For the past twenty years, state attorneys general have played an increasingly prominent role in enforcing laws and regulations affecting the business community. While often appropriate, state AG enforcement can also lead to inconsistent, duplicative and politically motivated enforcement of key laws and regulations. In addition, many state AGs hire outside plaintiffs’ lawyers for these cases, raising questions about conflicts of interest and political favoritism. Read More...
Modern state AG litigation began with the lawsuits filed against tobacco companies in the 1990s. These generated billions in state revenue, favorable publicity for state AGs and huge profits for certain plaintiffs’ firms hired by state AGs to conduct the litigation.
The success of the tobacco litigation has led many AGs to target additional business sectors, particularly in the pharmaceutical and financial services areas. While some cases may be legally appropriate, other state AG actions appear more about enhancing a state AG’s political standing. In addition, businesses face the danger of inconsistent and duplicative enforcement by each of the fifty state AGs as well as numerous federal regulators. This is particularly true in the financial services context, where the Dodd-Frank law grants state AGs the power to enforce regulations issued by the new Consumer Financial Protection Bureau.
Also problematic is the use of outside contingency fee counsel by many state AGs. This involves state AGs awarding secret, no-bid contingency fee contracts to outside plaintiffs’ lawyers to represent their states in litigation. As plaintiffs’ lawyers are awarded large contingency fees from successful lawsuits, money may be funneled back into campaign contributions to the AGs. These alliances raise significant concerns about conflict of interest, favoritism, the use of a public entity for personal gain, and fairness in prosecutions.
Twenty-one states—Alabama, Arizona, Arkansas, Colorado, Florida, Indiana, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Nevada, North Carolina, North Dakota, Ohio, Texas, Utah, Virginia, West Virginia and Wisconsin—have passed "sunshine" legislation to create an open process of hiring outside contingency fee counsel. These measures vary, but more recent laws require state attorneys general to disclose their contingency fee contracts, ensure that they maintain control of the litigation and impose reasonable limitations on fee awards to private attorneys. Other attorneys general have adopted office policies that implement many of these reforms. Companies are also fighting back against AGs hiring outside counsel in court.