Law & Principles

Legal reform almost killed by GOP defectors

April 29, 2022

Ray Carter

Legislation that would cap contingency fees paid to private law firms by state government narrowly passed the Oklahoma House of Representatives due to some Republican lawmakers joining Democrats in opposition.

Had the bill failed, opponents would have preserved a system that has provided millions of state dollars to attorneys, including some who reportedly did little or no meaningful work.

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 through the office of the attorney general.

“The bill itself has to do with bringing some transparency and some sunshine into contracts that are executed by the AG to outside counsel,” said O’Donnell, R-Catoosa. “We’ve had some issues with the poultry cases in the past. We had an issue with the tobacco cases in the past and, most recently, the opioid cases. And we’re just trying to bring an RFP (request for proposal) process and some transparency into that.”

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.

The legislation was filed in the aftermath of controversy regarding millions paid to a handful of private law firms hired by former Attorney General Mike Hunter when the state sued several opioid manufacturers, but the issue has been debated going back to tobacco and poultry lawsuits pursued during the tenure of former Attorney General Drew Edmondson as well.

In 2017, 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.

The fee paid to Coffee, a former state Senate leader, drew extra scrutiny because of his political ties to both state lawmakers and Hunter and reports that he played a relatively minor role in the lawsuit. In 2019, Oklahoma Watch reported that “a review of the publicly available court file shows little involvement by Coffee in the day-to-day work of the case.” Oklahoma Watch reported most courtroom appearances, briefs, and motions were made by members of Hunter’s staff or lawyers from the other two firms.

In 2019, Stitt criticized the opioid-lawyer fee arrangement, saying the legal fees “just seemed grossly over-inflated” and criticized the lack of an “open, transparent bidding process,” saying the hiring process looked “kind of hand-picked” and “a little slimy.”

The fees paid to private firms in the opioid lawsuit grew even more controversial in 2021 after the Oklahoma Supreme Court overturned a $465 million judgment handed down against Johnson & Johnson. The court held that the “public nuisance” argument wielded by the state through its private attorneys was not valid, stressing that public-nuisance claims must “address discrete, localized problems, not policy problems.”

However, that ruling came after the private firms had racked up millions more in fees as the result of other companies settling. When Teva Pharmaceuticals settled its lawsuit for $85 million, it was estimated that $12.75 million would go to private firms.

During a committee hearing on SB 984, O’Donnell noted that Florida has an “identical” cap on contingency fees and that Texas imposes similar limitations, yet private law firms continue to accept state contracts in those states, including one of the firms involved in Oklahoma’s opioid lawsuits—the Nix Patterson firm.

The legal reforms provided for in SB 984 previously won easy approval in the Oklahoma Senate, passing on a 38-6 vote. But in the Oklahoma House of Representatives, the measure passed on a 51-35 vote. A bill requires 51 votes to pass out of the House chamber.

The narrow margin of passage was due to 21 Republicans joining Democrats in opposition.

The Republicans opposing the bill included state Rep. Anthony Moore, a Clinton Republican who previously sided with Democrats on another high-profile issue.

In March, Moore joined Democrats in voting against legislation that would require district attorneys and local law enforcement officials to investigate potential election fraud when more than 10 voters are registered at a single residential address.

SB 984 now returns to the Senate for consideration of House amendments.