CALDWELL: Avalanche of Contingency Fee Contracts Coming

"(The) Louisiana AG’s office expects to receive a virtual avalanche of requests from local parish school boards asking it to review their resolutions to enter into contingency fee contracts..."

To begin with, I admit that the subject of contingency fee contracts has two strikes against it: it’s complicated and it’s boring. And, in their attempts to write about it and be brief, media and non-media writers (and even some lawyers) can be inaccurate in their reporting and mislead the reader. I like to think this is mostly unintentional and I’ll continue to correct folks as best I can. But it will be helpful if everyone in this state who is now or will be writing about contingency fee contracts would do so accurately. Because the taxpayers of Louisiana are plenty smart enough to understand the truth when we take the time to tell it to them.

The Louisiana Legislature grants the authority to use contingency fee contracts to certain state and all local governing agencies (the Levee Board, local school boards, etc.). Despite the media attention the Louisiana Attorney General’s office has recently received about this topic, the AG’s office is not one of the agencies authorized to use them. We do, however, have a job to do when an authorized agency that is required to have AG approval determines that a contingency fee contract will fulfill its needs.

I appreciate this opportunity from LaPolitics.com to write about this issue, because it’s important that the media and any other reporting entity first understand it. And, it’s good timing because—due to an as-yet unresolved funding issue—the Louisiana AG’s office expects to receive a virtual avalanche of requests from local parish school boards asking it to review their resolutions to enter into contingency fee contracts, as St. John the Baptist Parish has already done.

The ability for law firms to work on a contingency fee basis is an important tool in the legal arsenal. They allow an attorney representing the agency to keep a percentage of the fee he or she recovers from the case. In cases where the upfront costs of recovering money owed to a state or local entity would make it impossible to take on the case, the contingency fee approach is a viable option. Here are the basics:

1.) A contingency fee contract is one in which the attorney who is hired is generally responsible for all the up-front costs and keeps a percentage of the money recovered; that is a portion of the client’s money.

2.) Contingency fee contracts are used in Louisiana by those state and local agencies that are authorized to do so.

3.) Unless the Legislature makes a special exception, the AG cannot hire private attorneys under a contingency fee contract to represent the state.

4.) Contingency fee contracts are never permitted in criminal cases. They are usually used to recover (collect) money.

5.) Contingency fee contracts are useful to authorized agencies that lack funding to pay for up-front costs to prepare the case. The contingency arrangement allows attorneys to make money only if they collect on behalf of the state. And, because the lawyers aren’t paid hourly fees, it ensures that the agency doesn’t pay more than it collects (i.e., won’t pay $10,000 in hourly fees to collect a $5,000 debt).

6.) When an authorized entity that is required to have AG approval, such as the Levee Board or a local school board, decides to enter into a contingency fee contract, its governing body first passes a resolution defining the need for, and the specifics of, the contract. This is when the AG’s office comes in. We review the resolution to determine that:

— The need for the contract is clearly explained.

— The fee is reasonable under the circumstances.

— The resolution is in compliance with Louisiana law.

— The attorney or law firm is in good standing with the Louisiana State Bar.

On a case-by-case basis, we sometimes become aware of, or purposefully determine if, there is a conflict of interest. For example, in some—but not all—cases, we would not have a firm that is suing the state in one case simultaneously defending it in another.

Once our review is complete, the AG’s office notifies the requestor that the resolution has been approved or rejected.

Finally, and this is key, whether or not it approves or rejects the resolution, the AG’s office does not advise, approve or reject the state or local entity’s decision to use a contingency fee contract. It is the Louisiana Constitution that grants that right. Nor do we recommend a specific attorney, or reject resolutions based on the attorney selected, as long as that attorney is in good standing with the bar.

Our office values performance and the law over politics and attention-generating drama. Given that this issue is so clearly about the law, I hope we can reduce the misunderstandings that surround it and focus on other important issues that actually need public debate in order to be settled.

(Click here for a flowchart further explaining the procurement process for private legal counsel.)

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