Contingency Lawyers Undermine Integrity of Government Prosecutions

Guest Post by Margaret Little 

There’s been a lot of press coverage of the climate change subpoenas that were issued and then withdrawn by U.S. Virgin Islands Attorney General Claude Walker. But one issue that’s been relatively neglected is whether his contingency-fee agreement with the class action law firm Cohen Milstein is even legal under the law of the Virgin Islands. That contract provides that Cohen Milstein will “represent” the government and advance all costs and expenses of litigating the controversial climate change investigation, and in turn awards Cohen Milstein 27% of the Virgin Islands recovery of the first $150 million from the investigation’s targets.

Under principles of public finance law common to the various United States and territories, all funds owed to the government from whatever source, however obtained, and in whatever form, are public monies. They are subject to public control and accountability, and no one in the Executive Branch has the appropriations power to transfer these funds to contingency fee attorneys. That includes an attorney general. 

A review of Virgin Island law confirms these principles. The laws which effectively comprise its constitution require the deposit of all public funds into the Department of Finance (3 V.I.C. §177(3)), and provides that “[n]o money shall be paid out of the Virgin Islands treasury except in accordance with an Act of Congress or money bill of the legislature.” (V.I.C. Rev. Org. Act of 1954 § 3). Laws enforcing these provisions similarly call into question the legality of these arrangements, specifically 33 V.I.C. §3101 which provides:

No officer or employee of the Virgin Islands shall make or authorize an expenditure from, or create or authorize an obligation under, any appropriation or fund in excess of the amount available therein; nor shall any such officer or employee involve the government in any contract or obligation for the payment of money for any purpose, in advance of appropriations made for such purpose, unless such contract or obligation is authorized by law. (Emphasis added.)

As many have argued, giving private parties a contingency fee interest in the proceeds of a government prosecution fundamentally undermines the integrity of that proceeding, violating defendants’ due process rights and calling into question the ethics and conduct of the entire prosecution. Young v. United States, 481 U.S. 787, 808-814 (1987).

The validity of such contingency fee contracts with attorneys general was contested in several states during the tobacco wars and in other mass tort litigation. The contracts were found to violate state law in West Virginia and Louisiana, but withstood appellate challenges in Maryland and Minnesota.  Since then the issue has been quiescent, but in New Hampshire a trial court recently invalidated such a contract, which the state attorney general had signed without legislative approval. In the judge’s view, this violated the legislature’s appropriations function and thus ran afoul of the New Hampshire Constitution. State of New Hampshire v. Actavis Pharma, Inc. 

The New Hampshire ruling exposes the immutable truth that firms like Cohen Milstein are munificently funded with public money that has been transferred to them without legislative oversight, control, or accountability. Such firms use their multi-million dollar fee awards to secure and leverage new waves of litigation against industries targeted by their powerful political partners, the state attorneys general whose ideological agendas they finance in the litigation, and who often benefit from the firms’ lavish political contributions. The public should understand that contingency fee financing is an end run around state appropriations laws, and that they result in public funds being unlawfully diverted to support this lawsuit industry. Most importantly, such financing fundamentally violates basic principles of democratic accountability.