Lawyers will win states' 'tort lotto'

0 Comments | Insight on the News, March 16, 1998 | by David Wagner

Private lawyers stand to make fortunes as `special attorneys' representing state governments against big tobacco, under new rules designed to guarantee that defendants can't win.

What would you say to a fee of $7,700 per hour? That's how much certain plaintiffs' attorneys stand to make in Florida's lawsuit against the tobacco industry to recoup Medicaid costs, as calculated by a free-market policy analyst. Similar jackpots are on tap in other states.

Robert Levy, a senior fellow in constitutional law at the Cato Institute in Washington, notes that this figure assumes 24-hour workdays and seven-day workweeks during a 42-month period. If we assume the lawyers occasionally ate, slept and visited the necessary during those 42 months, the hourly rate goes even higher.

Evidently, say critics, some members of the plaintiffs' bar believe allegedly obscene profits should be redirected from the tobacco industry to their own.

The exorbitant hourly rates, if achieved, would not be the fruit of ordinary tort lawsuits by individuals against the tobacco giants. Instead, it would come from lawsuits brought by states seeking to recover their Medicaid funds from the industry.

Florida amended its Medicaid Third-Party Liability Act in 1990 and again in 1994, creating a virtual can't lose situation for the state when it sues an industry to recoup Medicaid expenses. According to Levy, these amendments altered several traditional rules of the common law of torts:

* They abolished the "assumption of risk" defense, i.e. the argument that the plaintiff knowingly took the risk and therefore cannot recover damages;

* Causation need no longer be specific. Whereas in an ordinary tort case the plaintiff has to show that the defendant directly caused the plaintiff harm, in Florida Medicaid cases the state, as plaintiff, can substitute "statistical analysis" for particular causation;

* The state need no longer identify individual Medicaid recipients whose costs it supposedly is trying to recoup;

* The court may apportion liability among different companies based on "market share";

* No statute of limitations now is valid in Medicaid cases;

* If the state wins (and under these rules, it can hardly lose), it is authorized to recover "reasonable" attorney fees for outside counsel.

Florida enacted these changes by statute. The Legislature eventually voted to repeal them, but Democratic Gov. Lawton Chiles vetoed the repeal bill. Meanwhile, similar changes are working their way through the legislative process in Iowa, Maryland, Massachusetts and Vermont, and have been put into effect by judicial decision in Texas.

It is the rule allowing fees for outside counsel that represents the jackpot for the trial attorneys. The states that are bringing Medicaid lawsuits against the tobacco industry argue that their limited staffs of state-salaried lawyers are no match for the armies of blue-chip law firms, staffed by phalanxes of former Harvard Law Review editors, that the industry can afford to throw at them. So the states need to hire crack tort lawyers from the private bar. And, for the same budgetary reasons that prevent the states from handling these cases solely with state-salaried attorneys, the private attorneys brought in to help must be recompensed on a contingency-fee basis: that is, they get a percentage of any monetary verdict or settlement.

In Levy's view, this sets up a very problematic relationship between the state and the private bar. "These new rules have the effect of punishing the industry," he tells Insight, "and the private `special attorneys' are in effect auxiliary prosecutors.

"But is it proper for the state to use the private bar on a contingency-fee basis? Prosecutors -- unlike private attorneys -- are supposed to balance the needs of the legal system against zeal for courtroom victory. They have to protect all parties, including the defendant. A private plaintiff's attorney litigating for the state on a contingency-fee basis is not going to do this. He will be anything but a dispassionate balancer of competing interests."

And the bigger that contingency fee is, Levy argues, the more unilaterally zealous these "private-public" prosecutors will be. As a defendant, you can forget about getting a fair shake when the attorney on the other side is looking at $7,700 an hour if he cleans your clock -- and a goose egg if he doesn't.

But that kind of prosecutorial incentive is "exactly what the state needs in certain circumstances," says David Fonvielle of Tallahassee's Fonvielle, Hinkle & Lewis, one of the firms handling Medicaid/tobacco litigation for Florida. "In a hostile litigating environment, against an industry that is battle-hardened in litigation, state attorneys will get run over," Fonvielle explains to Insight. "That's one of the things they told us when they came to us. It's an exception to the general rule, but it's an exception justified by what's at stake: It's in the interest of the state and its taxpayers to pursue this litigation, but the state can't do it alone. And it's not without precedent: Florida already contracts with outside contingency-fee lawyers to handle certain collection cases. In those cases, and in the tobacco cases, the theory is the same: The state is better off not using its own resources in certain high-risk legal environments."