A bill introduced by state Sen. Vince Leach, SB 1459, throws some needed sunshine on a legal process currently hidden from public view.
If the bill passes and is signed into law, Arizona taxpayers will know whether their local government has partnered up with the trial bar in lawsuits against private industry claiming a company caused a “public nuisance”—a notoriously ambiguous and vague legal construct. Such lawsuits can result in big monetary wins for the lawyers, but leave taxpayers with comparative crumbs.
Sen. Leach’s bill makes sure taxpayers will know if this disturbing national trend of runaway public nuisance lawsuits is gaining a foothold here.
The union between local governments and the trial bar has produced lawsuits that are expansive in their size and in the scope of issues and industries they target, reaching far beyond the municipal level.
Everything from global climate change to electronic data breaches to lead paint has been the subject of big lawsuits brought by trial attorneys on behalf of a handful of cities and counties. Literally any business or industry could fall within one of these public nuisance cases.
These local government lawsuits are often arranged under contingency fee contracts, whereby the plaintiff government doesn’t have to outlay any money up front, but gets a cut of the settlement.
To governments, the potential payoff from a contingency fee lawsuit can be tantalizing, especially if the plaintiff government is facing budget struggles.
But such seemingly low-stakes contracts can lead to mischief. A spate of bad headlines about state attorneys general hiring their friends and campaign contributors to handle cases that resulted in firms racking up big bills—which led to fewer dollars going back to taxpayers—caused states like Arizona over the last several years to put in place safeguards to ensure that taxpayer resources aren’t abused in lengthy, expensive legal battles.
With bipartisan support, the state Legislature back in 2011 passed into law a bill that greatly enhanced the transparency over contracts the state AG inks with outside law firms working on a contingency fee basis.
Sen. Leach’s legislation would extend those same safeguards to the local level.
The bill, among other provisions, requires the local government to produce an annual report that details its use of contingency fee contracts and it caps the fees that an outside firm can recover at a generous $50 million.
As pointed out by the American Tort Reform Association, the fee cap protects the public because a typical one-third contingency fee on a $1 billion settlement or judgment—an amount not unheard of in some types of government litigation—means that plaintiffs’ lawyers take $333 million of the taxpayer’s recovery.
Sen. Leach’s bill faces stiff opposition. Even his stated willingness to amend the bill has done nothing to appease a coalition of city governments, trial attorneys, and plaintiff activists lined up to preserve a status quo that ensures their lawsuit arrangements remain hidden from the light of day and taxpayers.
Proponents of greater transparency have their work cut out for them to convince the Legislature that local governments should play by the same set of rules as the state when it comes to hiring outside counsel.
If a lawsuit is brought in their name, taxpayers deserve to know who ends up the winner: them, or trial lawyers. Sen. Leach’s bill helps provide the answer.
President and CEO
Arizona Chamber of Commerce and Industry