NCPA - National Center for Policy Analysis

Dangers of Regulation Through Litigation

August 14, 2000

The tobacco lawsuits saw the creation of the alliance between state attorneys general (AGs) and plaintiff lawyers representing the states. The contracts that led to these alliances were done without public debate or competitive bidding. They were generally awarded by the state AGs to campaign contributors or friends.

Moreover, these private lawyers were promised contingency fees, which means they made more if they won bigger settlements for the states. Some legal experts say it should be illegal for governments to give private attorneys contingency fees when a sovereign government itself (a state or the U.S.) is a party to a suit.

Beyond the way that the contracts were made, the amount of fees awarded under them were mind-boggling:

  • One Mississippi lawyer was awarded $847.8 million for his services in tobacco litigation in Texas, Florida and Mississippi.
  • The former law firm of the Missouri AG received $27 million under a contract that required no record keeping of time spent on the case.
  • Three Wisconsin firms' fees were billed at $2,853 per hour, for a total of $75 million.
  • Five law firms in Texas were awarded $3.3 billion, then donated $1.8 million to the state Democratic Party -- the party of the Texas AG who appointed them.

Another troubling aspect of the tobacco suits is that many states rewrote their laws to ensure they won the tobacco cases. By stripping away the legal defenses of the companies, the states guaranteed an increase in the state treasury. Such statutes can be used against other targeted industries, such as gun makers, former makers of lead-based paint, health maintenance organizations (HMOs), pharmaceutical firms, nursing homes and car rental companies.

Source: John Fund and Martin Morse Wooster, "The Dangers of Regulation Through Litigation," 2000, American Tort Reform Foundation, 1850 M Street N.W., Suite 1095, Washington D.C., 20036, (202) 682-1163.


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