Have you ever lost a bet and had to eat or drink something so nauseating that just thinking about it induces a gag reflex? A college classmate’s alchemic experiments with ketchup and maple syrup, perhaps? Peggy Little’s new CEI study, Pirates at the Parchment Gates, exposes another abhorrent blend—one which all of us have been forced to swallow with regularity over the past two decades: state attorneys general outsourcing their enforcement work to bounty-hunting trial lawyers.
In Pirates, Little lays out cogent legal and policy arguments against the unsavory bedfellow relationship between public attorneys general and private plaintiffs’ lawyers. As with most insidious featherbedding arrangements, the entanglements Little describes form a self-propagating feedback loop. These arrangements begin when an enterprising private plaintiffs’ firm reaches out to a state’s attorney general and offers its services in conducting an investigation and litigation on the state’s behalf. As a general formula, these proposals often involve legally unprecedented and expansive allegations against politically unpopular and deep-pocketed corporate defendants. The private firm will usually front the entire cost of the litigation and the state attorney general will permit them to draw a fee from a share of the money they win (if any) on the state’s behalf (i.e. a contingency fee agreement). Often the aim of the litigation is not to go to trial, rather it is to overwhelm defendants with costs—in court, in the newspapers, and on Wall Street—sufficient to compel them to agree to settlement. If successful, the state and the private attorneys divide the spoils of the settlement according to the terms of their initial agreement. And then to close the feedback loop, the plaintiffs’ firm donates to the attorney general’s reelection campaign. The order may vary slightly (as Little notes, sometimes the quid pro quo contribution to the state attorney general’s reelection fund precedes the agreement entirely), but that’s the gist of it.
At almost every point in the cycle, the collaborators flout the law. To allow a private firm with a profit motive to influence the investigation of a defendant is to dispense with the due process requirement of a neutral impartial investigation. To allow a private firm to front all costs of the litigation is to permit extra-statutory funding of an executive agency, thus infringing the legislature’s power of appropriations. To coerce settlement on a legally dubious theory with the threat of astronomical damages is to effectively impose an excise tax on a disfavored industry, another power reserved to legislatures. To pay the private attorneys out of the state’s recovery is to tap into the public fisc, again without legislative authorization. To cap it off with a political donation from the firm back to the attorney general raises even more ethical, statutory, and constitutional issues.
It’s remarkable how many of the issues Little raises dovetail with litigation work at CEI. In the more mundane realm of class action litigation, we have seen plaintiffs’ attorneys attempt to regulate entire industries via class settlements. We have seen excessive above-market fees. We have even seen political logrolling. But Pirates is still more chilling, because not only are private attorneys misusing the law; they’ve now captured public servants and enlisted them in the enterprise. As a recipient of the U.S. Virgin Islands attorney general’s unlawful subpoena, and as a challenger to the unconstitutional tobacco industry Master Settlement Agreement, CEI has been, and continues to be, at the forefront of combatting this unholy public/private alliance.