Proposal would cap state contingency fees

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State Sen. Mark Obenshain, R-Harrisonburg, is leading an effort to limit contingency fees that private lawyers recover when they sue in the name of the state.

The state Senate last month approved the measure that also would require public disclosure of contracts for all outside lawyers representing state agencies in civil cases.

Obenshain’s Senate Bill 447 starts with a cap of 25 percent for recoveries up to $10 million with progressively lower caps for amounts recovered in excess of $10 million. An overall cap of $50 million would apply to Virginia’s share of any contingency fee.

The measure is aimed at enterprising lawyers who collect millions in fees pursuing public enforcement actions on behalf of state taxpayers. One such lawyer, Dickie Scruggs of Mississippi, pocketed more than $1 billion in fees suing tobacco companies for states’ costs of smokers’ medical care.

In Virginia, Obenshain said, the state is paying lawyers from California, New York and Pennsylvania to recover assets for the Virginia Retirement System.

“These are the folks we are paying these contingency fees out to, instead of to our state employees,” Obenshain said in the Senate Jan. 26.

But Obenshain said the bill is not directed at existing arrangements.

“This doesn’t cast any stones. It simply assures that we have the maximum level of accountability and transparency that we can possibly have,” Obenshain said.

Sen. J. Chapman Petersen, D-Fairfax, opposed the fee limits, arguing the attorney general needs a free hand in deciding how best to pursue litigation.

“You can have any percentage you want, but that percentage times zero will always equal zero,” Petersen said. “If you don’t give your attorney general discretion to hire the right counsel, you will end up with zero.”

“We might lose out on a tobacco settlement, we might lose out on a foreclosure fraud settlement, we might lose out on a Wall Street fraud settlement. And that’s going to cost our taxpayers,” Petersen said.

The added requirements would complicate procedures at the attorney general’s office, Petersen continued.

“There’s already a competitive bidding process to have these contracts. What we’re doing is we’re trying to micromanage that process without knowing any of the details or any of the future circumstances that might apply.”

Sen. Thomas A. Garrett, R-Buckingham, defended the proposal.

“I just don’t understand why this isn’t a reasonable restraint on the expenditure of the tax dollars granted to the commonwealth by the people we purport to serve,” Garrett said.

Obenshain said opponents, including a representative from Attorney General Mark Herring, refused to suggest an alternative cap. Obenshain concluded there was more at stake than simply limiting fees for trial lawyers.

“They want to utilize this for the kind of activism that these lawsuits are really not intended for,” Obenshain said.

The Senate vote was 21-18, primarily along party lines. Democrat Jennifer T. Wexton of Leesburg joined Republicans to pass the measure. Sen. Glen Sturtevant, R-Chesterfield, abstained.

The bill is now before the House Courts Committee.