Published in Economic Development

Chamber urges transparency as AG gears up for high-profile PFAS, opioid litigation

BY Sunday, June 23, 2019 07:00pm

When tobacco companies settled claims with dozens of states in the late 1990s over the use of deceptive marketing tactics, trial lawyers took home billions of dollars in what remains a contentious example of lawyers’ fees for representing the government.

With those sums still fresh in their minds decades later, business advocates in Michigan want to ensure excessive fees aren’t paid out to private firms as Attorney General Dana Nessel seeks their help in high-profile litigation involving PFAS and opioid manufacturers.

Michigan Attorney General Dana Nessel COURTESY PHOTO

“We are compelled to pursue the very best legal expertise we can find in the country to assist us in successfully going after those who are poisoning our planet and our people,” Nessel said last month.

Nessel took the “unusual … but not unprecedented” step in seeking outside expertise on the high-profile cases because the specialized services aren’t immediately available in the department, said spokesperson Kelly Rossman-McKinney.

“It’s not at all that we feel this is inappropriate behavior,” said Wendy Block, vice president of business advocacy at the Michigan Chamber of Commerce. “When done right, these contracts with outside counsel are transparent, accountable to the system and done above board.”

The concern is that contracts are awarded based on “political favoritism” to firms whose fees lack oversight, Block said.

“We’d like to see taxpayers’ best interests at the forefront of these contracts,” she said.

According to the U.S. Chamber of Commerce’s Institute for Legal Reform, 15 states have formal policies to improve transparency when hiring outside counsel, known as “Transparency in Private Attorney Contracting.” While Michigan is not among these states, officials say they’re taking steps to control potential fees related to high-profile litigation. 

Rossman-McKinney said compensation to outside firms will be “clearly stated” in a binding contract, and that the terms laid out in a request for proposals last month are “clear that the State will pay no costs or fees unless an award is obtained, which means that the potential risks of financing the litigation are borne by the attorney and not the client, in this case the Department of Attorney General.”

State Rep. David LaGrand, D-Grand Rapids, is a former Kent County assistant prosecutor and lawyer at Warner Norcross + Judd LLP. He said the Attorney General’s Office simply lacks the resources of a large private law firm.

“It’s very important that voters have robust representation in things that are critical issues to the public,” LaGrand said. “If that means at some point the AG’s office has to hire outside expertise so they can make sure corporations with deep pockets don’t get to outmaneuver the people’s representation, that’s entirely appropriate.”

Saying contingency fees “inherently get problematic,” LaGrand added that it’s “obviously incumbent on the attorney general that citizens get good value for their money. I have a high degree of confidence in Attorney General Nessel’s ability to monitor that and be a watchdog over expenditures.”

Lawsuits mount

Nessel’s call for outside expertise comes as litigation mounts in other states related to PFAS contamination and opioid use.

That includes municipalities in Southwest Michigan, where Calhoun and Kalamazoo counties filed separate federal lawsuits on June 7 against a host of opioid manufacturers, including Purdue Pharma, Janssen Pharmaceuticals and Insys Therapeutics Inc., among others.

Most recently, an Ohio federal court heard a proposal from lawyers representing hundreds of local governments that would allow any U.S. city, town and county seeking a settlement from opioid manufacturers, distributors and retailers. According to the New York Times, the number of municipalities eligible for a payout could increase from 1,650 to more than 24,000 “and open the way for a comprehensive national opioid settlement with the pharmaceutical industry.” Such a widespread settlement could allow companies to avoid future lawsuits at the local level.

Michigan is already involved in PFAS litigation with Rockford-based Wolverine World Wide Inc., which used 3M products in shoes. Former Gov. Rick Snyder asked then-Attorney General Bill Schuette to look into litigation against 3M, which paid $850 million last year to settle a case brought by the state of Minnesota. Across the U.S., plaintiffs are seeking damages for personal injury, medical costs and decreased property values. According to the American Bar Association: “There is no indication that this will slow down anytime soon.”

Nessel has said litigation against 3M and other chemical manufacturers is expected soon.

As it relates to opioid-caused deaths, LaGrand said “unfortunately all we can hope for is money to compensate for damages. You can’t fix deaths from over-prescriptions of opioids with money. I hope we can have much more robust protections for citizens from opioids.”

He hopes PFAS litigation, meanwhile, “leads to more accountability in cleanup.”

Attorney Jim Olson, founder and president of Traverse City-based For Love of Water, hopes Nessel takes an “aggressive role” in PFAS litigation “to hold those responsible based on burden of proof and causation. If someone caused a release, they should pay for it and clean it up, whatever it costs. If there’s no alternative, they should do what’s necessary to make those injured parties whole.”

That includes covering the costs of a new municipal drinking water system or private wells, if necessary, he added. 

Olson said other potential environmental issues for which the state might need special counsel include algal blooms in Lake Erie and elsewhere, and damages to the state related to climate change.

“I suspect with any Great Lakes water issue — whether diversion or consumptive use — with significance to the state, that would be the case,” Olson said.

Legislation needed?

Despite a lack of formal policy, the State Bar of Michigan requires contingency fees for cases that don’t involve personal injury or wrongful death to be reasonable under rules of professional conduct. A 1991 formal ethics opinion from the State Bar says a contingency fee would be unreasonable if a private firm representing the government acquires a greater interest in the outcome of the litigation than the government.

Additionally, the Legislature can place limits on contingency fees in specific instances.

The Michigan Chamber raised the issue around contingency fees in the 2018 election when Block penned an op-ed in the Detroit News supporting attorney general candidate Tom Leonard. Block says Michigan should join other states that have Transparency in Private Attorney Contracting legislation to oversee the process.

Rossman-McKinney said the department has “internal policies and model documents” that apply when seeking outside counsel, or Special Assistant Attorneys General. One condition stipulates that a contract is awarded based on value to the state. Further, Nessel has imposed a “process control” that removes the names of bidders from consideration, presumably addressing concerns about political favoritism.

LaGrand said firms billing by the hour is a best practice when hiring outside counsel. He is “inclined to think the Legislature should get actively involved here,” but added the AG’s Office “should have a pretty free hand” in seeking the expertise it needs.

FLOW’s Olson thinks Michigan needs legislative reform that addresses litigation involving “systemic harms” when the state is involved, such as the Flint water crisis.

Meanwhile, Nessel supports “applying appropriate controls” on individual contracts for special counsel, “but would want to consider whether a one-size-fits-all set of guidelines is the best way to ensure robust representation of the interests of (the public),” Rossman-McKinney said.

For now, the AG’s Office is being public about the selection process, which Block called a “good first step.”

“It’s a big deal,” Block said. “There’s a lot of money potentially on the line here.”

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