February 12, 2010

The cozy relationship between elected state officials and the plaintiffs lawyers who contribute to their campaigns and win state business has always been ethically troublesome, if not illegal. So we're happy to report that a number of states have been taking steps to address pay to play.

For more than a year, Florida Attorney General Bill McCollum has been working to reform the process for hiring private attorneys who represent the state on a contingency-fee basis. He scored a partial victory late last month when Florida's Board of Trustees, which oversees public pension funds, approved a $50 million per case cap on legal fees paid to outside securities litigation counsel. That may seem like a generous cap, but in 1997 Florida settled a lawsuit with tobacco companies for $13 billion, and the lead law firm got $250 million.

Mr. McCollum, who's running for governor, also wants outside firms to engage in competitive bidding, and any resulting contract and fees awarded to be posted on the Internet. A bill with both reforms has the AG's support and has been introduced in the state legislature.

Alabama, Iowa, Mississippi and Oklahoma have also introduced so-called attorney retention sunshine acts that force states to disclose contracts for legal services and limit the money going to private lawyers. Similar bills are expected to be introduced in Ohio, Pennsylvania, Utah and Washington state. South Carolina Attorney General Henry McMaster has backed legislation that would require outside counsel to submit detailed billing records to his office for review and approval.

Connecticut, Colorado, Kansas, Minnesota, North Dakota, Texas and Virginia have already passed sunshine measures, and it's a sign of progress that other states are hoping to follow suit. Colorado discourages contingency fee arrangements between private lawyers and the government. North Dakota mandates that any such deals in excess of $150,000 be approved by an emergency commission. Virginia requires "an open and competitive" bidding process for contingency pacts that are expected to pay out more than $100,000.

Tiger Joyce of the American Tort Reform Association says the strong backing of the state AG can make all the difference. "The Attorney General must be on board for changing the system in our experience," says Mr. Joyce. "Not just lip service but actively promoting it."

However, some state AGs have a vested interest in the status quo. Mississippi's Jim Hood has resisted reform and regularly hires private attorneys who have donated to his political campaigns. Last week Mr. Hood announced the state's $18.5 million settlement in a lawsuit against the pharmaceutical company Eli Lilly over its marketing of the drug Zyprexa. According to the Jackson (Mississippi) Clarion Ledger, "The Houston, Texas law firm of Bailey Perrin Bailey—which donated $75,000 in campaign contributions to Hood—and a Mississippi firm will earn $3.7 million in outside counsel legal fees from the Zyprexa settlement."

In New York, Attorney General Andrew Cuomo has aggressively investigated pay-to-play hanky panky by securities firms seeking pension business. But private law firms contracting with the state haven't received the same scrutiny. This might have something to do with the fact that plaintiffs lawyers have contributed more than $200,000 to the aspiring governor's campaign coffers.

Reforms that limit or expose pay to play are obviously in the interest of taxpayers, but they also promote good governance. There are legitimate reasons for states to hire private lawyers, particularly when an AG's office is understaffed or in need of specific legal expertise. But when public officials farm out legal work to political contributors, it feeds public skepticism and calls into question the integrity of the office.