HOUSTON - Attorney General Ken Paxton agreed to pay outside lawyers as much as $3,780 per hour to sue Google – a questionable arrangement that fails to protect taxpayers, says one area attorney.
Back in December, Paxton announced Texas was leading a multistate coalition in an antitrust lawsuit against Google, alleging the company monopolized products and services used by advertisers and publishers in online-display advertising.
To aid the state, Paxton’s office hired two notable law firms, Keller Lenkner (a Chicago firm) and The Lanier Law Firm, which is based in Houston.
And while Paxton claims the contingent contracts with the firms comply with Section 2254 of the Texas Government Code, attorney Mark McCaig, who unearthed the contracts, suspects that may not actually be the case.
McCaig posted his thoughts and findings on Big Jolly Times today, writing that outside counsel the state hired stand “to reap significant financial rewards should the litigation prove successful.”
The two contracts, while similar in many respects, contain a key difference in how the law firms could potentially be paid, McCaig writes.
According to the article, the contract with Keller Lenkner is a contingent-fee contract that provides that the firm will be paid the lesser of 1) 11 percent the net monetary recovery from any settlement or final judgment or 2) a calculation based on the contractual billable hourly rate of a person performing work under the contract, multiplied by four.
The contract provides for billable hourly rates ranging from $200 per hour for paralegals ($800 per hour with the multiplier) and up to $945 per hour for “Partner,” “Shareholder,” or “Of Counsel” attorneys ($3,780 per hour with the multiplier).
The contract with the Lanier Law Firm contains two potential ways the firm could be paid under the contract, McCaig writes.
The first is similar to that contained in the contract with Keller Lenkner - a contingent fee comprised of the lesser of 1) 11 percent the net monetary recovery from any settlement or final judgment or 2) a calculation based on hourly rates ranging from $200 per hour for paralegals ($800 per hour with the multiplier) and up to $945 per hour for “Founder,” “Senior Attorney,” or “Of Counsel” attorneys ($3,780 per hour with the multiplier).
“The second potential way the Lanier Law Firm could be paid under the contract is a provision for a mixed hourly fee. Under this provision, should the Texas Legislature specifically appropriate at least $43,283,112 for the Google litigation, the Lanier Law Firm would be entitled to be paid monthly based on invoiced hourly fees of half of the contractual hourly rates until such time as the appropriated funds are exhausted,” McCaig writes.
“At the conclusion of the litigation, the Lanier Law Firm would then be entitled to a contingent fee of 5% of any net financial recovery, minus the hourly fees paid to the firm. It is unclear at this time whether the legislature will make an appropriation during the upcoming legislative session that would trigger a mixed hourly fee for the Lanier Law Firm.”
As a result of a handful of politically connected attorneys reaping billions from the tobacco settlement in the ‘90s, Texas implemented strict provisions governing the hiring of outside lawyers on a contingent-fee basis by the state.
One of the reforms passed was a requirement that there be a demonstrated need before the state can hire outside lawyers on a contingent-fee basis (the aforementioned Section 2254).
And while Paxton has determined his office can’t handle the Google litigation and that the outside legal services needed can’t be obtained under a contract providing only hourly fees, whether he had a factual basis to do so is highly questionable, according to McCaig.
Paxton’s office employs more than 4,000 people, including nearly 750 attorneys. Additionally, nine other states have joined Texas in the suit against Google.
“It is hard to imagine that the Attorneys General of these ten states do not have the manpower to handle at least the bulk of this litigation on their own,” McCaig writes. “Additionally, Paxton made a finding that services from outside lawyers could not be reasonably obtained on an hourly fee basis. Texas has a robust legal market, including many attorneys with significant experience handling complex commercial litigation.
“To claim that the Attorney General’s office could not reasonably find lawyers willing to work on the Google litigation for an hourly fee is preposterous.”
Since the contracts are likely to be worth more than than $100,000, Section 2254 imposes a requirement that Paxton provide the Legislative Budget Board (LBB) with information demonstrating that the legal services cannot be obtained from attorneys working under an hourly fee contract.
“Based on documents I have obtained from the Attorney General’s office and the Legislative Budget Board, it appears that Paxton failed to provide the (LBB) with this legally required information,” McCaig writes. “While Paxton provided his findings as well as copies of the contracts to the (LBB), as required by law, he failed to provide any required information supporting his findings.”
McCaig believes there are potential pitfalls for the outside lawyers Paxton hired.
First, the contracts are arguably void, as Paxton appears to have neglected to provide the LBB with information demonstrating that the legal services could not be obtained on an hourly fee basis prior to entering into the contingent-fee contracts.
“Such a procedural defect could potentially void the contracts,” McCaig writes.
Additionally, Section 2254 requires that either the legislature appropriate funds to pay fees and expenses under the contracts or that the LBB approve the payment of any fees or reimbursements under the contracts before they are made.
According to the article, absent a legislative appropriation, not only must the LBB find that the contract and proposed payments comply with applicable state laws, they must also find that the proposed payments are reasonable and necessary, which provides the LBB a possible opportunity to prevent payments for work that they deem unreasonable or unnecessary.
“As the contracts awarded by Attorney General Paxton in the Google litigation are likely unnecessary and procedurally defective, I strongly encourage him to re-examine his approach to this litigation,” McCaig writes. “With Texas and nine other states spearheading this litigation, there should be ample manpower without the need for contingent-fee outside counsel.
“On his campaign website, Paxton touts ‘a lead role in protecting taxpayers’ as Attorney General. Signing unnecessary and potentially void contingent-fee contracts worth as much as $3,780 per hour of taxpayer dollars is about as far from protecting Texas taxpayers as you can get.”
McCaig is a Republican Precinct Chairman in Harris County.