc.state.ny.us/pension/index.htm (last visited Jan. 13, 2010).
141. See Editorial, supra note 39.
142. See Editorial, Hevesi, Round II, N.Y. Sun, July 19, 2007, available at http://www.nysun.com/editorials/hevesi-round-ii/58725/.
143. See Laura E. Simmons & Ellen M. Ryan, Securities Class Action Settlements: 2006 Review and Analysis 11 & fig. 10 (Cornerstone Research, 2006), available at http://securities.stanford.edu/Settlements/REVIEW_1995-2006/Settlements_Through_12_2006.pdf.
144. See Justice at Stake, http://www.justiceatstake.org/issues/state_court_issues/index.cfm (last visited Jan. 13, 2010).
145. See Brimelow & Spencer, supra note 96.
146. See id.
147. See Justice at Stake, http://www.justiceatstake.org/resources/facts_stats_and_quotes/ (last visited Jan. 13, 2010).
148. See, e.g., Press Release, Independent Expenditures Defined 2006 Washington Supreme Court Races, Justice at Stake (May 17,2007), available at http://www2.justiceatstake.org/contentViewer.asp?breadcrumb=7,55,978.
149. See Posting of Carter Wood to PointofLaw.com, http://www.pointoflaw.com/archives/2009/11/most-important.php (Nov. 2, 2009, 10:21 EST).
150. See National Institute on Money in State Politics, http://www.followthemoney.org/database/StateGlance/state_candidates.phtml?s=PA&y=2009&f=J (last visited Jan. 13, 2010).
151. See National Institute on Money in State Politics, http://www.followthemoney.org/database/StateGlance/candidate.phtml?c=116295 (last visited Jan. 13, 2010). Interestingly, the Philadelphia Trial Lawyers Association hedged its bets and also gave $125,000 to winning candidate Melvin. See National Institute on Money in State Politics, http://www.followthemoney.org/database/StateGlance/candidate.phtml?c=116282 (last visited Jan. 13, 2010).
152. See Press Release, Michigan Democratic Party Highlights Cliff Taylor as Top Target in 2008, Michigan Democratic Party (May 29, 2008), available at
http://www.michigandems.com/newsroom.php?id=44.
153. See Editorial, Despite His Agenda, Retain Chief Justice Clifford Taylor, Det. Free Press, Oct. 14, 2008.
154. See Posting of Walter K. Olson to PointofLaw.com, http://www.pointoflaw.com/archives/2008/11/election-result-2.php (Nov. 5, 2008, 2:55 EST).
155. No.08-22, slip op. (U.S. June 8, 2009), available at http://www.supremecourtus.gov/opinions/08pdf/08-22.pdf.
156. See id. at 13 (Roberts, C. J., dissenting).
157. See Michael DeBow et al., The Case for Partisan Judicial Elections (Federalist Society 2003), available at http://www.fed-soc.org/publications/PubID.90/pub_detail.asp.
158. See U.S. Chamber of Commerce Institute for Legal Reform, Promoting “Merit” in Merit Selection: A Best Practices Guide to Commission-Based Judicial Selection (2009), available at http://www.instituteforlegalreform.com/images/stories/documents/pdf/research/meritselectionbooklet.pdf.