State AGs and private plaintiffs' firms redux

I seem to have opened a Pandora's box when I wrote last week about the ruling by a federal judge in Kentucky that Merck can proceed with a constitutional challenge to the state attorney general's use of private lawyers to bring consumer protection claims against the pharmaceutical company. Within hours of the post's publication, I heard from groups on both sides of the debate over state hiring of contingency fee lawyers. It turns out that there's a lot more foment over the issue than I had realized.

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Of course, there wouldn't be so much lobbying against AGs' use of outside lawyers if the plaintiffs' bar hadn't been so successful in obtaining recoveries for state governments. And according to The Center for Justice and Democracy at New York Law School, taxpayers and consumers are the beneficiaries of that success.

Indeed, according to congressional testimony by Northern Illinois University law professor Amy Widman, when business groups talk about limiting contingency fees for outside lawyers hired by state AGs, "what (they) are really discussing is the ability of citizens to have laws enforced even against powerful industries." Widman, who co-authored a 2011 Cardozo Law Review article on state AGs' enforcement of their power under federal consumer protection laws, told the same congressional subcommittee that heard former Florida AG Bill McCollum call for restrictions on states' use of private lawyers that state AGs have not abused the authority Congress has given them, so Congress should continue to permit states to enforce the law by hiring outside counsel.

"It appears from the data that states approach their enforcement role as primarily a means to supplement and support federal enforcement," Widman said. "It is also clear that Congress chose to grant state attorneys general enforcement powers ... in order to increase enforcement. If Congress were to grant the authority with one hand and limit it with the other through regulation of contingency fee arrangements, which in turn would sometimes mean that state attorneys general could not bring a viable enforcement action due to lack of resources, it would amount to an enforcement authority on paper but without any practical significance."

In particular, Widman noted that when Congress passed the 2008 Consumer Protection and Safety Improvement Act and the 2010 Dodd-Frank Act, there was discussion of barring AGs from entering contingency fee contracts to enforce the laws, but no such provisions ended up in the legislation. That's appropriate, she said. "Representing the citizens of their state against large-scale consumer abuses -- whether consumer protection, environmental protection, curbing financial fraud, or other types of systemic injuries -- is both expensive and requires a large staff, resources that many state AG offices are lacking," Widman testified. "State attorneys general must be able to rely sometimes on outside counsel in order to marshal the manpower needed to rectify these types of abuses."

Is Widman's empiricism a heavy enough counterbalance to the scary predictions of pro-business groups? Are defense arguments about due process rights finally going to persuade judges who have so far been reluctant to limit the power of state AGs to hire outside firms? Clearly, these are questions that are going to be as hot in 2013 as they were in 2011 and 2012.

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For a copy of the complete article, contact CJ&D.