U.S. District Judge Danny Reeves of Frankfort, Kentucky, has just contributed a new episode to the ongoing saga of whether state attorneys general may hire contingency-fee lawyers to prosecute cases on behalf of consumers. Last Thursday, in a thoughtful 33-page opinion, the judge ruled that Kentucky’s attorney general,Jack Conway, has not violated Merck’s constitutional due process rights by using the private firm Garmer & Prather to litigate consumer claims related to Merck’s marketing of the pain reliever Vioxx. Reeves rejected arguments by Merck’s counsel at Skadden, Arps, Slate, Meagher & Flom that contingency-fee lawyers should not be permitted to represent the AG in a quasi-enforcement action.
As you probably recall, AGs’ use of private law firms is a hot-button policy issue for the U.S. Chamber of Commerce and the American Tort Reform Association, which are generally opposed to the practice. They’ve lobbied hard for state legislatures to enact limits on the use of contingency-fee counsel or, at least, regulations to govern relationships between AGs and outside counsel. So far, according to ATRA president Tiger Joyce, 13 states have enacted such laws. But law professor Amy Widman of Northern Illinois University, who specializes in AGs’ enforcement of consumer protection laws, has testified before Congress that state lawyers need to be able to tap the resources of the private bar or else consumer laws will go unenforced by resource-strapped AGs.
That was the context for Reeves’s ruling, in what I’ve previously called the leading litigation challenge to state use of private lawyers. After Kentucky’s suit bounced between state and federal court, finally alighting in Franklin Circuit Court, Merck filed a declaratory judgment action in federal court, seeking a ruling that Kentucky’s use of contingency-fee lawyers was unconstitutional. The judge denied the pharmaceutical company’s motion for a preliminary injunction but also twice refused the AG’s motion to dismiss the suit. Last week’s ruling came on Merck’s motion for summary judgment.
The heart of the issue, Reeves said, is who controls the case. The judge agreed with Merck’s argument that it has a fundamental right to a “neutral prosecution” in what amounts to an enforcement action (because the AG is seeking statutory penalties). The litigation must be untainted by the financial incentives of the lawyers prosecuting the case, Reeves said. To determine whether it is, he pointed to helpful but non-binding guidance by the state Supreme Courts of California and Rhode Island in very similar cases, and said he had to look both at the letter of the contract between the AG and Garmer & Prather as well as at the AG’s actual oversight of Kentucky’s Vioxx litigation.
The contract was a relatively simple matter. Under the revised version signed in July 2012, the AG has final authority over all discretionary decisions in the case, including settlement. But the extent of that authority in practice was more complicated. The deposition testimony of the state lawyer tasked with overseeing the Vioxx litigation indicated that she wasn’t up to speed on day-to-day decisions in the case, such as the hiring of expert witnesses. Nor did any state lawyer sign the letter rejecting a proposed settlement, Merck said. “The AG’s office cannot control critical decision-making when it knows virtually nothing about the lawsuit it is supposed to be directing,” Merck argued.