La. AG making case for contingency contracts

by Leslie Turk

Today AG Buddy Caldwell got $5 million for legal expenses related to the oil spill, but now he needs legislative authority to hire, on a contingency basis, the best and brightest legal strategists to mount an effective case against oil giant BP.

Gov. Bobby Jindal today announced that $5 million of the $25 million block grant BP gave the state for oil clean up and response efforts will help Attorney General Buddy Caldwell's office with legal expenses from the oil spill.

"BP fronted the state $25 million to support the functions of our first responders and others fighting to protect our coasts because the reimbursement process can be slow," Jindal says. "It's important to note that this $25 million doesn't even scratch the surface of our state's total needs in responding to and recovering from this catastrophic oil spill. We are designating today $5 million of this total to the [AG's office]."

"Without this essential funding it would be virtually impossible to engage in the difficult task ahead of ensuring that BP lives up to its financial obligations and responsibilities to the state of Louisiana," says Caldwell.

Caldwell says he learned a lot about potential legal expenses during a recent visit with the former attorney general of Alaska who handled the Exxon Valdez case. "Alaska put up $35 million in 1989 in a legislative session just to get their experts, get their lawyers, working on the main cases, and we need to do that," Caldwell says. "We need the money from the Legislature."

His request could very well turn this regular session, which ends June 21, on its ear. Caldwell estimates Louisiana will need as much as $65 million. He could find some help in legislation being pushed by Senate President Joel Chaisson II, D-Destrehan, but not nearly enough. Senate Bill 731 would allow the AG to execute contingency-fee contracts to hire private attorneys to help the state handle its potential lawsuit, a likely necessity if Louisiana is to retain the best legal experts, much like BP is already doing.

The bill requires the AG to document why his office cannot handle the litigation in-house and calls for Caldwell to solicit at least three proposals from outside law firms. He must also receive approval from two legislative oversight committees before hiring outside counsel on contingency.

Chaisson says he initially started investigating how states such as Texas and Alabama handle contract help on legal matters. He discovered that most states offer contingency fees to private attorneys and that the better programs have strict guidelines and loads of transparency. But he never envisioned it as a mechanism to help Louisiana litigate its way through a disaster like the one it now faces. "Then lo and behold, here comes BP," Chaisson says.

Currently, the state can pay private attorneys by the hour for their services. Chaisson's bill would give them a cut of the funds recovered in a particular case - much like plaintiff attorneys do in standard car-accident cases or other personal injury claims.

It's called a contingency fee because the plaintiff attorneys don't get paid unless their clients - in this case, the state - actually recover money damages from the defendants.

The proposed law requires a contingency fee to be payable out of all sums recovered for the state by the contracting private attorney or law firm and prohibits the attorney general from entering into a contingency fee contract that provides for an aggregate contingency fee in excess of:
(1) 25% of any recovery of up to $50 million
(2) 20% of any portion between $50 million and $100 million
(3) 15% of any portion exceeding $100 million to $250 million
(4) 10% of any portion exceeding $250 million

The bill also allows reasonable expense reimbursement for the legal team.

Chaisson says BP has billions of dollars to work with, while Louisiana is facing a $3 billion budget shortfall over the next two years. "It's going to be the largest litigation this country has ever seen, and we ought to have the same tool as [our neighboring states]," he says.