Class action "cops": public servants or private entrepreneurs?
INTRODUCTION I. THERE IS GROWING PUBLIC DISTRUST OF THE CLASS ACTION DEVICE II. IN RESPONSE TO GROWING CRITICISM, SOME PLAINTIFFS' ATTORNEYS MISLEADINGLY SEEK TO PORTRAY THEMSELVES AS "PRIVATE ATTORNEYS GENERAL" A. The Profit-Seeking Class Action Lawyer and the Concomitant Effects on Lawsuit Initiation, Selection, and Settlement 1. Lawsuit initiation and selection 2. Settlement B. State Attorneys General Are Subject to Constraints Unknown to Private Class Action Attorneys C. The Enforcement Analogy's Inconsistency with Private Attorney General Statutes D. Blurring Public/Private and Civil/Criminal Distinctions E. Delegation of Attorney General Functions to Private Lawyers III. IF CLASS ACTION LAWYERS SEEK TO PORTRAY THEMSELVES AS PUBLIC SERVANTS, THEY SHOULD BE SUBJECT TO THE SAME ETHICAL STANDARDS AS PUBLIC SERVANTS A. Some Jurisdictions Have Enacted Legislation Addressing Ethical Issues That Arise When States Retain Private Lawyers to Represent Their Citizens 1. Some states bar payment of contingency fees in public representations by private attorneys 2. States are also addressing ethical concerns raised by attorney general retention of campaign contributors B. States Should Consider Applying the Same Types of Ethical Standards to Class Action Lawyers 1. Contingency fees should be eliminated or drastically curtailed 2. Class action attorneys should be prohibited from litigating class actions before judges to whom they have contributed CONCLUSION
Recent surveys indicate growing public distrust of the class action device. Initially intended as a means of resolving numerous commonly grounded controversies through a single lawsuit, class actions are now widely perceived as little more than a money generator for attorneys. This perception should not be surprising, given the emerging pattern of class action settlements (particularly in state courts) in which virtually all of the recovered money flows to the class attorneys, rather than the allegedly injured class members.
During the congressional debate over the recently enacted Class Action Fairness Act, (1) opponents of the legislation sought to recharacterize class actions as private law enforcement efforts and to paint the class attorneys who bring such actions as "private attorneys general"--extensions of federal and state regulators. This has become a common theme among plaintiffs' lawyers. As one commentator has put it, "Because the government has limited resources, private parties need to pick up the slack. Our entire system of government is based on private initiatives, and class actions are no different." (2) Or as another commentator sees it, "The government can only do so much in policing corporate wrongdoing--society needs private attorneys general to assist in protecting victims' rights." (3)
There are two fundamental problems with this revisionist rationale for class actions. In the first place, the concept raises fundamental questions about the validity of the class action device under the Rules Enabling Act. (4) After all, if the true purpose of the class concept were to facilitate private law enforcement, it would be a substantive right. The Rules Enabling Act, however, authorizes the federal judicial branch to create nothing more than purely procedural mechanisms.
That insight is more than a mere technicality. Class actions were designed to allow more efficient recovery of damages for allegedly injured parties. On the other hand, the purpose of law enforcement is to stop or deter wrongful behavior; the restoration of private losses is not a core element of that concept. Thus, recharacterizing class actions as law enforcement tools will serve to reinforce the current negative public perception that although class actions are purportedly brought to recover losses for purportedly injured parties, the real purpose is to take money away from alleged wrongdoers and put it in the hands of uninjured third parties (mostly the attorneys who bring the actions).
The other problem with this analogy is that the incentives for private attorneys bear no resemblance to what motivates classic governmental law enforcement personnel. A government enforcer is charged with promoting the public good and typically is paid the same modest salary regardless of (1) which alleged wrongdoers he or she chooses to pursue, and (2) the size of any settlement or verdict he or she obtains. Private class action attorneys, in contrast, have a very direct interest in the outcome of class action litigation, since they normally keep a hefty portion of the proceeds.
In this regard, the private law enforcement characterization promoted by some class action attorneys is no different from permitting self-appointed "police officers" to roam the streets, set up speed traps, pull over drivers (whether or not they were speeding), and give them the option of either (1) spending a few nights in jail, or (2) resolving the problem by paying the police officer (for personal benefit) whatever he demands. No doubt, the self-appointed "cops" would argue that this would be an efficient system. After all, it would discourage speeding. But justifiably, the public would have no trust in--or respect for--such a system of law enforcement, since prosecutorial decisions would be driven (or at least would have the appearance of being driven) by the overwhelming financial self-interest of the police officers themselves.
Even if the law enforcement rationale for class actions could be squared with established concepts of American law (which it cannot), it would be valid only if the analogy to law enforcement were made complete--i.e., only if the current massive financial incentives for attorneys bringing class actions were eliminated. More specifically, if class actions are law enforcement mechanisms, the counsel who bring them should be paid like law enforcers. They should be paid a reasonable wage for their work, but they should not be sharing the fruits of whatever recovery they obtain. In particular, they should not be eligible for a percentage of whatever recovery they obtain, which has always been an irrational means for paying counsel who bring class actions.
Part I of this Article addresses the growing public distrust of the class action device that is due, in part, to a general perception that the main beneficiaries are the attorneys who receive massive fee awards, rather than the allegedly injured consumers. Part II discusses plaintiffs' attorneys' attempts to recast themselves as private attorneys general and examines the problems that arise from the delegation of attorney general functions to private lawyers. Part III offers some proposals for increasing the accountability of class action lawyers by implementing ethical standards for class attorneys and reducing or eliminating contingency fees.
I. THERE IS GROWING PUBLIC DISTRUST OF THE CLASS ACTION DEVICE
Over the past decade, public disillusionment with class actions has grown. Polls have found that Americans do not trust the class action system, do not think that consumers benefit from class actions, and believe that lawyers take home all the money recovered in such cases. In one recent nationwide poll, only 5% of the respondents thought consumers benefited the most from class actions; 47% viewed attorneys as the primary beneficiaries. (5) Another poll taken in Texas found that 81% of potential jurors resent class action lawyers, and believe that class actions are merely a good way for plaintiffs' lawyers to make money--not a good way for people who sue to receive the compensation they deserve. (6) Over the past two years, more than one hundred editorials in major newspapers have decried the class action "mess" in this country and have urged Congress to take corrective action. These include newspapers of all political stripes, including the Wall Street Journal, the Washington Post, and USA Today. (7) For example, in one of its several editorials on the subject, the Washington Post observed that "[n]o portion of the American civil justice system is more of a mess than the world of class actions." (8) The growing sense that something must be done about class actions recently culminated in passage of the bipartisan Class Action Fairness Act, legislation that expands federal jurisdiction over interstate class actions and requires federal courts to carefully scrutinize coupon settlements. (9)
The criticism of class action practice (particularly in state courts) that led to the passage of the new law stems from several factors. The first is the exponential growth in the number of class actions. (10) Studies show that class action filings have more than tripled over the last decade, (11) an increase occurring primarily in state courts. (12) Much of that explosion is taking place in a small number of rural counties that have come to be known as "magnet" (13) courts or "magic jurisdictions." (14) For example, Madison County, Illinois, covers just 725 square miles and is home to less than 1% of the U.S. population. Yet, class action filings in that county's courts, which are frequently cited as major class action magnets, have increased by more than 5000% over the last five years. In 1998, there were just two class actions filed in Madison County's courts; (15) in 2003, there were 106. (16) Similar increases have been noted in Jefferson County, Texas, Palm Beach County, Florida, and other jurisdictions that are reputedly plaintiff-lawyer friendly. (17) It is expected that the recent passage of the Class Action Fairness Act will substantially reduce the role of magnet courts in class action practice, but the precise effects of the bill obviously remain to be seen.
Numerous reasons have been given for the increase in class action filings, all of which are targeted in the new legislation. A bipartisan report issued by the U.S. Senate Judiciary Committee noted several abuses that have become more commonplace as the volume of class actions has increased: the filing of duplicative class actions by competing attorneys, violations of the class members' and defendants' due process fights, the proliferation of confusing settlement materials that class members are unable to understand, and the use of bounties to compensate some class members at the expense of others. (18) But far and away, one of the most heavily criticized class action abuses has been the use of class action settlements to generate huge fees for lawyers and little or nothing for the allegedly injured consumers. (19)
The U.S. Court of Appeals for the Third Circuit was among the first tribunals to express concerns about class action settlement abuses. In a groundbreaking ruling, it rejected a proposed settlement involving alleged fuel tank defects in General Motors (GM) trucks in 1995, noting that "settlement classes create especially lucrative opportunities for putative class attorneys to generate fees for themselves without any effective monitoring by class members." (20) Nearly ten years and thousands of coupon settlements later, one of many newspaper editorial boards calling for class action reform made essentially the same point: "something [is] terribly wrong with a legal system in which class-action lawyers can win settlements for their clients in the form of coupons while collecting hefty fees for themselves in cash." (21)
The Senate Report accompanying a prior version of the Class Action Fairness Act (the Senate Report for the passed legislation has not yet been published) similarly highlighted lopsided settlements as the first and foremost class action abuse, pointing in particular to
the now infamous Bank of Boston class action settlement ... [in which] the defendant bank was accused of over-collecting escrow monies from homeowners and profiting from the interest. The settlement, approved by an Alabama state court, awarded up to $8.76 each to individual class members, while the class counsel got more than $8.5 million in fees. To make matters worse, the fees were simply debited directly from individual class members' escrow accounts, leaving many of them worse off than they were before the suit. In testimony before the Subcommittee on Administrative Oversight and the Courts, class member Martha Preston recounted how she received $4 from the settlement, but was charged a mysterious $80 "miscellaneous deduction," which she later learned was an expense used to pay the class lawyers' $8.5 million settlement fee. Ms. Preston expressed her disbelief over how "people who were supposed to be my lawyers, representing my interests, took my money and got away with it." (22)
The Federal Trade Commission (FTC) has also voiced growing concerns about class action abuse, to the point where it has begun filing amicus briefs opposing class action settlements in select cases in which the class relief seems too low or the attorneys' fees egregiously high. As former FTC chairman Timothy Muris put it, "Our job is to get more money to consumers, and by giving attorneys less, we're giving consumers more." (23) In a speech about the FTC's amicus brief program, Commissioner Thomas B. Leary expressed particular concern about cases in which private attorneys file a class action on the heels of a government investigation, basically free-riding on the government's investigative efforts. (24) "The counsel then negotiate a settlement in which the class members receive nominal recoveries, the defendants are protected from future private lawsuits, and the plaintiffs' lawyers recover generous fees for very little work." (25) Leary noted that in such cases, either the class members were genuinely injured, in which case they were undercompensated, or the class members were not really injured at all, in which case the lawyers were overcompensated. (26) Either way, these cases effectively amount to a transfer of wealth from a company to a class action lawyer, with no real work accomplished by the plaintiffs' lawyer and no real benefit to the consumers on whose behalf the suit was supposedly brought. (27)
Almost daily, newspapers spotlight class action settlements in which the attorneys are the sole beneficiaries. Frequently, newspaper reporters learn about these settlements when they receive a mailed notice that they are part of a proposed class action settlement. (28) Some have expressed concern not only about the windfall for plaintiffs' lawyers, but also about the problematic nature of providing "relief" to class members that is little more than a marketing program in disguise. As one editorial put it, "The most despicable of class-action settlements in recent years have been those that award coupons or credit to the plaintiffs that are redeemable with the very company being sued." (29) The Senate Judiciary Committee compiled a list of abusive settlements in support of the Class Action Fairness Act that is set forth in the Senate Report for the 2003 version of the legislation. (30) The following cases are some of the examples. (31)
Picaut v. Premier Cruise Lines: (32) This class action alleged that a cruise line collected "port charges" that exceeded the amount actually paid by the defendant. This is just one of numerous cruise class actions that have been filed and settled over the last several years. Under the settlement in this case, plaintiffs will receive $30 to $40 discounts from another cruise line on its two-and three-night cruises out of Port Canaveral, Florida. (33) (Premier is no longer in business.) In other words, a company that had not even been sued and had absolutely no risk of liability agreed to offer coupons--presumably recognizing that such coupons are a promotional opportunity. Counsel for the plaintiffs received $887,000 in fees, costs, and expenses. (34) Numerous other cruise class actions have resulted in similar coupon settlements. (35)
In re Kansas Microsoft Litigation: (36) Microsoft has settled antitrust class actions in ten states in which plaintiffs alleged that Microsoft used its monopoly to gouge consumers. Based on the terms of the settlement, consumers who bought Microsoft software will receive a $5 to $10 voucher good for future purchases of particular computer hardware or software products. To receive the voucher, consumers must download a form from an online website (37) and then mail it in. To redeem the voucher, consumers must mail in the voucher, a photocopy of an original receipt, and an original UPC code. Half of the unclaimed settlement money will be used to donate Microsoft products to schools. A federal judge rejected a similar settlement in part on the ground that the school donations were intended to inflict further injury on Apple. Attorneys in these cases have sought hundreds of millions of dollars in fees. (38)
Shields v. Bridgestone/Firestone Inc.: (39) This suit involves customers who had Firestone tires that were among those that the National Highway Traffic Safety Administration investigated or recalled, but who did not suffer any personal injury or property damage. After a federal appeals court rejected class certification, plaintiffs' counsel and Firestone negotiated a settlement, which has now been approved by a Texas state court. Under the settlement, the company has agreed to redesign certain tires (a move already underway irrespective of the suit) and to develop a three-year consumer education and awareness campaign, but the members of the class received nothing. The lawyers will receive up to $19 million. (40)
Ross v. Portillo's Restaurant Group, Inc.: (41) In this case, consumers alleged that the beer goblets served at a Chicago restaurant chain were misrepresented to contain 12 ounces, when they held only 10.6 ounces. In settlement, the company agreed to give away fifty thousand coupons for $1 off every subsequent $5 purchase at its twenty-two Chicago-area restaurants. (42) All cash from the settlement will go to the lawyers.
DeGradi v. KB Holdings, Inc.: (43) In this case, consumers alleged that KB Toys engaged in deceptive pricing practices on certain products. Under the settlement agreement, the toy retailer offered a thirty-percent discount on selected products between October 8, 2003, and October 14, 2003. In other words, the retailer agreed to hold a sale. According to an independent analyst, KB Toys would benefit from the settlement, because "they're driving traffic." (44) The attorneys received about $1 million. (45)
Ramsey v. Nestle Waters North America, Inc.: (46) This suit involved allegations that Poland Spring water does not really come from a spring deep in the woods of Maine. The settlement calls for discounts or free water to Poland Spring customers over five years and contributions of $2.75 million to charities. In addition, the named plaintiff will receive $12,000. Skeptics noted that the company would have donated to charity and offered promotional discounts anyway. Plaintiffs' lawyers received $1.35 million. (47)
Chavez v. GameStop Corp.: (48) In this class action, plaintiffs alleged that GameStop misrepresented some of the video games it was selling as new, when they had actually been previously purchased and returned. Under the settlement, GameStop agreed to post notices in stores stating, "All software for video game consoles may have been used and returned in accordance with (the store's) return policy." Further, anyone who bought a game from particular stores on specified dates and could produce their receipt would receive a coupon for five percent off the price of any one game. In other words, customers would receive $1.25 off a $25 game--as long as they kept their receipts. The coupon could be redeemed at retail locations, but not on the defendant's website. (49) Lawyers for the plaintiffs were paid $125,000 in fees and costs. (50)
Some judges have begun cracking down on these settlements. In another case involving cruise line port charges, a Florida judge slashed the plaintiffs' lawyers' fee requests .from $1.4 million to $294,000 and ordered that a quarter of the fees be paid in $10 to $60 travel vouchers--the same vouchers that were awarded to the eighty thousand class members. In explaining his decision, the judge said, "Too often, lawyers use class actions as cash cows that ultimately don't yield much for plaintiffs." (51) It is clear from the empirical research, however, that a sprinkling of decisions denying excessive attorneys' fees will not suffice to systematically address settlement abuses; faced with defeat in one jurisdiction, plaintiffs' lawyers can simply file in one after another of the 3065 local county courts nationwide until they find a friendly one.
The recently passed Class Action Fairness Act seeks to address many of these abuses by allowing more class actions to be removed to federal court, requiring greater scrutiny of class action settlements in federal court, and requiring that attorneys' fees based on the value of coupon settlements be based on the coupons that were actually redeemed. (52) The effects of the legislation-and how successful plaintiffs' counsel will be at bringing class actions that circumvent the new law--remain to be seen. But the legislation is mostly jurisdictional: it does not answer the fundamental questions of when class actions are appropriate and what their proper use is.
II. IN RESPONSE TO GROWING CRITICISM, SOME PLAINTIFFS' ATTORNEYS MISLEADINGLY SEEK TO PORTRAY THEMSELVES AS "PRIVATE ATTORNEYS GENERAL"
As public dissatisfaction with class actions has grown, plaintiffs' attorneys have responded by trying to change the terms of the debate, arguing that their role is not simply to get recovery for their clients, but also to "police" big business. Under this theory, it does not matter if the class members recover only a pittance and most of the money goes somewhere else (particularly to the lawyers). As the theory goes, what matters is that class action lawyers will punish and deter corporate misconduct. For example, a partner in one prominent plaintiffs' class action firm argues on its website that "[b]ecause the government has limited resources, private parties need to pick up the slack. Our entire system of government is based on private initiatives, and class actions are no different." (53)
In a speech to students at Temple University, another class action lawyer similarly argued that class actions are a means to enforce the law, and that "through private actions, the law can be effectively applied to redress all wrongdoing, even those [sic] which the government can not immediately address, and through private application [the law] is often applied in innovative ways." (54) Last year, during congressional debate over the Class Action Fairness Act, numerous plaintiffs' groups and public interest groups similarly tried to argue that the current state court class action system is necessary to rein in unpopular industries, like HMOs, tobacco companies, and firearms manufacturers. As one consumer watchdog group put it, class actions are critical to the ability of the general public "to collectively hold renegade corporations accountable." (55)
This new rationale--that class action lawyers effectively serve as "private attorneys general"--is only appropriate if class action lawyers act like, and achieve the same results as, public servants. But neither proposition is true. Class action lawyers' motives are very different from those of public servants. They operate under critically different constraints, and they achieve different outcomes. This rationale is thus quite misleading.
A. The Profit-Seeking Class Action Lawyer and the Concomitant Effects on Lawsuit Initiation, Selection, and Settlement
The first respect in which state attorneys general differ from private class action lawyers is that state attorneys general are public officials who represent "the people" or "the state" and whose incomes are not "contingent" upon litigation outcomes. Class action lawyers, in contrast, are self-appointed, and they have a high financial stake in the outcome of litigation. These differences affect decisions such as whether to initiate legal action, and in what kinds of cases, as well as when and how to settle filed cases. Ultimately, these differences call into question the validity of the private attorney general analogy.
1. Lawsuit initiation and selection
Clearly, state attorneys general have always had the power to initiate civil lawsuits when deemed appropriate. (56) Indeed, "American courts uniformly recognize a state's authority to sue, as parens patriae, to vindicate the state's and its citizens' interests." (57) In Alfred L. Snapp & Son, Inc. v. Puerto Rico, the U.S. Supreme Court held that an "easily identified" interest of a state includes "the exercise of sovereign power over individuals and entities within the relevant jurisdiction--this involves the power" to "enforce a legal code, both civil and criminal." (58) Even more broadly, a state has parens patriae power to prosecute civil actions in furtherance of the health, welfare, and economic well-being of its citizens. (59)
For that reason, proponents of the private attorney general analogy seldom claim that state attorneys general lack the authority to initiate lawsuits aimed at protecting the public interest. Instead, they argue that, although state attorneys general may possess the legal authority to initiate legal action, they often lack the resources needed to take such legal action. According to proponents of the analogy, class action lawyers are needed to fill the enforcement gap left by inadequately funded state attorney general offices and to punish and deter misconduct that would otherwise go undetected or unpunished.
The principal problem with this contention is that, in most cases, class action lawyers do not fill any such enforcement gap. Empirical data show that, far from filling gaps, class action lawyers predominantly file "copycat" or "coattail" lawsuits that follow on the heels of government investigations. A "recurring pattern is evident under which the private attorney general simply piggybacks on the efforts of public agencies--such as the Securities and Exchange Commission (SEC), the FTC, and the Antitrust Division of the Department of Justice--in order to reap the gains from the investigative work undertaken by these agencies." (60) The result is that the "filing of the public agency's action serves as the starting gun for a race between private attorneys, all seeking to claim the prize of lucrative class action settlements, which public law enforcement has gratuitously presented them." (61)
The "coattail" effect is more pronounced in cases involving criminal action by the government or in cases in which the government has already secured rulings that could have preclusive effect in subsequent civil litigation. For example, "[b]arely had the ink dried on Judge Thomas Penfield Jackson's findings of fact in the Microsoft antitrust trial when plaintiff's lawyers began filing class actions against the software giant. One could hardly ask for a better portrait of everything that is predatory about class-action plaintiff's lawyers." (62)
This problem, which was first spotlighted over twenty years ago, is not subsiding. (63) The FTC has filed several legal briefs requesting that courts reduce attorneys' fees in class actions in which private lawyers have "piggybacked" on the FTC's own investigations. (64) Even more recently, New York attorney general Eliot Spitzer's actions against investment and insurance companies have spawned entire industries of copycat class action lawsuits. (65)
The reason class action lawyers prefer to follow--rather than to lead--government investigations is simple: those lawyers prefer "no research" lawsuits that appear likely (from the investigation itself) to yield lucrative settlements with only a minimal investment of time and money. (66) In contrast, government lawyers, who by definition are not driven by profits, tend to be willing to spend more time doing the factual and legal research needed to decide what kinds of cases should be brought, not simply to increase revenue, but to further the public good.
The "gap-filler" argument also ignores that state officials often choose not to initiate legal action for reasons other than inadequate resources. For example, state attorneys general, as elected officials tasked with pursuing the public interest, have discretion to determine that, although a particular lawsuit might produce a recovery, the lawsuit should not be brought. If, for example, the lawsuit requires a reading of a state insurance law that has been either expressly or implicitly rejected by the state insurance commissioner, the state attorney general may defer to that decision and not bring legal action. Or a state attorney general may conclude that civil litigation against an entity such as a corporation is not called for under certain circumstances, such as when the discovered wrongdoing is cabined to a few individuals and the corporation has taken appropriate remedial action. The class action lawyer, by contrast, has no reason or incentive to defer to any such government official, nor any concern about overdeterrence. The opposite is true: so long as the lawsuit appears likely to generate a settlement and accompanying attorneys' fees, the class action lawyer's incentive is to file it.
Some private class actions combine the worst of both worlds--they are "coattail" lawsuits and they supplant the reasoned decisions of state officials. Many class actions, for example, are filed precisely because a state or federal regulatory agency has investigated an alleged problem and concluded that no punishment or remedial action is called for under the circumstances. Class action lawyers then "piggyback" on the factual work undertaken by the agency and simply use the class action vehicle as a way to relitigate the decision whether remedial action is required. (67)
The net effect is that regulatory decisions are shifted away from expert agencies and into the hands of plaintiffs' lawyers, judges, and juries. In a recent insurance case filed against State Farm, for example, plaintiffs' lawyers filed a nationwide class action asserting that the use of nonoriginal equipment manufacturer ("non-OEM") crash parts as repair parts following vehicle crashes constituted consumer fraud. (68) Despite the fact that at least forty states have enacted statutes or regulations expressly permitting the use of non-OEM parts as a method of reducing insurance premiums to policyholders, the trial court certified a nationwide class of almost five million owners of State Farm insurance, applied the forum state's law to all of those claims, and ultimately entered a judgment against State Farm that now exceeds $1 billion.
The "gap-filler" argument is thus both theoretically and empirically unsound. When class action lawyers file "coattail" or "copycat" lawsuits, they do not fill an enforcement gap. To the contrary, they act only to increase the potential penalty beyond--well beyond--the limits established by law and agreed to by state officials. And when class action lawyers file lawsuits state officials have not filed, it may very well be that those state officials decided not to file those cases for a reason. In that case, class action lawyers perform the antidemocratic function of usurping the role traditionally entrusted to expert regulatory agencies and state attorneys general.
Private class action lawyers also have different incentives from state attorneys general when it comes to settling cases. State attorneys general settle cases in a manner they believe furthers the public interest, and often do not factor attorneys' fees into the settlement equation. Private class action lawyers, on the other hand, do not consider the public interest in deciding whether to settle cases, and do strongly consider attorneys' fees.
These differences have at least two important consequences on settlements reached in cases brought by state attorneys general and private class action lawyers. First, it is well understood that attorneys' fees play a disproportionate role in private class action settlements. As discussed in Part I, many class action settlements involve literally tens of millions of dollars in attorneys' fees, whereas those same settlements involve little if any financial benefit to the class members. Settlements that pair huge attorneys' fees with "coupons" worth pennies or little more for the putative class members are common. It is one thing for attorneys' fees to factor into a settlement decision--it is quite another thing for the legal system when fees become the tail that wags the dog in private class action settlements.
Second, state attorneys general often settle cases with public policy issues in mind. Private class action lawyers, on the other hand, are profit-driven and typically have only fees and some recovery by class members in mind. The desire of state attorneys general to base settlements on policy (not profits) has important consequences for the crafting of settlements. For example, state attorneys general may take a more balanced view as to the appropriate severity of a civil punishment than private class action lawyers, approving a settlement involving forward-looking remedial relief. Or, as another commentator has explained, "whereas political incentives would more likely drive government lawyers to insist upon making information public, a contingency fee lawyer faces a powerful incentive to negotiate with defendants for higher monetary payments conditioned on confidentiality." (69)
B. State Attorneys General Are Subject to Constraints Unknown to Private Class Action Attorneys
State attorneys general not only have different incentives from private class action lawyers; they also face different constraints. The first constraint is that state attorneys general are politically accountable. Most directly face the ballot box. They may be voted out of office if their constituents disagree with their enforcement decisions. Moreover, as public officials, they also face the constraints imposed by their legal authority. For example, attorneys general are constrained by state law and principles of state territoriality. They generally do not bring actions that fly in the face of their own states' existing laws, even if a sister state has a contrary law. And they do not file parens patriae actions on behalf of citizens of the other forty-nine states.
Private class action lawyers face none of these constraints. They are not officeholders, and are thus not politically accountable for litigation decisions and settlements. Nor do they face express limits on their legal authority. Rather, as self-appointed law enforcement officers, they may bring whatever action they deem profitable, wherever they deem it to be most profitable, and on behalf of whatever group of individuals they believe the court will certify as a class. Given the peculiarities of the named plaintiff class action model, a plaintiffs' lawyer may generally file a class action wherever a single named plaintiff resides or purchased a product. The class action lawyer may also "define" the proposed class to include any group of individuals allegedly harmed by the same misconduct, framed at whatever level of abstraction, including individuals residing nationwide. The combination of these two facts--"universal venue" plus a nationwide class definition--permits serious mischief by plaintiffs' lawyers. Indeed, it is now well established that these facts permit plaintiffs' lawyers to seek out the state court judges--the "magnet courts"--around the country that are most likely to certify lawsuits (including those with proposed nationwide classes) for class treatment and approve settlements that provide worthless coupons to class members while enriching plaintiffs' lawyers. (70)
The fact that private plaintiffs' lawyers face fewer limits on their legal authority in bringing class actions than do state attorneys general is ironic, given that private plaintiffs' lawyers have no real underlying authority for pursuing class actions as private attorneys general. By way of analogy, if self-appointed "cops" began policing the streets to punish and deter wrongdoing, they might very well be exempt from the constraints imposed by the Fourth Amendment (since they would not be state actors), but they would also lack any serious authority to police the streets in the first place.
C. The Enforcement Analogy's Inconsistency with Private Attorney General Statutes
Another problem with the private attorney general model is that it equates class action lawsuits with true private attorney general statutes enacted by legislatures. Class actions may, of course, assert a wide variety of underlying state and federal substantive claims based in statutory or common law. The vast majority of those underlying laws are not themselves "private attorney general" laws in the traditional sense. Indeed, when first coined over sixty years ago, the "private attorney general" phrase was used to describe statutes under which a legislature specifically authorized a private plaintiff to sue on behalf of the general public--even if the private plaintiff was not himself or herself harmed by the asserted misconduct. (71)
Perhaps the best known private attorney general statute is the federal False Claims Act. (72) The False Claims Act permits the federal government to bring both criminal and civil actions against individuals who submit "false or fraudulent claim[s] for payment" to it. (73) But it also authorizes "qui tam" actions, in which a private plaintiff--known as a "relator"--brings a civil action to enforce the law in the name of the sovereign, the United States. (74) Another well-known private attorney general statute is California's Unfair Competition Law (UCL), (75) which prohibits, inter alia, "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." (76) The UCL also provides for enforcement by the California attorney general, local prosecutors, or private parties. (77) Until recently, the UCL also authorized lawsuits filed by "any person acting for the interest of itself, its members or the general public," (78) even if that person was not a competitor of the defendant and has not been harmed by the defendant's conduct. (79)
A common feature of true private attorney general statutes is that they permit "bounty hunters" unharmed by the asserted misconduct to pursue the public good through asserting a "public right" on behalf of the general public or the sovereign. Moreover, the purposes behind these statutes are precisely the ones offered by class action lawyers to describe the purposes of all class actions. With respect to the False Claims Act, for example, Congress "intended the qui tam provisions to supplement the nascent prosecutorial capabilities of the Attorney General by creating financial incentives for private individuals to enforce the statute." (80)
Proponents of the private attorney general model of class actions point to these statutes as evidence that private lawyers can indeed pursue the public good and police corporate wrongdoing through private litigation. There are fundamental problems, however, with that argument. The fact that in narrow areas, legislatures have created specific private attorney general statutes does not mean that every class action should be treated as a de facto private attorney general lawsuit. Indeed, the vast majority of class actions are not filed under the UCL or the False Claims Act, and most do not have any legitimate claim of embodying a true private attorney general action. Equating any private class action--even if it is based purely on a common law tort claim--with a private attorney general action ignores the fact that the relevant legislature has implicitly rejected the idea that the particular tort claim should receive the status of a private attorney general action. Respect for the democratic process thus requires circumscribing the use of the phrase "private attorney general" to those lawsuits grounded in statutes authorizing a private party to litigate on behalf of the general public or the sovereign.
Moreover, because they were enacted by legislatures, laws like the UCL and the False Claims Act are subject to the ordinary democratic process, including amendment or repeal. This allows the democratic process to refine these statutes over time in furtherance of basic public policy objectives. The democratic process has unquestionably influenced the scope of private attorney general statutes like the False Claims Act and the UCL. When it appeared, for example, that "coattail" qui tam lawsuits were enriching relators without furthering the False Claims Act's intended purposes, Congress specifically amended the statute to prohibit lawsuits based on information the federal government already possessed and also to reduce the "bounty" a relator could obtain. (81) And on November 2, 2004, the voters of California passed Proposition 64, which in large part repealed the private attorney general provisions of the UCL. Under Proposition 64, a private individual may sue under the UCL only if he or she "has suffered injury in fact and has lost money or property as a result of ... unfair competition." (82) And if an injured individual seeks to bring a UCL claim in a "representative" capacity, his or her claim must "comply with procedural requirements applicable to class actions." (83)
Similarly, true private attorney general statutes have checks on the power of a private plaintiff. Under the False Claims Act, for example, a qui tam lawsuit is filed under seal, and the federal government has a period of sixty days to investigate the issue and decide whether to intervene in the case. (84) If the federal government decides to intervene, it assumes "primary responsibility" for pursuing the claim. (85) If the federal government decides not to intervene, it may even ask the court to dismiss the action. (86) And, even before the passage of Proposition 64, the remedies available to a private litigant asserting a UCL claim were narrower than those available to a public litigant. (87)
D. Blurring Public/Private and Civil/Criminal Distinctions
The "private attorney general" phrase has traditionally been used to describe statutes under which a legislature has specifically authorized a private plaintiff to sue on behalf of the general public or the sovereign. On the other hand, class action lawyers today invoke the phrase to justify the entire class action agenda--regardless of the substantive law that underlies the claims in a particular class action. That much broader use of the term blurs several important distinctions that the law has historically recognized.
First, the modern use of the phrase blurs the distinction between public and private lawyering. In a state attorney general action, the state attorney general represents the public or the sovereign. In a private lawsuit, by contrast, the private lawyer represents a party. And more specifically, in the class action world, the private lawyer represents the "named plaintiff" and, if the class is certified, that specific class of individuals. But the private attorney general model of the class action lawyer blurs the scope of the attorney-client relationship. If the class action is really about policing corporate misconduct, what role, if any, does the named plaintiff play in a class action, and does the private lawyer have any responsibilities to that named plaintiff?
Second, the modern use of the phrase blurs the distinction between civil litigation and criminal punishment. Generally speaking, "policing" corporate misconduct is the business of criminal law enforcement, whereas civil litigation is about obtaining compensation for injuries sustained by third parties. Again, the private attorney general model blurs this distinction by suggesting that class action lawyers pursuing compensatory damages claims are self-appointed, quasi-law enforcement officers tasked with punishing and deterring misconduct. If that is the case, then the heightened procedural protections that exist in criminal proceedings, as well as quasi-criminal proceedings like punitive damages claims, should extend to the defense of class action lawsuits.
The blurring between private and public, and civil and criminal, litigation also offends the Rules Enabling Act. (88) Under that federal statute--and the myriad state constitutional provisions, statutes, and rules that largely mirror it--the class action device is purely procedural, and cannot abridge, enlarge, or modify substantive law. This point was made by the Senate Judiciary Committee in its report regarding the Class Action Fairness Act of 2000. Relying on cases from a number of federal courts rejecting efforts to use the Federal Rules of Civil Procedure to expand substantive rights, the report concluded that "[t]o the extent that class actions are characterized as having a private attorney general purpose, there are strong arguments that rule 23 is simply null and void." (89) Another commentator has observed that class "actions constitute a form of procedural shell game, in which a procedural device that has been designed to do nothing more than facilitate the enforcement of the substantive law's authorization of private damage suits transforms that private remedial model into a qualitatively different form of remedy that was never part of that substantive law." (90) If the class action device cannot alter an element of a substantive claim, then neither should it be converted from a private method of civil litigation into a public method of punishment and deterrence.
E. Delegation of Attorney General Functions to Private Lawyers
The problems explored above concerning the private attorney general model of the class action lawyer have been confined to cases in which class action lawyers have simply proclaimed themselves quasi-law enforcement officers pursuing the public good by punishing and deterring corporate misconduct. That model, however, has become more complex in recent years due to the willingness of many state attorneys general to team up with private plaintiffs' lawyers in bringing consumer fraud and antitrust litigation. For example, state governments, as well as the federal government, have sometimes hired private lawyers to pursue government claims. For example, in the tobacco litigation, many state attorneys general hired private lawyers (on a contingency basis) to represent their states. (91) This is also becoming a trend in cases involving lead paint and gun control, as well as environmental remediation lawsuits. (92) These cases share important characteristics with traditional class actions: they involve "aggregating the claims of [the state's] citizens and fulfilling a role similar to that of a class action." (93) Similarly, state attorneys general have sometimes teamed up with private class action lawyers to pursue class action and parens patriae litigation simultaneously. (94) As one commentator summed this up, "The new litigation involves a mix of private class actions brought by private attorneys on behalf of injured individuals and consumers, and public actions brought by state attorneys general, municipalities, and others, often with the assistance of private attorneys." (95)
Although this development is an important one, it does not in any way render apt the general model of private class action lawyers as private attorneys general. Rather, it simply confirms that there is a continuum of cases, ranging from purely private to purely public, that has a wider range of middle ground than it did before. In garden variety class actions, plaintiffs' lawyers are no more private attorneys general today than they were yesterday.
To be sure, some have praised this development as an "efficient effort to buy expertise in class actions or the substantive underlying legal area." (96) And this development does, at least to some degree, reduce some problems explored above with respect to the private attorney general model. For example, there is at least some political accountability in cases in which the attorney general plays some role. But these arrangements do not eliminate the problems altogether.
In addition, these new private/public arrangements create new problems that deserve close scrutiny. First, these arrangements risk converting the public offices of state attorneys general into less-than-objective profit centers, further blurring the distinction between public and private litigation and even running afoul of state and federal law. (97) Second, these arrangements may bypass the proper budgetary processes by permitting risk-free investments by governments--investments whose costs are borne only after a settlement. (98) Third, they risk bypassing the legislative process by seeking industry-shaping behavior that legislatures have specifically contemplated and rejected. (99) Fourth, they risk creating the appearance of impropriety as public officials dole out choice assignments, particularly in "coattail" cases following some other state's investigation, to political patrons. That problem may be magnified by the possibility that these arrangements will facilitate the existence of "revolving doors" between lucrative plaintiff practices and stints at attorney general offices.
III. IF CLASS ACTION LAWYERS SEEK TO PORTRAY THEMSELVES AS PUBLIC SERVANTS, THEY SHOULD BE SUBJECT TO THE SAME ETHICAL STANDARDS AS PUBLIC SERVANTS
As discussed in Part II, private attorneys who effectively negotiate their salaries with defendants and have little or no accountability to the individuals they represent have very different incentives from government employees, who are subject to important constraints and receive a modest government salary. Nonetheless, those private attorneys seek to portray themselves as private attorneys general, helping police corporate conduct and enforce consumer protection laws. Even if one were to assume the validity of the analogy, that raises other questions: what can be done to increase the accountability of class action lawyers so that they are subject to the constraints faced by true public servants, and in doing so, what can be done to help restore public confidence in our class action system?
In this regard, it is useful to consider first the scenario discussed above, in which state attorneys general actually contract with private attorneys to represent their citizens. A number of states have tried to address the ethical concerns implicated by these alliances through legislation that regulates the selection and compensation of private attorneys and binds them to ethical standards akin to those of public employees. Among the approaches with which states have experimented are (1) imposing a competitive bidding process for the selection of private attorneys, (2) barring private attorneys from accepting contingency fee contracts when they are retained by a state attorney general, and (3) prohibiting attorneys who contribute to state attorney general campaigns from collaborating with those attorneys general on litigation. Below, we suggest broader adoption of such policies and application of some of these principles to class action practice generally.
A. Some Jurisdictions Have Enacted Legislation Addressing Ethical Issues That Arise When States Retain Private Lawyers to Represent Their Citizens
Most contracts between governmental entities and the private sector are regulated through publicly negotiated competitive bidding. If a state government wishes to purchase office equipment, it must follow certain procedures and can only purchase these items from sources that meet certain competitive bidding requirements. The price, of course, plays an important role in selecting the winning bid--as do quality, specification compliance, and ethical considerations. The reason for these procedures is obvious: they ensure that public funds are spent in an efficient, properly authorized manner.
In contrast to these restrictions on most state contracts, attorneys general in most states are free to hire private attorneys without any procedural requirements, despite the obvious ethical concerns of such appointments. One reason for the lack of regulation in this area has been the prevailing view that in contingency suits, the taxpayers do not directly pay for the retention of the private attorney--and thus, such retentions are a "deal" for the state and do not raise the same issues as overpriced paper clips.
Experience, of course, has shown otherwise. In the tobacco litigation, private attorneys negotiated huge fees, which, while not technically paid for by the taxpayers, arguably resulted in smaller recoveries for the states. A number of commentators expressed concern about that result, leading to proposed--and in some cases, enacted--legislation addressing attorneys' fees and retention. (100)
1. Some states bar payment of contingency fees in public representations by private attorneys
Government attorneys, like most other professionals, are paid a salary for their work. When a government attorney secures a victory, he or she normally does not keep a percentage of the proceeds--that would be a misappropriation of public money. The same is true of private attorneys hired by states to represent them in specialized matters, such as patent litigation and debt collection. In such situations, attorneys are required to provide a detailed accounting to the public of their time and are paid accordingly. As discussed above, the exceptions to this norm have been in the areas of consumer fraud and antitrust litigation. State attorneys general have been entering into contingency contracts, under which the private lawyers essentially keep a portion of the recovery they secure for the state's citizens, rather than being paid a negotiated fee for the work actually done in the case.
The use of contingency fee contracts during the tobacco litigation spawned vigorous constitutional debates over the issues that arise when private attorneys act for profit on the public's behalf. Various courts sought to address the boundaries of public/private partnerships and considered the extent to which attorneys general can contract out their parens patriae powers. (101) In several cases, the courts concluded that attorneys general could not enter into contingency fee agreements on behalf of the people of a state without approval from the legislature. (102) At least one state's supreme court found that separation of powers principles prevented the attorney general from entering into contingency fee agreements at all. (103)
But just as important as the constitutional issues raised by contingency fees in public/private partnerships are questions about incentives and accountability. (104) While state-appropriated money is not directly involved in absorbing the costs of lawsuits brought under contingency fee agreements by private attorneys, large fee payments ultimately reduce the public's recovery. Thus, contingency fee contracts create the illusion that litigation is being conducted at no cost to taxpayers--when in fact, large payments to private attorneys come from the awards to the public. (105) Former Alabama attorney general Bill Pryor, a critic of contingency fee contracts between government entities and private attorneys, has noted that
there needs to be either a ban of contingent fee contracts for government attorneys or tight regulation in this area.... The use of contingent fee contracts allows governments to avoid the appropriation process and create the illusion that these lawsuits are being pursued at no cost to taxpayers.... If you do not ban these arrangements, in the context of government suits, you should, at least, consider several legislative restrictions: caps on hourly rates or percentages; competitive bidding; detailed time and expense record keeping; review by legislative committee of contracts with attorneys; and limits on campaign contributions by attorney to government officials. (106)
Some states are taking steps to ensure that outside attorneys representing the government act in the interest of the individuals that they represent and to prevent the waste of funds won on behalf of the public. Notably, five states (Colorado, Kansas, North Dakota, Texas, and Virginia) have enacted laws that restrict the use of contingency fee contracts by the state to varying degrees, either by capping hourly rates, requiring competitive bidding, or preventing attorneys general from making contingency fee contracts without legislative approval. (107)
Colorado. Although Colorado generally contracts with outside attorneys at an hourly rate, (108) a law enacted in 2003 permits government agencies to hire outside counsel under contingency fee agreements subject to defined terms. In the declaration accompanying the law, the legislature explained that certain restrictions were necessary because contingency fee contracts give the attorneys involved in the case "a direct personal stake in the outcome of legal proceedings [that] is potentially unfair to the citizens or businesses against whom the governmental entity has filed suit and may not serve the best interests of the citizens or businesses on whose behalf the governmental entity initiates legal proceedings." (109) The legislature also reasoned that the restrictions were necessary to provide accountability for government decisions and to avoid the payment of excessive attorney fees by the state. (110) Instead of giving outside attorneys representing the state a blank check, the law requires private attorneys to report monthly costs, including the number of hours billed, a description of work performed, and court costs associated with the case. In addition, the law caps the amount that the state may pay under a contingency fee contract to $1000 an hour. (111)
Kansas. Under the Kansas law governing contingency contracts, the state's Legislative Budget Committee must approve both the proposed request for the contract and the final contingency fee contract. (112) In addition, the Kansas law requires the state's director of purchases to prepare a quarterly detailed report disclosing the hours worked on the case, the expenses incurred, the aggregate fee amount, and a breakdown of the hourly rate. (113) Kansas also requires that the judge hearing the case assess whether the attorneys' fees are reasonable prior to final disposition. Any individual can provide the court information about the reasonableness of the fees paid by the state. (114) In determining reasonableness the court is instructed to consider a number of factors, including the time and labor required, legal skill, risk, customary fees, the results obtained, and experience. (115)
North Dakota. Shortly after the North Dakota Supreme Court denied a challenge to the attorney general's authority to enter into contingent fee arrangements with private attorneys, that state's legislature became one of the first to enact restrictions on contingency fee agreements with private attorneys acting on behalf of the public. (116) Under this statute, North Dakota requires its attorney general to get approval from the state's Emergency Commission (comprised of the governor and the chairman of the state Senate Appropriations Committee) in cases where fees may exceed $150,000 and the outside counsel is compensated by a contingency fee arrangement. (117) State senators supporting the legislation argued that the legislative branch of government should have oversight over large contingency fee cases because such contracts are effectively "appropriation[s] that go to private attorneys." (118)
Texas. Texas statutes set the most detailed terms for contingency fee agreements between state government entities and private attorneys of any state. Texas requires all state government entities to notify the Legislative Budget Board before entering into contingency fee agreements (if recoveries are expected to exceed $100,000) for legal services. The Legislative Budget Board may only approve proposals after a finding that (1) there is a substantial need for the legal services, (2) the legal services cannot be adequately performed by state attorneys, and (3) private attorneys cannot be paid hourly rates because of the nature of the services or because the government entity contracting for the services does not have the amount available to pay the fees. (119)
Texas also sets the terms of contingency fee contracts with private attorneys. (120) All contingency fee contracts must provide the method by which the fee is computed and state how expenses will be paid. Texas also limits reimbursement for outside expenses (such as experts and consultants) if they are not contemplated by the agreement--expenses thus are only reimbursed by appropriation. (121) In addition, Texas caps hourly rates at $1000 per hour and adopts a lodestar method for fee computation. (122) Under this method, the base fee (the hourly rate multiplied by the hours worked) is multiplied by a "reasonable multiplier based on any expected difficulties in performing the contract"; this multiplier may not exceed four without legislative approval. (123) In addition, the contract must limit the amount of the contingency fee to a stated percentage of the amount recovered--it may not exceed thirty-five percent without approval by the legislature. (124)
Texas also requires outside attorneys to keep current and complete written time and expense records as well as report these records to the state auditor. (125) In addition, the contracting attorney must provide the state with a description of the recovery and the firm's computation of the amount of the contingency fee at the conclusion of litigation. (126)
Virginia. In 2003, Virginia enacted a law that requires public, competitive bidding for all contingency fee contracts exceeding $100,000. (127) The Virginia law requires outside attorneys to file proposals that include the cost of services, the qualifications and relevant experience of the attorneys, and the legal expertise of the attorneys. (128) The Virginia budget report accompanying the law estimated that the competitive bidding requirement would result in savings because the reform would encourage "legal services firms to submit lower prices for representing the Commonwealth's state agencies than they otherwise would." (129)
2. States are also addressing ethical concerns raised by attorney general retention of campaign contributors
Another concern that arose during the public/private joint tobacco litigation in the early 1990s was the perception that the lucrative contingency fee contracts were being awarded to large political donors. For example, Mississippi attorney general Mike Moore chose his top campaign contributor to lead the state's Medicaid recovery suit against the tobacco companies.(130) And in West Virginia, tobacco defendants successfully challenged the state's contingency fee contract with lawyers who had contributed to the attorney general's campaign. (131)
One attorney general who opposed contingency contracts generally noted that they "create the potential for outrageous windfalls or even outright corruption for political supporters of the officials who negotiated the contracts." (132) At the very least, awarding legal contracts to campaign donors raises concerns that private attorneys are selected to represent the public not merely on the basis of their efficiency and competence, but also on the strength of their political connections.
In response to these concerns, the American Bar Association (ABA) drafted Model Rule 7.6 of the Model Rules of Professional Conduct, which states, "A lawyer or law firm shall not accept a government legal engagement ... if the lawyer or law firm makes a political contribution or solicits political contributions for the purpose of obtaining or being considered for that type of legal engagement or appointment." (133) Notably, the ABA stopped short of prohibiting lawyers from accepting contracts from government officials to whom they make political contributions. (134) But the comment to Model Rule 7.6 warns of the serious conflict of interest that exists when lawyers make political contributions to government agencies that contract for litigation services:
[W]hen lawyers make or solicit political contributions in order to obtain an engagement for legal work awarded by a government agency, or to obtain appointment by a judge, the public may legitimately question whether the lawyers engaged to perform the work are selected on the basis of competence and merit. In such a circumstance, the integrity of the profession is undermined. (135)
Rule 7.6 requires proof of illegal purpose and is therefore virtually unenforceable in all but the most extreme cases--cases that could also be prosecuted under existing state bribery laws. As a result, some states have adopted more restrictive rules in order to prevent even the appearance of corruption. New York, for example, prohibits a lawyer from making a political contribution to any candidate if "a disinterested person would conclude that the contribution is being made or solicited for the purpose of obtaining or being considered eligible to obtain a government legal engagement," even if there is no "understanding between the lawyer and any government official or candidate that special consideration will be given in return for the political contribution or solicitation." (136) To determine whether a "disinterested person" would conclude that a contribution to a candidate for government office has been made for the purpose of obtaining a legal contract, the New York Code allows factfinders to consider whether legal work was awarded pursuant to a process "insulated from political influence," the amount of the contribution, whether the contributor had plans to seek government legal work, and whether the contributor is eligible to vote in the candidate's jurisdiction. (137)
Even the New York rule, however, is not nearly as stringent as rules that govern other professionals who do business with states. Most notably, under Rule G-37, promulgated by the Municipal Securities Rulemaking Board and approved by the SEC, financial professionals are prohibited from making campaign contributions to state and local bond issuers (and officials of such issuers) for two years prior to entering a contract with the bond issuer and two years after termination of such a contract. (138) In addition, the rule requires disclosure of all contributions to bond issuers. (139) Rule G-37 is widely seen as having had a salutary effect on the municipal bond industry. (140)
With Rule G-37 as a model, a few states are taking steps to prohibit or cap political contributions to candidates from those seeking any government contracts, including contracts for legal services. For example, South Carolina prohibits government contractors from making campaign contributions to officials responsible for issuing the contract. (141) West Virginia also bans campaign contributions to state candidates from those seeking a government contract. (142) And Ohio caps political contributions from government contractors within the two years prior to negotiation of a contract, to officeholders in an executive agency that has ultimate responsibility for awarding a contract. (143)
B. States Should Consider Applying the Same Types of Ethical Standards to Class Action Lawyers
As discussed above, the appropriation by class action attorneys of the "private attorney general" moniker raises many of the same ethical issues as the actual retention of private attorneys by a state attorney general. For that reason, it is worth considering whether some of the proposals discussed in this Article could be applied effectively in the class action context as well.
1. Contingency fees should be eliminated or drastically curtailed
The time has come to reconsider the use of contingency contracts in class action cases. As with suits brought on behalf of the state, contingency contracts create the illusion that nobody is paying the attorneys' fees, when in fact these contracts have high costs to society in terms of diminished plaintiff recovery, imposition of a so-called "tort tax" on American consumers, and a resulting drain on the national economy. Moreover, the notion that it is more efficient to set a price at the end of litigation is directly contrary to nearly every other consumer transaction. To the contrary, setting fees before litigation commences also allows counsel and client to decide whether it is worthwhile to proceed with that compensation system in place. As the U.S. Court of Appeals for the Seventh Circuit has noted, "[t]he best time to determine [the market] rate is the beginning of the case, not the end (when hindsight alters the perception of the suit's riskiness, and sunk costs make it impossible for the lawyers to walk away if the fee is too low)." (144)
In this regard, it may make sense for legislatures to consider a complete or partial ban on the use of contingency fees in class actions. Drawing on the statutes that have been enacted to regulate states' retention of private plaintiff attorneys, such legislation might require that plaintiffs' attorneys establish an hourly fee at the start of litigation with an appropriate, modest lodestar.
Alternatively, if contingency fees remain in use in class action litigation, they should be drastically curtailed to address the appropriate distinction between an individual case and a class action. In an individual case, most states permit contingency fees ranging from 33% to 40%. The entire purpose of a class action, however, is to achieve efficiency gains by aggregating hundreds or (more often) thousands of similarly situated individuals. In a certified (or settled) class action involving, for example, five million individuals, each of whom is asserting a $1000 claim, courts should extend to the issue of attorneys' fees the efficiency gains of the class action device itself. If that device, working as intended, makes a five-million-plaintiff case more like a one-plaintiff case, there is no reason to base the contingency fee on a large percentage of $5,000,000,000 (the total class recovery, assuming a plaintiff verdict). Rather, a much smaller number is appropriate, particularly if the case is a "coattail" class action in which there is less (or even approaching zero) risk of no recovery.
For example, assume that a person has a civil claim that would cost $40,000 in fees and expenses to prosecute fully. If the claim were worth $100,000, the attorneys retained to bring the lawsuit on behalf of the claimant would have the potential of recovering the $40,000 in fees and expenses that they would invest in prosecuting the action under the standard contingency fee arrangement (that is, 40% of the recovery). If ten thousand other people possessed precisely the same claim against the same defendant, such that all of those claims could be presented on a class basis (that is, the same evidence would be presented on behalf of all class members), the entire group of similar claims presumably could be prosecuted on a class basis in the same cost range--perhaps four times what it would cost to litigate the claim individually. Under current practice, if the class action succeeded, the attorneys prosecuting the action would have the potential of recovering upwards of $400 million (40% of the $1 billion that would be recovered at the rate of $100,000 for each of the ten thousand claimants), even though prosecution of the class action would really cost only around $160,000 (four times the cost of the single plaintiff action). Indeed, even if prosecution of the class action cost ten times more than the individual action ($400,000), the class attorneys would still score a huge windfall under our current class action contingency fee system, all because the system affords no discount of the contingency fee amount in recognition of the purported efficiencies involved in prosecuting a case on a class basis.
Still other options include the following proposals:
* Banning the payment of contingency fees in "follow-on" or "copycat" class actions, drawing on the qui tam analogy in Part II.
* Requiring class action attorneys to itemize their costs and hours billed in settlement notices sent to class members (i.e., their clients) and provide a justification for the fees sought.
* Creating a simple mechanism for class members to file written objections to attorneys' fees in a class action.
2. Class action attorneys should be prohibited from litigating class actions before judges to whom they have contributed
Judges routinely review attorneys' fee awards prior to settlement of big class actions. In jurisdictions where these judges privately finance their campaigns, they are often in the position of reviewing the proposed fee awards for some of their major campaign contributors. That gives the appearance that the judges are inappropriately influenced by their contributors and calls into question the practice of plaintiffs' firms making substantial political contributions to elected judges, particularly when the same judges approve massive contingency fee awards.
Recent data show that political spending by plaintiffs' attorneys is out of control. For example, major plaintiffs' firms contributed massive amounts of money to a tightly contested judicial race in Madison County, Illinois's Fifth District, a magnet jurisdiction for class actions. (145) Spending for the race totaled over $9 million dollars (as much as the candidates for Illinois attorney general spent in their 2002 statewide race). Moreover, some of the top contributors (contributing between $50,000 and $1.165 million each) were the same firms that routinely bring and settle class actions in the jurisdiction, including two of the most frequent class action fliers in Madison County. (146)
Changes in the election process, including prohibiting class action lawyers from contributing to judicial campaigns or requiring that judges recuse themselves from class actions brought by their contributors, would reduce appearances of a quid pro quo when elected judges approve huge attorneys' fees in class action settlements. (147)
Growing disillusionment with class actions--particularly those that end in "no real benefits" settlements--has placed pressure on plaintiffs' lawyers to justify a form of justice in which they are frequently the only beneficiaries of the litigation that they initiate. In response, some of those lawyers have suggested that their failure to achieve any real monetary benefits for their clients is of no moment, since they are augmenting state and federal government efforts to regulate and investigate corporations. Without their privately funded efforts, these attorneys argue, society would not have sufficient resources to "polic[e] corporate wrongdoing" (148) and "hold renegade corporations accountable." (149) But this justification is flawed on numerous levels, distorts the purpose of the class action device, and highlights significant distinctions between the work of consumer class action lawyers and the work of true public servants.
Nevertheless, the effort by certain class action lawyers to cast themselves as "private attorneys general" may unwittingly provide possible solutions to the growing abuse of the class action device. By rethinking the way class action lawyers are paid for their work, making them more accountable to their "clients," and holding these lawyers to the same standards as public employees, state legislatures could drastically curtail class action abuse, restoring the original purpose of class actions: to enable citizens to band together and vindicate important rights.
(1.) Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.).
(2.) Lieff Cabraser Heimann & Bernstein, LLP, Class Action Lawsuits: Answers to Frequently Asked Questions, at http://www.lieffcabraser.com/about.htm (last visited Mar. 20, 2005) [hereinafter Class Action Lawsuits FAQ].
(3.) Id. (emphasis added).
(4.) 28 U.S.C. [section] 2072(b) (2000).
(5.) Darryl Haralson & Adrienne Lewis, USA Today Snapshots: Opinions on Class-Action Lawsuits, USA TODAY, Mar. 24, 2003, at 1B; Press Release, U.S. Chamber of Commerce, Chamber Poll Shows Americans Want Class Action Reform; Almost Half Believe Plaintiffs' Lawyers Benefit More than Consumers (Mar. 5, 2003), available at http://www.uschamber.com/press/releases/2003/march/03-40.htm.
(6.) Corporate Distrust on the Rise, Study Shows, TEX. LAW., Nov. 4, 2002, at 1.
(7.) See, e.g., Editorial, Class-Action Plaintiffs Deserve More than Coupons, USA TODAY, Oct. 9, 2002, at 12A; Editorial, Class-Action Showdown, WALL ST. J., July 8, 2004, at A14; Editorial, Reforming Class Actions, WASH. POST, June 15, 2003, at B6.
(8.) Editorial, Actions Without Class, WASH. POST, Aug. 27, 2001, at A14.
(9.) See Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.).
(10.) John H. Beisner & Jessica Davidson Miller, They're Making a Federal Case of It ... In State Court, 25 HARV. J.L. & PUB. POL'Y 143, 157 (2001) [hereinafter Beisner & Miller, Federal Case].
(13.) John H. Beisner & Jessica Davidson Miller, Class Action Magnet Courts: The Allure Intensifies, 4 Class Action Litig. Rep. (BNA) 58 (Jan. 13, 2003) [hereinafter Beisner & Miller, Magnet Courts].
(14.) Richard Scruggs, Asbestos for Lunch, Remarks at the Prudential Financial Research Financial Services Group Conference (June 11, 2002).
(15.) Beisner & Miller, Magnet Courts, supra note 13, at 58.
(16.) Trisha L. Howard, While Congress Debated Bill, Lawyers Rushed to File in Madison County, ST. Louis POST-DISPATCH, Jan. 11, 2004, at El.
(17.) Beisner & Miller, Magnet Courts, supra note 13, at 58.
(19.) S. REP. NO. 108-123, at 15-18 (2003). A recent study by Theodore Eisenberg and Geoffrey Miller purported to analyze attorneys' fees in state and federal class actions over the last decade and to determine (1) whether fees have generally increased over this period, and (2) whether state courts are more generous than federal courts when it comes to awarding fees to lawyers in class action settlements. See Theodore Eisenberg & Geoffrey P. Miller, Attorney Fees in Class Action Settlements: An Empirical Study, 1 J. EMPERICAL LEGAL STUD. 27 (2004). While the study concluded that attorneys' fees are not higher in state court cases, it suffered from fundamental flaws that render this conclusion unreliable. First, the study almost exclusively analyzed federal court precedents and thus could not draw meaningful comparisons between federal and state court cases. And second, the study explicitly excluded "coupon" settlements. As a result, the study virtually ignored the cases where the attorneys' fees are typically most egregious and the state courts in which most of the abuses are occurring.
(20.) In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 788 (3d Cir. 1995) (disapproving settlement granting $1000 coupons to class members who purchase new GM trucks).
(21.) Editorial, Pay the Lawyers in Coupons, Too, ROCKY MTN. NEWS (Denver, Colo.), July 25, 2004, at 7E [hereinafter Pay the Lawyers].
(22.) S. REP. NO. 108-123, at 15-16 (footnotes omitted).
(23.) Caroline E. Mayer, FTC Seeks to Limit Attorney Fees in Class Action Suits, WASH. POST, Sept. 30, 2002, at A17.
(24.) Thomas B. Leary, The FTC and Class Actions, Remarks at the Class Action Litigation Summit (June 26, 2003), available at http://www.ftc.gov/speeches/leary/ classactionsummit.htm.
(27.) While some have sought to blame defense counsel (and to some extent, their clients) for agreeing to such settlements, that criticism cannot be justified. Defense counsel are under ethical obligations to zealously represent their clients (and, in turn, their shareholders). The responsibility for protecting the class interests lies exclusively with the purported class counsel, under the supervision of the court handling the matter.
(28.) See, e.g., David Averill, Editorial, So Sue!, TULSA WORLD, Oct. 26, 2003, at G1.
(29.) Editorial, Plaintiffs Left Out, ROCKY MTN. NEWS (Denver, Colo.), Nov. 11, 2003, at 34A.
(30.) S. REP. No. 108-123, at 16-18 (2003).
(31.) The case discussions in the following paragraphs are adapted from a white paper the authors of this Article prepared during recent debates over class action reform. John Beisner & Jessica Davidson Miller, Recent State Court Class Action Settlements: Good for Lawyers, Bad for Consumers (n.d.) (unpublished white paper, on file with author). For other, similar case discussions also adapted from the same white paper, see U.S. Chamber Inst. for Legal Reform, State Court Class Action Settlements: A Pattern of Abuse and a Proposed Solution (comments submitted to FTC), at http://www.ftc.gov/bcp/workshops/ classaction/other/inst_legalreform.pdf (last visited Mar. 21, 2005).
(32.) No. 96-06932 CA-FN (Fla. Cir. Ct. filed May 1, 1996).
(33.) See The Law Offices of Douglas Bowdoin, for Plaintiffs, and Todd Pittenger of Lowndes, Drosdick, Doster, Kantor & Reed, P.A., for Defendant, Announce a Proposed Class Action Settlement, BUS. WIRE, July 2, 2003, LexisNexis Library, Business Wire File.
(34.) Premier Cruise Line Class Reaches Settlement, MEALEY'S LITIG. REP.: CLASS ACTIONS, July 17, 2003, at 19.
(35.) Tom Collins, Broward Judge Slashes Fee Request, Blasts Attorneys Suing Cruise Lines, BROWARD DAILY BUS. REV., Mar. 15, 2001, Westlaw, Broward Daily Business Review file.
(36.) No. 99 CV 17089 (Kan. Dist. Ct. Johnson Cty. filed July 29, 2003).
(37.) The relevant website is Microsoft Products Settlement--Kansas--Homepage, at http://www.microsoflproductssettlement.com/kansas (last updated Aug. 25, 2004).
(38.) Paul Adams, Judge Rejects Microsoft Settlement, BALTIMORE SUN, Jan. 12, 2002, at 1A; Dan Voorhis, Here's How to Claim Your Share of Microsoft Settlement, WICHITA EAGLE, Dec. 28, 2003, at 1B.
(39.) No. E-0167637 (Tex. Dist. Ct. Jefferson Cry. filed July 31, 2002).
(40.) Miles Moore, BFS Settles Nationwide Class Action Suit, RUBBER & PLASTICS NEWS, Aug. 4, 2003.
(41.) No. 00 CH 13612 (Ill. Cir. Ct. Cook Cty. Nov. 18, 2003).
(42.) Judge Approves Portillo's Class Action Settlement over Mislabeled Beer, PR NEWSWIRE, Nov. 26, 2003, LexisNexis Library, PR Newswire File.
(43.) No. 02 CH 15838 (Ill. Cir. Ct. Cook Cty. Oct. 1, 2003).
(44.) Betty Lin-Fisher, 30% off Sale Part of KB Toys Settlement, AKRON BEACON J., Oct. 14, 2003, at D1.
(45.) Stephanie Zimmermann, KB Toys Settles Lawsuit over "Low" Prices by Offering Discount, CHI. SUN-TIMES, Oct. 11, 2003, at 3.
(46.) No. 03 CHK 817 (Ill. Cir. Ct. Kane Cty. Nov. 5, 2003).
(47.) Edward D. Murphy et al., Conflict and Change, PORTLAND PRESS HERALD, Jan. 4, 2004, at IF; see also Notice of Proposed Class Action Settlement and Settlement Hearing, Ramsey (Aug. 20, 2003), available at http://www.noticeclass.com/springwatersettlement/ LongFormNoticev2.pdf.
(48.) No. CGC-02-406658 (S.F. (Cal.) Super. Ct. Sept. 22, 2003).
(49.) Gamestop.com, Notice of Class Action and Proposed Settlement (Aug. 1, 2003), available at http://www.garnestop.com/gs/help/classaction.asp.
(51.) Pay the Lawyers, supra note 21.
(52.) See Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.).
(53.) Class Action Lawsuits FAQ, supra note 2. The website continues, "Michael B. Hyman, Editor in Chief of the ABA Publication Litigation Docket, agreed: 'The government can only do so much in policing corporate wrongdoing--society needs private attorneys general to assist in protecting victims' rights.'" Id.
(54.) Sheller Ludwig & Badey, Temple Graduate Class Learns Benefits of Class Actions, at http://www.sheller.com/NewsDetails.asp?NewsID=156 (Oct. 28, 2004).
(55.) Jamie Court, Limit on Class Action Suits Will Eviscerate Consumer Rights, at http://www.consumerwatchdog.org/ftcr/co/co000609.php3 (June 14, 2000).
(56.) See, e.g., Bill Isaeff et al., Origin and Development of the Office, in STATE ATTORNEYS GENERAL: POWERS AND RESPONSIBILITIES 3, 7-9 (Lynne M. Ross ed., 1990).
(57.) Richard P. Ieyoub & Theodore Eisenberg, State Attorney General Actions, the Tobacco Litigation, and the Doctrine of Parens Patriae, 74 TUL. L. REV. 1859, 1864 (2000).
(58.) 458 U.S. 592, 601 (1982).
(59.) Ieyoub & Eisenberg, supra note 57, at 1866-71.
(60.) John C. Coffee, Jr., Rescuing the Private Attorney General: Why the Model of the Lawyer as Bounty Hunter Is Not Working, 42 MD. L. REV. 215, 222 (1983).
(61.) Id. at 228.
(62.) Howard M. Erichson, Coattail Class Actions: Reflections on Microsoft, Tobacco, and the Mixing of Public and Private Lawyering in Mass Litigation, 34 U.C. DAVIS L. REV. 1, 40 (2000).
(63.) See id. at 1-3.
(64.) See, e.g., Brief of Amicus Curiae The Federal Trade Commission, In re First Databank Antitrust Litig., 209 F. Supp. 2d 96 (D.D.C. 2002) (No. 1:01CV00870), available at http://www.ftc.gov/os/2002/01/hearstbrief.pdf; Brief of Amicus Curiae The Federal Trade Commission, In re Buspirone Patent Litig., 185 F. Supp. 2d 340 (S.D.N.Y. 2002) (MDL Docket No. 1410), available at http://www.ftc.gov/os/2002/01/busparbrief.pdf.
(65.) Monica Langley & Theo Francis, Risky Business: Insurers Reel from Spitzer's Strike, WALL ST. J., Oct. 18, 2004, at A1; Pat Milton, Insurer Marsh Facing $500 Million Penalty, TULSA WORLD, Oct. 29, 2004, at E6; Potential Liability Sparks Class Actions on Behalf of Policyholders, Shareholders, BEST'S INS. NEWS, Oct. 25, 2004, Westlaw, A.M. Best Newswire File.
(66.) Bryant Garth et al., The Institution of the Private Attorney General: Perspectives from an Empirical Study of Class Action Litigation, 61 S. CAL. L. REV. 353, 377 (1988).
(67.) Some courts have found class actions to be barred under those circumstances. See, e.g., In re Bridgestone/Firestone Inc. Tires Prods. Liab. Litig., 153 F. Supp. 2d 935, 946 (S.D. Ind. 2001) (holding that plaintiffs' request for vehicle recall was preempted by the decision of the National Highway Traffic Safety Administration not to order a recall).
(68.) See Avery v. State Farm Mut. Auto. Ins. Co., 746 N.E.2d 1242, 1254 (Ill. App. Ct. 2001), appeal allowed, 786 N.E.2d 180 (Ill. 2002).
(69.) Erichson, supra note 62, at 36-37.
(70.) See generally supra Part I.
(71.) See Associated Indus. v. Ickes, 134 F.2d 694, 704 (2d Cir. 1943).
(72.) 31 U.S.C. [subsection] 3729-3733 (2000).
(73.) Id. [section] 3729(a)(1); see also id. [section] 3730(a).
(74.) See id. [section] 3730(b).
(75.) CAL. BUS. & PROF. CODE [subsection] 17200-17208 (West 1997).
(76.) Id. [section] 17200.
(77.) See id. [section] 17204.
(78.) Id. (emphasis added).
(79.) See Comm. on Children's Television v. Gen. Foods Corp., 673 P.2d 660, 667 (Cal. 1983). Indeed, there is some authority holding that an individual basing a UCL claim on the violation of another statute may sue even if the other statute does not create a private right of action at all. See Midpeninsula Citizens for Fair Hous. v. Westwood Investors, 271 Cal. Rptr. 99, 108 (Ct. App. 1990).
(80.) Ara Lovitt, Note, Fight for Your Right to Litigate: Qui Tam, Article II, and the President, 49 STAN. L. REV. 853, 856 (1997).
(81.) Id. at 857.
(82.) CAL. BUS. & PROF. CODE [section] 17204 (West Supp. 2005).
(83.) OFFICIAL VOTER INFORMATION GUIDE: CALIFORNIA GENERAL ELECTION NOVEMBER 2004, at 38 (2004).
(84.) 31 U.S.C. [section] 3730(b)(2) (2000).
(85.) Id. [section] 3730(c)(1).
(86.) Id. [section] 3730(c)(2)(A).
(87.) See CAL. BUS. & PROF. CODE [subsection] 17203-17204, 17206 (West 1997).
(88.) See 28 U.S.C. [section] 2072(b) (2000).
(89.) S. REP. No. 106-420, at 41 (2000). To support this statement, the committee offered footnote 100, which reads in part:
See, e.g., In re Baldwin-United Corp., 770 F.2d 328, 335 (2d Cir. 1985) (rejecting arguments that Fed. R. Civ. P. 23 could be used as authorizing issuance of an injunction to protect class members); Synanon Church v. United States, 557 F. Supp. 1329, 1330 n.2 (D.D.C. 1983) (rejecting argument that Fed. R. Civ., p. [sic] 57 creates right to jury trials in declaratory judgment actions). Cf. Douglas v. NCNB Nat'l Bank, 979 F.2d 1128, 1130 & n.2 (5th Cir. 1992) (declining to apply Fed. R. Civ., p. [sic] 13(a) where doing so would "abridge as lender's substantive rights and enlarge the debtor's substantive rights").
(90.) Martin H. Redish, Class Actions and the Democratic Difficulty: Rethinking the Intersection of Private Litigation and Public Goals, 2003 U. CHI. LEGAL F. 71, 81-82 (2003) (footnotes omitted).
(91.) See id.
(92.) See, e.g., Erichson, supra note 62, at 22; Edmondson Fed Up, DAILY OKLAHOMAN (Oklahoma City, Okla.), Sept. 10, 2004, at 6A; Press Release, Dep't of Justice, Federal Court Dismisses Four Billion Dollar Claim Against the United States (Nov. 26, 2002), available at 2002 WL 31663169.
(93.) Erichson, supra note 62, at 19-20 (quoting former Colorado attorney general Gale Norton).
(94.) Deborah R. Hensler, The New Social Policy Torts: Litigation as a Legislative Strategy, 51 DEPAUL L. REV. 493,497 (2001).
(96.) Edward Brunet, Improving Class Action Efficiency by Expanded Use of Parens Patriae Suits and Intervention, 74 TUL. L. REV. 1919, 1932 (2000).
(97.) Vesting enforcement power in a private attorney with a financial stake in the litigation may violate the Due Process Clause. See, e.g., Marshall v. Jerrico, Inc., 446 U.S. 238, 249-50 (1980) (holding that "[a] scheme injecting a personal interest, financial or otherwise, into the enforcement process may bring irrelevant or impermissible factors into the prosecutorial decision and in some contexts raise serious constitutional questions"). It may also violate basic tenets of the "neutrality" of enforcement officers. See, e.g., Clancy v. Superior Court, 705 P.2d 347, 353 (Cal. 1985) (holding that a contingency fee agreement between city and private attorney concerning abatement action was "antithetical to the standard of neutrality that an attorney representing the government must meet"). And at least one state's supreme court has found that separation of powers principles prevent the attorney general from entering into contingency fee agreements, period. Meredith v. Ieyoub, 700 So. 2d 478, 481 (La. 1997) ("[U]nder the separation of powers doctrine, unless the Attorney General has been expressly granted the power in the constitution to pay outside counsel contingency fees from state funds, or the Legislature has enacted such a statute, then he has no such power.... [O]ur constitution vests the power over state finances in the legislative branch as part of its plenary power, a power the Attorney General can obtain only by the constitution or other law.").
(98.) See, e.g., Meredith, 700 So. 2d at 483.
(99.) Hensler, supra note 94, at 498.
(100.) See, e.g., Margaret A. Little, A Most Dangerous Indiscretion: The Legal Economic, and Political Legacy of the Governments' Tobacco Litigation, 33 CONN. L. REV. 1143, 1150-56 (2001); Adam Cohen, Are Lawyers Running America?, TIME, July 17, 2000, at 22.
(101.) As suggested above, parens patriae is the power of the attorney general to act on behalf of state residents.
(102.) See, e.g., Meredith, 700 So. 2d at 484.
(103.) Meredith, 700 So. 2d at 481.
(104.) Other states have upheld contingency fee contracts with outside counsel where state attorneys general acted pursuant to a statutory grant of authority. City of San Francisco v. Philip Morris Inc., 957 F. Supp. 1130, 1135 (N.D. Cal. 1997) (denying defendant's motion to disqualify counsel hired under a contingency fee contract); Philip Morris Inc. v. Glendening, 709 A.2d 1230, 1240-41 (Md. 1998) (holding that a contingency fee contract authorized by the governor of Maryland was valid); State v. Philip Morris Inc., No. C1-94-8565 (Minn. Dist. Ct. filed Aug. 18, 1994) (holding that the Minnesota constitution provides the attorney general with the authority to enter into contingency fee contracts); Philip Morris Inc. v. State, No. L 11480-096 (N.J. Super. Ct. filed Aug. 20, 1996) (upholding New Jersey statutory scheme allowing contingency fee contracts); Philip Morris Inc. v. Graham, No. 960904948 CV (Utah Dist. Ct. Mar. 11, 1997) (upholding a Utah statute allowing contingency fee contracts).
(105.) Michael DeBow, Restraining State Attorneys General, Curbing Government Lawsuit Abuse, POL'Y ANALYSIS, May 10, 2002, at 1-18.
(106.) Bill Pryor, Curbing the Abuses of Government Lawsuits Against Industries, Presentation to the American Legislative Exchange Council 8-9 (Aug. 11, 1999), available at http://www.heartland.org/pdf/48482a.pdf.
(107.) See COLO. REV. STAT. ANN. [section] 13-17-304 (West Supp. 2004); KAN. STAT. ANN. [section] 75-37,135 (Supp. 2003); N.D. CENT. CODE [section] 54-12-08.1 (Supp. 2003); TEX. GOV'T CODE ANN. [section] 2254.103 (Vernon 2000); VA. CODE ANN. [section] 2.2-510.1 (Michie Supp. 2004).
(108.) COLO. LEGIS. COUNCIL STAFF, CONCERNING A LIMITATION ON THE USE OF CONTINGENT FEE CONTRACTS BY GOVERNMENTAL ENTITIES TO RETAIN PRIVATE ATTORNEYS, S.B. 03-086, 2003 Sess. (2002).
(109.) COLO. REV. STAT. ANN. [section] 13-17-302(f) (West Supp. 2004).
(110.) Id. [section] 13-17-302(g)-(h).
(111.) Id. [section] 13-17-304.
(112.) KAN. STAT. ANN. [section] 75-37, 135(a) (Supp. 2003).
(113.) Id. [section] 75-37,135(d).
(114.) Id. [section] 75-37,135(e).
(116.) State v. Hagerty, 580 N.W.2d 139 (N.D. 1998).
(117.) N.D. CENT. CODE [section] 54-12-08 (Supp. 2003).
(118.) See Hearing on SB2047 Before the Senate Judiciary Committee, 56th Leg. 3 (N.D. 1999) (statement of Sen. Stenehjem).
(119.) TEX. GOV'T CODE ANN. [section] 2254.103(d) (Vernon 2000).
(120.) Id. [section] 2254.105 (Vernon 2000).
(122.) Id. [section] 2254.106(a)-(b) (Vernon 2000).
(123.) Id. [section] 2254.106(c).
(124.) Id. [section] 2254.106(d).
(125.) Id. [section] 2254.104(a)-(b) (Vernon 2000).
(126.) Id. [section] 2254.104(c).
(127.) VA. CODE ANN. [section] 2.2-510.1 (Michie Supp. 2003).
(129.) VA. DEP'T OF PLANNING AND BUDGET, FISCAL IMPACT STATEMENT, H.B. 309, at 1 (2002).
(130.) Kevin Sack, Tobacco Industry's Dogged Nemesis, N.Y. TIMES, Apr. 6, 1997, at A22.
(131.) See Sam Tranum, W. Va. Tobacco Lawyer Fees Raise Questions, CHARLESTON DAILY MAIL, June 26, 2002, at P6A.
(132.) Pryor, supra note 106, at 8.
(133.) MODEL RULES OF PROF'L CONDUCT R. 7.6 (2003).
(134.) In 1998 an ABA Task Force on Lawyer's Political Contributions issued a divided report that condemned "pay-to-play" practices and recommended disclosure of political contributions by lawyers, but did not support the disqualification of lawyers (or law firms) who make political contributions. The ABA declined to adopt a pay-to-play rule until it approved Model Rule 7.6 in February 2000.
(135.) MODEL RULES OF PROF'L CONDUCT R. 7.6 cmt. 1.
(136.) N.Y. CODE OF PROF'L RESPONSIBILITY EC 2-37 (2000).
(137.) Id. at EC 2-38.
(138.) MUN. SECS. RULEMAKING BD. R. G-37(b)(i)(2005).
(139.) Id. R. G-37(e)(i).
(140.) In a recent Interpretive Notice on G-37, the Municipal Securities Rulemaking Board noted that the impact of the rule has been positive: "The rules have altered the political contribution practices of municipal securities dealers and opened discussion about the political contribution practices of the entire municipal industry." Mun. Sec. Rulemaking Bd., Notice Concerning Indirect Rule Violations: Rules G-37 and G-38 (Aug. 6, 2003), available at http://www.msrb.org/msrb 1/archive/G-3738August2003.htm.
(141.) S.C. CODE ANN. [section] 8-13-1342 (Law. Co-op. Supp. 2004).
(142.) W. VA. CODE ANN. [section] 3-8-12(d) (Michie Ann. Supp. 2003).
(143.) OHIO REV. CODE ANN. [section] 3517.13(I) (Anderson Supp. 2003).
(144.) In re Synthroid Mktg. Litig., 264 F.3d 712, 718 (7th Cir. 2001).
(145.) Jim Copland, Turning out Trial Lawyers, Inc., NAT'L REV., Nov. 8, 2004, http://www.nationalreview.com/comment/copland200411080818.asp.
(146.) Beisner & Miller, Magnet Courts, supra note 13; Beisner & Miller, Federal Case, supra note 10; Copland, supra note 145.
(147.) Copland, supra note 145.
(148.) Class Action Lawsuits FAQ, supra note 2.
(149.) Court, supra note 55.
John H. Beisner, Matthew Shors & Jessica Davidson Miller *
* Mr. Beisner is managing partner of the Washington, D.C., office of O'Melveny & Myers LLP and chairs the firm's Class Action Practice Group. Ms. Miller is a member of the firm's Class Action and Strategic Counseling Practice Groups. Mr. Shors is a member of the firm's Class Action and Appellate Groups. The authors wish to thank Terrell McSweeny, J.D. (expected 2005), Georgetown University Law Center, for her research assistance and thoughtful contributions to the Article.
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|Title Annotation:||The Civil Trial: Adaptation and Alternatives|
|Author:||Beisner, John H.; Shors, Matthew; Miller, Jessica Davidson|
|Publication:||Stanford Law Review|
|Date:||Apr 1, 2005|
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