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Critics question motives of lawyer contingency fee bill

By: Dan Shaw, [email protected]//March 29, 2013//

Critics question motives of lawyer contingency fee bill

By: Dan Shaw, [email protected]//March 29, 2013//

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By Dan Shaw

While opposing sides debate the need to limit lawyer contingency fees, some are questioning why only certain payments are up for discussion.

Assembly Bill 27, which was discussed Thursday in front of the state’s Assembly Judiciary Committee, would cap at $30 million the amount of contingency fees Wisconsin pays in any single case. It also would require that information about the state’s payment of contingency fees be posted to the Internet and would place lawyers who work for the state for contingency fees under the supervision of state attorneys.

The sponsor of the bill, state Rep. Mike Kuglitch, R-New Berlin, said the push to rein in contingency fees goes back to the big tobacco settlement of the 1990s, in which three Wisconsin law firms — what was then Habush, Habush, Davis and Rottier of Milwaukee; Brennan, Steil, Basting and McDougall of Janesville; and Whyte, Hirschboeck, Dudek of Milwaukee — obtained a $5.9 billion recovery for the state.

The three firms worked with the understanding that they could charge the state contingency fees if they won but would receive nothing if they lost. Habush spent about $1 million litigating the case, money that couldn’t have been recouped if the firm was unsuccessful, said Habush attorney Robert Jaskulski.

When the firms did win, they initially sent in a bill for $847 million. That later was reduced to $75 million, or about 13 percent of the total payout amount. Still, Klugitsch said, that came out to about $3,000 an hour, an amount that infuriated many taxpayers.

“When contingency results in those potentially huge settlements,” he said, “a lot of conflict of interest could happen.”

State Rep. Evan Goyke, D-Milwaukee, said that it hasn’t been firms paid with contingency fees that have been giving rise to suspicions lately, however. He pointed to the firm of Michael Best & Friedrich LLP, which was paid hourly for its work helping Wisconsin lawmakers redraw legislative districts in 2011.

Many questions have been raised over the firm’s work on redistricting. At one point, a federal court ordered the firm to pay about $17,500 in fines after finding it had filed frivolous motions to prevent documents related to the case from being released.

Calls to the Michael Best were not returned by deadline.

Jaskulski, who spoke Thursday on behalf of the Wisconsin Association for Justice, said if contingency fee payments are to be made more transparent to protect taxpayers, so should all payments to law firms hired by the state, including those paid hourly.

“[This bill] is not being advanced by taxpayers,” he said. “This is a bill that large corporations are interested in and they are interested in it because they are on the other end of this battle. If there is an opportunity to make the playing field uneven, that’s an opportunity they will chose to take.”

Bill McCollum, a Washington-based lawyer who attended the hearing on behalf of the U.S. Chamber of Commerce, said the bill is needed to ensure the bulk of windfall settlements and judgments go to the taxpayers rather than lawyers.

He also said publicizing the fees paid under contingency contracts will help reduce suspicions that state officials merely are funneling business to favored law firms.

“The perception of impropriety,” he said, “is as damaging as the reality.”

The fact that the proposed bill applies only to contingency fees keeps it in line with similar legislative models national groups are encouraging states to adopt. The American Legislative Exchange Council, an organization that draws up model legislation that it believes legislatures can adopt to further free-market principles, has put forth a Private Attorney Retention Sunshine Act. The proposal would require a bidding selection process for lawyers who want to do contingency work for a state.

ALEC’s model legislation does not call for caps on fees, though. In that way, the proposed Wisconsin bill is more in line with the Transparency in Private Attorney Contracting act that was adopted by Florida in 2010. Since then, four other states have signed similar bills, winning praise from the U.S. Chamber of Commerce and similar groups.

McCollum, who was attorney general of Florida when that state adopted TPAC, said the Wisconsin bill is meant more as a preventive measure than as a remedy of current abuses.

That is not to say, McCollum said, that Gov. Scott Walker or Attorney General J.B. Van Hollen have entered into improper contingency-fee contracts.

“But,” he said, “they won’t always be governor and attorney general.”

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