As Mississippi's attorney general, Jim Hood rarely shies away from litigation, especially when victory could put millions of dollars into the state treasury. During more than eight years in office, Hood has reinforced Mississippi's reputation as one of the nation's fiercest litigants, especially on the securities front. In the name of the state's pension system, he's taken on around two dozen corporations, including Bank of America and Boston Scientific. All together, he's netted the state more than $500 million in penalties and settlements.
But some Mississippi lawmakers say that too much of the money ends up going to the private lawyers Hood hires for extra help. Private attorneys representing Mississippi can receive up to a quarter of corporate payouts, which often means millions of dollars.
That money comes through contingency fee contracts, arrangements in which private attorneys — if victorious — receive a healthy slice of a court award or settlement. If the state loses, it pays no fees. Attorneys are usually willing to accept this arrangement instead of charging an hourly rate. In fact, Mississippi leads the nation in contingency fee contracts. For the state, it's a no-lose deal, supporters say. The contracts draw the attention of high-quality lawyers for big cases.
"There are certainly pros to the arrangement," says Ben Cooper, a professor of law at the University of Mississippi. "We're talking about cases that are big and expensive to litigate." The attorney general alone doesn't always have the resources to take on other high-priced legal teams, Cooper says.
Mississippi's biggest payout came before Hood's time in office. In 1997, the state received $4.1 billion as part of a national settlement between states and tobacco companies, recouping health care costs associated with smoking. Of Mississippi's share in that settlement, private attorneys were paid $1.45 billion.
Many state lawmakers — mostly Republicans — are hoping to change the system. Within a week, Republicans plan to introduce legislation likely to include caps on private-firm contingency fees and provide for open bidding on the contracts. That's partly because the fees are too high, the legislators say, but also because of the close personal and political relationships between the attorney general and the attorneys he hires. "Our goal is to provide more transparency," says Republican Lieutenant Governor Tate Reeves.
It's not the first time Mississippi Republicans have sought scrutiny over the attorney general's office. Past efforts have failed. But now, with Republicans in control over both legislative chambers for the first time in 140 years, chances of passage are much better. There is little doubt that newly elected Republican Governor Phil Bryant would sign the measure.
As Republican lawmakers zero in on Hood, the only Democrat serving in statewide office, millions of dollars are at stake for trial lawyers and for large corporations in the latest battle in what has been a decades-long war over Mississippi's civil justice system. "You see the same dynamic of business interests versus trial lawyers," Cooper says. "As always, the truth lies somewhere in the middle."
A national trend
If Mississippi does pass a bill dealing with private attorney contracts, it would join at least 10 other states that have either capped attorney fees or increased disclosure of contract provisions. Several of those states — including Arizona, Florida and Indiana — have passed their laws during the past three years. "We're thrilled," says Darren McKinney, a spokesperson for the American Tort Reform Association, which lines up against trial lawyers. "There seems to be a little momentum moving in our direction."
That current volume of legislation is due, in part, to the work of the American Legislative Exchange Council, a conservative group that offers model legislation to states. Bills passed in several states have adopted some of the council's language, including written justifications for private contracts, outside oversight and fee caps. In 2005, Texas passed one of the nation's strictest laws, which requires legislative review of large contracts.
Most attorneys general have signed contingency fee contracts, but Hood is the champion. He has signed 33 that are still active. Several of the contractors have contributed to his campaigns. But like many attorneys general, Hood has insisted that he seeks out the best legal talent available to his office.
Mississippi Democrats, as well as some legal experts, say that limiting contingency fee contracts could tie the hands of the attorney general to the state's detriment. They say that if lawmakers, for instance, placed a $1 million cap on contract fees — an idea floated in past legislation — the state would have difficulty attracting the best firms to go to court for taxpayers. One legislator who believes this is Democratic state Representative Bob Evans. "Nobody's going to spend tens of millions of dollars to make a million," says Evans, who is also a practicing attorney but not a plaintiffs' trial lawyer. "There has been no problem in Mississippi with what the attorney general has recovered."
If it weren't for high-priced attorneys, Evans argues, Mississippi would have lacked the muscle in 2005 to negotiate a $100 million settlement with MCI Worldcom over the way the telecommunications company paid income and franchise taxes. The state's tax commission was prepared to settle for just $3 million, he says. A tax attorney hired on a contingency contract basis negotiated a much bigger payout, which included a provision that MCI pay his attorney fees separately from the settlement.
Indeed, Mississippi pays rates lower than what lawyers collect in private civil lawsuits. When the state wins in court, it typically pays attorneys no more than 25 percent of the payout. Attorneys litigating a personal injury case, Cooper says, typically receive one third of court winnings. A recent study by the law firm Husch Blackwell says that contract rates paid by states around the country can eclipse 40 percent. Mississippi's rates fall in the middle.
Evans, along with his fellow Democrats, says that efforts to limit use of the contracts aren't rooted in policy concerns. "They're just trying to cut the money stream to Democratic lawyers," he says. "What [Republicans] care about is that their contributors don't get sued."
Indeed, trial lawyers are major contributors to Democrats, not only in Mississippi, but across the nation. And the corporations Hood and other attorneys general have sued tend to support Republicans.
Most critics of contingency fees, however, contend it's an economic issue. "If your state has a reputation of suing first and asking questions later," says McKinney, of the American Tort Reform Association, "what business is going to come there?... Litigation should be a drop-dead last resort."