Law & Principles

Cap on government lawyer contracts advances

April 13, 2022

Ray Carter

Contingency fees paid to private law firms by state government would be capped under legislation that has now won approval in the House Rules Committee.

Senate Bill 984, by state Sen. Kim David and state Rep. Terry O’Donnell, limits the scope and total amount of contingency fees that can be paid to private law firms hired by state government.

The legislation was filed following controversy regarding millions of dollars paid to a handful of private law firms hired by former Attorney General Mike Hunter when the state sued several opioid manufacturers.

SB 984 caps contingency fees based on a sliding scale tied to the size of any settlement, beginning with a 25 percent fee cap for any amount recovered that is $10 million or less and declining to 5 percent of any settlement greater than $25 million. The legislation also caps the total fee payable to a private firm at $50 million, exclusive of any costs and expenses provided by the contract.

Under the legislation, the office of the attorney general would be required to publicly post all contingency-fee contracts on the agency’s website within five business days after the date the contract is executed, and all contingency-fee payments to private firms would have to be published within 15 days after payment is delivered.

O’Donnell, R-Catoosa, told lawmakers the bill would “put some guardrails on contracts between the attorney general and outside counsel.”

State Rep. Kevin McDugle, R-Broken Arrow, asked if the 5 percent cap might deter private law firms from accepting state contracts.

“I’ve talked to the counsel that did the opioid (lawsuit),” McDugle said. “They were like at 15 percent they’d be good, but when we drop down to 5 percent that may be a number that scares some off.”

McDugle clarified that his conversation was with officials at the Nix Patterson firm in Texas.

“Nix Patterson has taken cases in Florida,” O’Donnell responded. “They have an identical fee structure just like this one.”

He said Nix Patterson has also done work for the state of Texas, which has a similar, although not identical, fee structure in place.

In 2017, then-Attorney General Mike Hunter announced the state was suing numerous pharmaceutical companies, accusing the companies of fueling widespread addiction in Oklahoma through their marketing efforts.

The lawsuits centered on a novel expansion of “public nuisance” law, and Hunter hired several private firms to handle the cases.

When Purdue Pharma chose to pay the state of Oklahoma $270 million to settle its lawsuit in 2019, the private law firms involved in the litigation were to receive a major share of those funds. Based on their contracts, Nix Patterson was to receive $31.6 million, the Whitten Burrage firm was to receive $18.3 million, and Glenn Coffee and Associates was expected to receive $5.6 million.

When Teva Pharmaceuticals settled its lawsuit for $85 million, it was estimated that $12.75 million would go to private firms.

In addition to the settlement with Purdue Pharma, the state also won a $465 million verdict against Johnson & Johnson with a significant share of that settlement also expected to go to private law firms.

But in 2021, the Johnson & Johnson verdict was overturned by the Oklahoma Supreme Court. The court held that the “public nuisance” argument wielded by the state was not valid, stressing that public-nuisance claims must “address discrete, localized problems, not policy problems.”

The court majority said one factor “in rejecting the imposition of liability for public nuisance in this case is that J&J, as a manufacturer, did not control the instrumentality alleged to constitute the nuisance at the time it occurred. … The State asks this Court to broadly extend the application of the nuisance statute, namely to a situation where a manufacturer sold a product (for over 20 years) that was later alleged to constitute a nuisance. … A product manufacturer’s responsibility is to put a lawful, non-defective product into the market. There is no common law tort duty to monitor how a consumer uses or misuses a product after it is sold. Without control, a manufacturer also cannot remove or abate the nuisance—which is the remedy the State seeks from J&J in this case.”

The dramatic amount of money being paid to private firms for the opioid lawsuit prompted the filing of SB 984 in 2021. The bill quickly advanced through the Oklahoma Senate, where it passed on a 38-6 vote.

But the bill never received a hearing in the Oklahoma House of Representatives, and the measure carried over to the 2022 session.

NonDoc, an online news site, recently reported that former Attorney General Mike Hunter asked House Speaker Charles McCall to prevent the bill from advancing during the 2021 legislative session.

Hunter resigned from office in May 2021, the same month the Oklahoma Legislature adjourned for the year.

SB 984 passed the House Rules Committee on a 5-4 vote. Despite his line of questioning, McDugle voted in favor of the bill and provided the margin of victory. The lawmakers who voted against the bill included state Reps. Chris Kannaday, R-Oklahoma City; Logan Phillips, R-Mounds; Mauree Turner, D-Oklahoma City; and Emily Virgin, D-Norman.

The bill now proceeds to the floor of the Oklahoma House of Representatives.