April 3, 2006

The Lead Paint Trial Continues

Carroll Andrew Morse

Julie Creswell of the New York Times had an excellent summary in Sunday's paper of the Rhode Island lead paint trial and how it may not be as finished as you think it is. In addition to detailing the history of the case and the pending issues involving possible appeals and setting damages, Ms. Creswell also reported on a mostly unnoticed aspect of the case that was heard today by the Rhode Island Supreme court...

As painful and expensive as the case's outcome could be for the paint companies, it also raises issues that go far beyond that industry. In particular, should state officials be allowed to essentially outsource public-health and public-nuisance cases to private legal firms that will try the cases free but take a piece of any recoveries made? Seven years ago, Sheldon Whitehouse, then Rhode Island's attorney general, agreed to those terms.

Defense lawyers representing the paint companies say that contingency-fee lawyers are interested only in racking up huge settlements, not in addressing the underlying problem. They have formally challenged the practice before the Rhode Island Supreme Court, which is scheduled to hear oral arguments on the issue tomorrow.

The official name of the case is State of Rhode Island v. Lead Paint Industries Association.

There's a slight quibble with Ms. Creswell's reporting. The use of contingency fees in this case is an issue, in part, because the lawyers didn't really provide their services for free. According to the Washington Legal Foundation, which has filed an amicus brief in the case,...

The State agreed that if it ever decided to drop the suit, it would be required to pay its attorneys on a quantum meruit basis; i.e., the value of all hours devoted to the case, at the attorneys' regular hourly rates....

[In their amicus brief], WLF also argued that the contract clause requiring a quantum meruit fee payment if the State seeks to abandon its suit effectively cedes all control of the suit to the lawyers -- because the Attorney General does not have at his disposal the millions of dollars required to satisfy that fee obligation.

What the WLF is pointing out is that after contingency-fee lawyers have invested so much time in a case, the state must continue to pursue it, not in the interest of the public good, but because it's the only way to pay off the lawyers without bankrupting the Attorney General�s office.

There's another dimension to this problem raised in the WLF brief...

WLF argued that the private attorneys handling the case for Rhode Island have an irreconcilable conflict with the State because it is in their interest to maximize any damage award paid by the defendant -- the larger the award, the larger the fee they will receive. WLF noted that a damage award based on the cost of removing all lead paint would be vastly larger than an award based on the cost of ensuring that painted surfaces on older buildings are kept intact. WLF argued that the decision of the attorneys to seek the former remedy -- despite the views of the Rhode Island legislature and virtually all scientists that the latter remedy is far better from a public health standpoint -- can only be explained by the attorneys' financial interest in maximizing their own fees.
In other words, since contingency fee lawyers are compensated based of damages awarded, they have an incentive to advocate (in the name of the state) for whatever is most expensive, not for what is most effective.

A third problem with states hiring contingency-fee layers to pursue class-action cases is described in detail in an amicus brief filed by the United States Chamber of Commerce. Remember the cronyism that everyone was upset about after the nomination of Harriet Miers to the Supreme Court? Well, according to the Chamber of Commerce, it runs rampant through the world of public contingency fee litigation. Their amicus brief lists 7 cases in 7 different states (list) where Attorney Generals made either their political donors or their former law firms rich by farming out contingency fee cases.

Unfortunately, Rhode Island does not seem to be immune to this. Jack McConnell, the lead lawyer in the lead paint case, is a big donor to the Rhode Island Democratic Party. Should the Attorney General be using his office to help enrich big Democratic donors?

Finally, one other campaign contribution of interest has been brought to Anchor Rising�s attention. Last summer, paint manufacturer DuPont "settled" their part of the case for donations totaling $12.5 million dollars to be given to various charities. Not everyone involved in the DuPont agreement, however, agrees that "settling" describes the final result. Here is Dupont's position, as quoted in the Times...

A spokeswoman for DuPont, Mary Kate Campbell, said, "When you look at the terms of the understanding that we reached with the Rhode Island attorney general, the attorney general and the state of Rhode Island got nothing. Nor did any of the outside lawyers."
But is it true that the Attorney General got nothing? Last December, after the case was "settled", a lawyer by the name of Bernard Nash gave a $1,000 campaign contribution to Rhode Island Attorney General Patrick Lynch. Mr. Nash works for the law firm of Dickstein, Shapiro, Morin & Oshinsky. Mr. Nash's firm is listed on a website called the "Dupont Legal Model" as a "Challenge Award Winner" with Bernard Nash listed as an "Engagement Partner"

Here's how the Dickstein website describes their relationship with DuPont...

DuPont continues to rely on Dickstein Shapiro's attorneys for a competitive edge in resolving complex public policy and litigation matters, and recently recognized the Firm as one of the best among its select network of Primary Law Firms and Service Providers.
Should an Attorney General really be taking a $1,000 contribution from a member of a law firm involved with a corporation that just settled a multi-million dollar case with his state?

These are the cases of cronyism listed in the US Chamber of Commerce amicus brief in State of Rhode Island v. Lead Paint Industries Association...

  • In 1996, then-Attorney General Carla Stovall of Kansas hired her former law partners at Entz & Chanay to serve as local counsel in the State�s tobacco lawsuit.
  • Then-Texan Attorney General Dan Morales also hired contingency fee lawyers to file his state�s tobacco litigation in 1996. Four of the five hired firms together had contributed nearly $150,000 in campaign contributions to Morales from 1990 to 1995.
  • South Carolina Attorney General Charles Condon came under fire for cronyism after he handpicked seven law firms to represent the state in the tobacco litigation�Six of the seven firms included the attorney general�s friends or political supporters.
  • Missouri Attorney General Jay Nixon selected five law firms that had made over $500,000 in political contributions over the preceding eight years, most to him and his party, to handle the state�s participation in the multi-state litigation against tobacco companies.
  • The two firms selected by the Pennsylvania Attorney General Mike Fisher to handle the tobacco lawsuits also happened to be among his largest campaign donors, placing in the top ten on a list of more than two-hundred contributors.
  • In 1994, Louisiana Attorney General Richard Ieyoub proposed to hire fourteen law firms � including many past contributors to his campaigns � to pursue environmental claims on behalf of his office.
  • Connecticut Attorney General Richard Blumenthal requested letters from individual firms or consortia of firms to represent the state in the tobacco litigation. The Attorney General selected four of sixteen firms that expressed interest. As reported in the local media, the three Connecticut-based firms included General Blumental�s own former law firm�[a firm] whose name partner is married to [a partner of Blumental�s own former law firm]�[and a firm] whose managing partner�served as personal counsel and counselor to Governor John Rowland.

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This should have implications not only for Sheldon Whitehouse but for the entire Democrat party.

I disagreed with the lead paint trial from the beginning on philosophical grounds, but this thing now screams impropriety.

And the campaign contributions from Nash/Dupont reeks of a quid-pro-quo! If Matt Brown can't get away with this, then neither should Lynch or Whitehouse

Posted by: johnb at April 4, 2006 6:36 AM

Ed Acorn has a very good piece on this issue in today's projo where he wonders

"It may be interesting to see how many trial lawyers contribute to the ongoing campaigns of Messrs. Whitehouse and Lynch, and how much the politicians tout this case."

Kudos to AnchorRising and Carroll Andrew Morse for being ahead of the curve. Perhaps Mr. Achorn should have spoken with AnchorRising before going to print! Let's see what happens with this case, but it seems to me to be another "Matt Brownism" for Sheldon and Lynch

What were they thinking!?

Posted by: rich at April 4, 2006 10:09 AM

If that doesn't arouse suspicions, take a look at the 2005 2nd quarter federal campaign finance filings of Sheldon Whitehouse. In what has all the appearances of laundering campaign funds (think Matt Brown) Jack McConnell, the lead lawyer in the lead paint case, and his wife were involved in a number of questionable transactions that boosted Sheldon Whitehouse's take by about $18,400 on June 30, 2005, the last day of the reporting period.

John J. McConnell Jr. gave $4,200 to Whitehouse06 on June 30, 2005, and $5,000 to RIPAC on June 30, 2005.

Sara Shea McConnell gave $4,200 to Whitehouse06 on June 30, 2005, and $5,000 to RIPAC on June 30, 2005.

RIPAC gave Whitehouse06 $10,000 on June 30, 2005.

Interestingly, Jack McConnell is the Treasurer of RIPAC.

It certainly appears that Whitehouse is getting paid back by McConnell for his help in the lead paint case.

Posted by: J Kramer at April 4, 2006 10:30 AM

this thing keeps getting better.

Lynch actually took $2500 from Bernard Nash and family, and $10,000 from Jack McConnell and family since 2002!

there's definately at least a "perception" problem here!

Posted by: johnb at April 4, 2006 11:16 AM