Government Use of Contingency Fee Lawyers Works Against Public Interest

Question: If on election day you were asked to chose between a political candidate who promised to work for a reasonable salary, and another candidate who wanted to be paid 25% of the government’s receipts, an amount which could reach billions of dollars, which candidate would you vote for?

Many voters thought they were voting for the former, but are getting the latter.

That’s because several dozen states have chosen to farm out legal work to lawyers who will be paid not for the number of hours they work but a percentage of the proceeds from lawsuits.

In Florida, for instance, a recent $11.3 billion tobacco settlement could mean a $2.8 billion payment for lawyers, an amount the Florida Attorney General’s office likens to $100,000 per hour. Six other states have offered lawyers 25% of the take from tobacco deals. Four others, like Texas, which may end up owing lawyers $1.5 billion, have given 15%. Five states agreed to give lawyers 10%, and others have agreed to let courts (which have in the past awarded 20%-30%) decide lawyers’ pay.

Advocates for trial lawyers give several reasons why lawyers should be paid large contingency fees instead of for work performed, like other state employees.

First, they say that contingency fees are the only way states can afford to hire top-notch lawyers. Nonsense. Tobacco litigation pits forty states with extensive revenues (the Texas state government alone collected $40.4 billion in 1996, which is about $4 billion more than the domestic and international tobacco revenues of the largest tobacco company, Philip Morris, for the same year) against tobacco companies who pay their lawyers by salary or by the hour. If tobacco companies can do it, so can the states. Some have: Maine has capped the fees for its lawyers at $150 per hour and Vermont’s lawyers, in the case of a national deal, will be paid no more than $200,000.

Second, lawyers’ advocates say it’s not fair to ask taxpayers to bear the risk of lawsuits. That’s ridiculous. These lawsuits are designed to raise revenue. If states want to raise revenue from targeted industries, they need only raise taxes on that industry. Raising taxes requires no risky lawsuits, no expensive lawyers, and, best of all, 100% of the proceeds can go directly into state services.

Another advantage of raising state revenues by taxes is that this is done in the legislature, where the public has a voice. And, as no private individuals get a percentage of the take from taxation, a decision to raise taxes (or not) is likely to be based on the merits.

Private lawyers will likely reap tens of billions from tobacco settlements. After they do, won’t they try to keep this cash cow going? If lawyers can make billions saying that states are due dollars for the adverse health effects of tobacco, won’t they want to say the same about junk food? Or liquor? Or fast cars?

The answer is: Yes. And that’s why private profit-making has no place in government decision-making. Government policies should be based on their merits, not on opportunities to give private lawyers billion-dollar profits.

Amy Moritz Ridenour is president of The National Center for Public Policy Research, a non-partisan think-tank based in Washington, D.C. Comments may be sent to her at [email protected].

The National Center for Public Policy Research is a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems. We believe that the principles of a free market, individual liberty and personal responsibility provide the greatest hope for meeting the challenges facing America in the 21st century.