Curtailing attorney solicitation of local governments, Texas House members hear testimony on HB 2826

By: David Yates

AUSTIN – There’s a growing trend in Texas – attorneys recruiting local governments to pursue litigation, one expert recently told members of the Texas House of Representatives.

The Committee on Judiciary & Civil Jurisprudence heard testimony on Monday concerning HB 2826 – a bill aimed at bringing transparency to how local governments hire law firms for civil lawsuits.

A sister bill has also been filed in the Senate. Both pieces of legislation relate to the “procurement of a contingent fee contract for legal services by a state agency or political subdivision.”

In other words, unlike the state, contingency fee agreements with local governments are percentage based instead of based on “reasonable” hour rates.

Texans for Lawsuit Reform believes HB 2826 will bring transparency to the process, requiring state entities to negotiate a contract with the “most highly qualified” attorney and not just the firms that solicit them.

“A growing trend in Texas and throughout the nation is lawyers recruiting governmental entities to pursue all kinds of lawsuits,” said Lee Parsley, general counselor for TLR, during the hearing. “The sales pitch is always the same. We represent you for free. We win only if you win.

“Many local governments find this offer to tempting to pass up.”

Some of the major concerns arising from contingency fee agreements with local governments, according Parsley, include contracts being signed with very little public input and a lack of competitive process, chiefly because the suits are lawyer driven.

“When the process is driven by the lawyer, the lawsuit is the original intent,” Parsley said. “It starts with the lawsuit and works backward from there, rather than starting with the client having a problem.”

For the better part of the afternoon, the committee heard testimony from a wide-range of individuals, a list comprised of several notable trial lawyers and public builders, along with numerous county and school district officials.

Many proponents of the HB 2826 argued the bill would help local governments keep lion’s share of proceeds from a lawsuit – an issue that became quite pronounced last year as Texas attorneys began scrambling to sign up local governments for opioid litigation.

Houston attorney Mark McCaig told committee members “curiosity” drove him to start unearthing contingency fee contracts Texas counties signed with law firms for representation.

What he found arguably raised some eyebrows across the state.

In Harris County, officials agreed to pay a contingency fee of 35 percent to three law firms for representation in an opioid suit, more than double what Dallas County’s elected representatives agreed to in their similar opioid suit.

“I also noticed a lot of this litigation is driven by attorneys,” McCaig told the committee, adding that his research revealed attorneys were emailing and calling public officials and, on some occasions, even making in person visits.

If passed, HB 2826 will move contingency fee contract approval out of the hands of the Texas Comptroller’s Office and into to lap of the attorney general.

Houston attorney Mike Gallagher, who is representing Harris County in its opioid suit, wasn’t overly fond of the proposed transfer of power.

Gallagher told the committee he believes such a change removes the authority of “every county judge, every county attorney, and every county commissioner” and gives it to the state AG, who then can make a “subjective” choice to overrule government officials.

Dozens of Texas counties have filed opioid suits, as has the state of Texas. In future scenarios, HB 2826 would grant the AG power to axe the county suits and file a uniform petition for the state as whole, essentially keeping the trial lawyer cut limited to just one case versus dozens.

The committee also heard from several public builders, who expressed concerns over the rise in construction defect lawsuits against them.

Jeff Brannen, chief legal officer for Balfour Beatty Construction in Dallas, testified that his company has been named in four major lawsuits in five years – all complaints brought by rural school districts.

“Each of these lawsuits follows the same pattern,” Brannen said. “A lawyer meets with someone in a rural school district … he offers to bring in an expert to look at the district’s buildings and provide an evaluation, free of charge. If the investigation reveals any issues that can be characterized as construction or design defects, the lawyer will then offer to sue.

“Regardless of the merits, these lawsuits force settlements.”

Brannen says the current system allows deals to be cut with lawyers in secret to generate lawsuits that “don’t often bother to change all the names from one lawsuit to the other.”

“This is not part of a fair justice system that we believe in,” Brannen said. “Instead, it’s a business model designed to extract settlements and generate returns for the law firm filing the suit, not for providing justice to the school district.”

The Texas Comptroller’s Office requires certain entities that fall under that water code provision to abide by the rules about using the lodestar calculation. So for example there is a percentage, but if the lodestar is lower than the percentage (hours worked x hourly rates x multiplier) they they paid based on the lodestar. If the percentage is lower they are paid on the percentage. Cities and counties clearly fall under the water code provision, but a good argument can be made that school districts do not.

HB 2826 was introduced by Rep. Greg Bonnen, a Republican out of Friendswood.