Everybody knows there is money to be made in lawsuits these days -- suits against breast implants, asbestos, Norplant, and the like. Fabulous riches to be made, amounting to billions of dollars for hard-working trial lawyers. So should it come as any surprise that this money has entered the bloodstream of politics?
It turns out there's more of it floating around than anyone could have imagined. The astonishing extent of political giving by trial lawyers has been brought to light for the first time in a report by the non-profit Contributions Watch. Trial lawyers are bankrolling politicians at a level unmatched by any profession: $ 100.4 million in combined state and federal giving from 1990 through 1995, heavily concentrated among a tiny core of extraordinarily rich plaintiffs' attorneys. The amount of money involved, as well as the results that money has bought, tell us something new, fascinating, and troubling. Trial lawyers have become the most powerful professional special-interest group in American politics.
Victories in tort cases are "generating literally billions of dollars in fees for lawyers to the point where they now effectively control certain political processes," says Lester Brickman, a professor at the Benjamin N. Cardozo School of Law in New York. "Money talks and big money talks loudest. If you have enough money -- and the litigation generates enough money -- it's going to be able to buy the political process. With enough money, you can buy a veto from the president of the United States." In the past year, President Clinton has twice vetoed legislation aimed at tort reform -- and one of the vetoes came just days after William Lerach, the most successful securities tort lawyer in the country, attended a White House dinner.
But the real evidence of trial-lawyer political power comes at the state level. From Florida to Arizona, state attorneys general are actually deputizing trial lawyers to litigate tort cases for them. These are cases for which the trial lawyers can earn colossal contingency fees -- cases in which the lawyers receive no money up front but a large cut of any settlement or jury award. The suits primarily involve tobacco companies and the health-care costs incurred by smokers. But they have moved beyond tobacco to asbestos and environmental litigation. Brickman says "the activities of the attorney general of Mississippi, to name just one," are heavily influenced by the state's trial-lawyer bar. And in a blatant conflict of interest, a number of state prosecutors are handing out these multibillion-dollar contracts -- without competitive bidding -- to the same lawyers who donate money to their campaigns.
In Texas, Louisiana, and other states where judges are elected, not appointed, trial lawyers make major campaign contributions to the men and women who then preside over cases argued by the very same trial lawyers.
What makes the Contributions Watch study such a breakthrough is its focus on state campaigns, where trial lawyers actually make their biggest political investments. It is fiendishly difficult to figure out how much money is spent at the state level. Federal Election Commission records are computerized and centralized; state campaign records often consist of boxes of paper filed away in state capitals.
The report also takes the first in-depth look at individual donations that usually escape notice because they are so hard to identify. Contributions Watch matched thousands of individual contributions with a directory of the American Trial Lawyers Association (ATLA), then added the names of well-known nonATLA litigators like Lerach. Donations by relatives were also included if a match could be verified. Warren Miller, executive director of Contributions Watch and a former analyst at the Federal Elections Commission, calls the numbers "very conservative," and indeed they are often smaller than tallies done by local newspapers.
The numbers show stunning largesse over the past six years. In 11 states where data were compiled from January 1990 to December 1995, individual trial lawyers gave $ 61.3 million at the state and local levels, swamping the $ 39. 1 million they gave to national campaigns.
Donations to political-action committees, which are easy to find, make up just a fraction of the money. Of the $ 9.7 million trial lawyers contributed in Illinois, for example, just $ 1.9 million came through a PAC; of the $ 5.4 million in Arizona, just $ 88,000 did. The pattern is the same in state after state.
Fully two-thirds of the $ 100.4 million total came from individual attorneys and not from organizations. And half of that came from a small core of about 150 plaintiffs' lawyers. Lerach alone gave $ 1.5 million over the six-year period in state and federal contributions. Like Lerach, the top trial-lawyer contributors nationwide are a Who's Who of mass-tort litigators.
For a sense of just how much money we're talking about, in 1995 trial- lawyer PAC and "soft money" contributions at the federal level were $ 8.1 million; tobacco companies gave $ 3.2 million; oil and gas companies $ 2.8 million; the Big Three automakers $ 842,000.
Where does all this money come from? Contingency fees. Originally devised as a way for a poor man to get a fair shake in court, the contingency fee has become a trial-lawyer bonanza. By amassing thousands of plaintiffs into one gigantic suit -- a so-called mass tort -- a trial lawyer can blackmail a company into a huge settlement for a claim resting on little or no evidence.
Brickman estimates that in mass torts, where the lawyer receives one-third to one-half of the settlement as his pay, the hourly attorney rate has reached spectacular levels -- in some instances as high as $ 150,000, with fees of $ 500 million and more.
The trial lawyers invest a portion of their earnings in the campaign coffers of elected officials, who then soften the ground for further litigation. And the litigation has blossomed. The horror stories are familiar by now -- padlocked playgrounds, swimming pools bereft of diving boards, exorbitantly expensive auto insurance. But the consequences are much more severe than these petty inconveniences and small injustices. Mass torts have become a threat to entire industries, not to mention due process, scientific research, and public health. One small-town Texas lawyer and bigtime political contributor, Harold Nix, has made millions in a mass tort alleging without evidence that hundreds of industrial products -- including factory hand soap -- caused "chemical AIDS," an illness he invented.
A $ 4.25 billion settlement against the makers of breast implants was based on allegations of silicone diseases without basis in medical fact -- a settlement that drove Dow Corning into Chapter 11 bankruptcy. The same kinds of claims are rapidly moving beyond dubious cosmetic surgery to life-saving medical devices such as pacemakers, heart valves, artificial joints, vascular grafts, shunts for kidney dialysis, and bone screws for spinal-cord injuries.
Tobacco litigation promises to be the mother lode of mass torts. It targets a despised industry with lots of sick customers and $ 43 billion in assets. Attorneys general in 15 states have hired contingency-fee lawyers to sue the tobacco companies, seeking recovery of Medicaid expenses for state residents treated for smoking-related illnesses. If successful, these suits could transfer roughly $ 20 billion from shareholders to state treasuries. A handful of trial attorneys will get a 25 percent cut in most cases.
Mississippi was the first state to file suit against tobacco companies on the Medicaid-recovery theory in 1994. Attorney general Mike Moore awarded the lead portion of the tobacco contract to his top campaign contributor, Richard Scruggs of Pascagoula, a wealthy asbestos litigator.
Scruggs had been looking for a "masterstroke" against the tobacco companies, and he found it in Medicaid and Mike Moore. Moore, who literally stood at Clinton's side when the president vetoed a productliability bill in 1995, also threw Scruggs a state asbestos lawsuit in 1992 after Scruggs contributed $ 20,550 to his 1991 reelection campaign. Scruggs earned a $ 2.4 million contingency fee in the case. A clear conflict of interest? "There is no conflict," says Mississippi assistant attorney general Trey Bobinger. "We have black folks, we have white folks, we have people with established track records in litigation, and like I said, some of these people have contributed but they also happen to be the best lawyers in the state."
Louisiana attorney general Richard Ieyoub, now running for the U.S. Senate seat vacated by retiring Democrat Bennett Johnston, is also awarding huge contingency-fee contracts without bidding, often to the same attorneys who contributed to his campaigns. Contributions Watch data from January 1991 to June 1996 show Ieyoub receiving $ 412,948 from contingency-fee attorneys. The Baton Rouge Morning Advocate reported last year that nearly half the law firms contributing to his campaign got contingency-fee contracts.
Assistant attorney general Emory Belton says Louisiana's tobacco suits were given to these lawyers because of their experience pursuing asbestos cases. Belton sees no conflict because so many trial lawyers contributed to Ieyoub's campaign. "It is not surprising that some of them got contracts," Belton says. "They certainly were in some instances contributors to his campaign. . . . He knew these people. He was confident in their ability. . . . I don't think it was any kind of quid-pro-quo-type scenario at all."
Texas attorney general Dan Morales did not use competitive bids to find a lawyer for his $ 4 billion tobacco suit. "After speaking with a number of law firms, he chose five firms," says spokesman Ron Dusek. The criteria were " primarily their success rate and their reputations for this type of litigation, and also their financial strength." They are mass-tort specialists and big Texas campaign contributors: the aforementioned Harold Nix, Walter Umphrey, John O'Quinn, John E. Williams, and the law firm of Reaud, Morgan & Quinn. Morales received $ 149,545 from 1990 to 1995 from four of them -- $ 85,000 from Umphrey; $ 41,500 from Reaud, Morgan; $ 11,045 from Williams; and $ 12,000 from O'Quinn. In all, Morales received $ 740,067 from trial lawyers.
Competitive bidding, Dusek says, "is not required for professional services. This is very important litigation and we want to be able to choose who we are going to use and not necessarily be required to choose the lowest bidder." With a 15 percent contingency fee, the five law firms will split $ 600 million if they win. In Florida's $ 1.43 billion tobacco litigation, the lawyers are expected to get upwards of $ 400 million. Florida assistant attorney general Jim Peters insists, "We're not handing it to them. They earned it. They created something where before there was nothing."
Even where there is bidding, the tobacco contracts somehow wind up with big campaign donors. Attorney Peter Angelos, who owns the Baltimore Orioles and got rich on asbestos litigation, got the tobacco contract in Maryland.
The lawsuits are intended to help the states defray costs in coping with the impact of tobacco on public health. But success means that billions of dollars in government proceeds will be transferred to private lawyers. These attorneys general, of course, are employed to argue cases on behalf of their states so that the states don't have to hire other lawyers. Or they could hire other lawyers by the hour.
States routinely hire outside counsel by the hour for specialized matters such as university patent litigation. But for tobacco, says Mississippi's Bobinger, "if we did it in-house, we'd have to go to our legislature and ask for $ 5 million or $ 10 million to fund the litigation." That, of course, while scads cheaper, would be highly inconvenient, provoking all kinds of debate about the wisdom of trying to ban smoking and using lawsuits to do it. As A. Foster Sanders, a district court judge in Louisiana, asked in a decision on a contingency-fee contract there, "Is it prudent to give away, potentially abandon, the state interest in such huge sums of money? . . . The attorney general would have the authority, uncontrolled, as to how to spend state funds in whatever amounts he deems appropriate. This would be an extreme miscarriage of justice."
The attorneys general say tobacco litigation is so complex and the tobacco companies so powerful that such suits are simply beyond their expertise and financial capability. "To have that type of counsel on board would require a substantial change in pay grades," says Florida's Peters, with considerable understatement. "These are the gunfighters, these are the guys who do high- profile, high-stakes litigation."
Besides which, the attorneys general argue, the lawyers cover all expenses and are paid only if they win. "This lawsuit is not costing the taxpayers of Mississippi any money," says Bobinger. "It could mean hundreds of millions of dollars to the people of Mississippi, which would be tremendous -- better schools, better roads, better hospitals, better health care."
The state tobacco suits push contingency-fee litigation into unexplored ethical territory, and not just because a state bears no resemblance to a poor person unable to afford a lawyer. "It's a Frankensteinian joinder of the all-powerful state and the perverse incentives of the contingency-fee arrangement," says Rep. Chris Cox, the California Republican who battled Lerach over securities-litigation reform. The attorneys general implicitly concede as much by insisting that tobacco is unique.
Florida governor Lawton Chiles says he will pursue nothing but tobacco in this way. Yet when asked at a press conference about alcohol, his general counsel, former trial lawyer Dexter Douglass, replied, "At this point, we don't have the statistics to proceed in that regard. . . . You gotta take 'em one at a time. I don't believe anybody in the world could handle all those industries at once."
Douglas was referring to an audacious Florida statute, written by Pensacola trial lawyer Fred Levin, that slipped through in the hectic waning hours of the 1994 legislature. The law explicitly strips companies of their ability to defend themselves against state Medicaid suits and allows statistics to count as evidence, rather than actual injuries. The law does not even mention tobacco.
The tobacco suits may open up a wide new avenue for litigation in all states, even those where companies are permitted to defend themselves. Anyone treated under Medicaid for an illness or injury that can be related to a product now represents a potential state claim. There are the obvious targets: alcohol, automobiles, guns. But the recent pattern of mass torts suggests much broader arenas -- pesticides, chemicals, medical devices, pharmaceuticals.
"It's extraordinary that this kind of attack can be organized in this way, because of course the implications go far beyond the tobacco companies," says Walter Olson, author of The Litigation Explosion. "It would be astonishing if a single one of them turned down any further business once that line is crossed, by saying, 'Oh no, I promised that it would only be tobacco, so I'm not going to take this lead paint case.'" Would an aspiring attorney general really tell Katie Couric on national television that he would not rescue children from lead poisoning?
Proponents of the tobacco suits dismiss these fears as scare-mongering by business. "Absolutely never in my 20 years of hanging around state attorneys general have I ever heard of any other business that would be treated in this fashion," says James E. Tierney, Maine's former attorney general and a consultant on the tobacco suits.
Yet such suits have already begun. Louisiana and Mississippi are both pursuing so-called mitigation cases against asbestos makers -- on contingency fee. Texas's Morales has said he is considering hiring contingency-fee lawyers to pursue environmental litigation in addition to the state's $ 4 billion tobacco suit.
And the technique is moving from the state to the local level. More than two dozen cities in Texas have hired contingency-fee lawyers to sue pipeline companies for franchise fees that the cities contend the companies owe them for crossing city property. John O'Quinn's firm, a big player in breast implants and involved now in the tobacco case, is handling those suits. Harvard Law School professor Laurence Tribe, who is on the Texas tobacco team, told the Wall Street Journal, "This could be the beginning of a beautiful relationship."
The Clinton White House, which found in tobacco a perfect foil for its efforts to prove that the president cares about children and families, has a keen interest in the tobacco suits. Vice President Al Gore joined Mike Moore at a June 4 rally in Jackson, where he blasted the Republican party as " almost a wholly owned subsidiary of the tobacco industry" because it has " made the conscious decision to accept so much money from the tobacco companies." After the rally, Gore attended a $ 25,000-per-couple fund-raiser at the home of Jackson trial lawyer David Nutt. Scruggs, the main lawyer in Moore's suit, even hired Clinton's disgraced former top strategist, Dick Morris, to poll Mississippians about their opinions on the tobacco suit. Bill Lerach similarly hired Bill Carrick, Clinton's chief California political strategist.
Lerach's core business is suing companies for fraud when their stock price falls -- a weird form of tort litigation made possible by a poorly written sub-clause in the Securities Exchange Act of 1934. Lerach's specialty, the " strike suit," is now threatened by securities-litigation reform -- which became law after Congress overrode Clinton's veto. Lerach is now funding Proposition 211, an initiative on the California ballot that effectively guts the federal legislation. Lerach fired Carrick after Clinton announced his opposition to Prop. 211 (the president was sucking up to Silicon Valley executives who were enraged by his original veto).
Paul Hendrie of the Center for Responsive Politics, a nonpartisan research group that tracks special-interest spending, says that "consultants have a special close access to those candidates and that access is not going to end when the campaign is over. They're in a position to make the case for their clients informally or directly. . . . That's a real danger."
Trial lawyers are now seeking to leverage their individual political contributions even more by starting a "bundling" operation. ATLA has asked for FEC approval to set up a program that would target favored candidates, recommend how much to contribute and when, and track the money. Their model is EMILY's List, the feminist political fund. But informal coordination among the trial lawyers is already well established. A letter dated June 25, 1993, from the Louisiana personal-injury firm Gauthier & Murphy, marked "PERSONAL AND CONFIDENTIAL," said: "A number of us, all of whom are members of the Louisiana Trial Lawyers Association, are getting together with Judge Joseph Bleich to discuss his interest in the Supreme Court. . . . We will be meeting with Judge Bleich at 1:15 on Tuesday, July 20th, at the Windsor Court Hotel in New Orleans." Bleich won a special election to the Louisiana Supreme Court in February, after receiving $ 217,000 from the trial bar.
Another Gauthier & Murphy letter, this one from 1992, announced a dinner at Antoine's restaurant in New Orleans "honoring Kitty" Kimball, also now a state supreme court justice. "If you can loan the campaign $ 5,000," the letter said, "we will see to it that after the election, the committee has the fundraisers necessary to pay back your loan. Please remember that Kitty is a sitting trial judge now. . . . If you are unable to loan your own money at this time, we have financing available for you personally. . . . The future of our practices is in our hands."
Ginger Sawyer, who tracks contributions for the Louisiana Association of Business and Industry, says that after judicial elections, defense attorneys " who didn't play" are invited to fund-raisers to help pay off the trial-bar loans. And some contributions appear to be disguised, Sawyer says. A $ 4,000 contribution to Bleich was listed on disclosure statements as coming from Oak Management, with the same address as Gauthier & Murphy. Another from "Big Ridge Cattle Company" had the same post-office box as leading trial lawyer Paul Wilkins. "It's bad enough that lawyers give money to judges who then sit on their cases, but it's really outrageous for a judge to actually solicit money from an organized group of lawyers who have a political agenda," says George Mason University law professor David Bernstein. "What else can one really conclude but that there's a quid pro quo?"
Trial lawyers and their consumer-activist allies say business gives money too, and plenty of it. True enough. But trial-lawyer money is aimed at just one thing: promoting litigation. That enhances its leverage considerably. Business agendas run from taxes to regulation to trade. Because trial lawyers have such a simple and single-minded program, they know exactly who their opponents are and can punish them easily -- particularly straying Democrats. " They'll go after you," says former Monsanto Chemical chairman Richard J. Mahoney, who was deeply involved in last year's tort reform fight in Congress. "Nobody on the side of tort reform would dare do that because you'd be back looking for support on another issue in another month. Trial lawyers have no fears, they're well funded, and they're well organized. They have a single issue and nothing else on their minds."
The contingency-fee industry not only protects its turf, but forever prowls for new targets. A conference in Philadelphia last March advertised, "Toxic and Mass Torts: New Exposures." ATLA's "litigation groups" include everything from AIDS and automatic doors to breast cancer and butane lighters; from delivery-service negligence and diet products to inadequate security and interstate trucking; from lead paint and liquor to nursing homes and Norplant; from tap-water burns and traumatic brain injury to vaccines and vending machines. There is money to be made and corporations to be pillaged.
Bribing judges was long ago made a crime. Bounty hunters were banished and state prosecutors put on salary for a reason -- to remove any financial stake in their prosecutions. Contingency-fee lawyers have a stake in litigation that reaches grotesque proportions. And now these lawyers are being deputized by attorneys general to prosecute under cloak of state authority.
When these lawyers are making large political contributions to the attorneys general who hire them to sue, in lawsuits that have contingency fees running literally hundreds of millions of dollars, prosecution for profit takes on a whole new dimension. Such conflicts of interest once were considered a threat to justice. Indeed they were. Indeed they are.
TOP TEN TRIAL-LAWYER CONTRIBUTORS
Federal and state combined, Jan. 1, 1989 to Dec. 31, 1995
1.William Lerach, $ 1,501,257
Lerach is a San Diego trial lawyer specializing in class-action securities fraud. A heavyweight contributor to Democrats, including President Clinton and California senators Barbara Boxer and Dianne Feinstein. Lerach has given $ 80,000 in "soft money" to the Democrats so far this election cycle, while his firm has given an additional $ 100,000, according to analyses by Common Cause and the Center for Responsive Politics. In 1994, Lerach handed out more political money than General Motors.
Lerach's suits charge companies with fraud when their stock prices drop, alleging that they misled investors. The huge class-actions are so costly to defend that most companies make multimillion-dollar settlements. Lerach makes millions while the thousands of plaintiffs make pennies on the dollar.
Congress passed a bipartisan bill last year to limit Lerach-style suits. Clinton vetoed the bill days after Lerach attended a White House dinner, which led to an immediate and overwhelming override, the only time a Clinton veto has failed. Lerach's heavy contributions this year should boost his $ 1. 5 million level considerably.
2. Michael L. Climaco, $ 1,301,230
A Cleveland lawyer whose megafirm plays both sides of the lucrative liability game, representing plaintiffs and defendants. Contributions are funneled largely through a PAC called Government Under Democracy, which gave $ 50,000 to Republican governor George Voinovich in 1993. Climaco gave $ 27, 900 to the Republican National Committee. He was once a candidate for Congress and vice chairman of the Cuyahoga County Democratic party.
3. David L. Perry, $ 941,391
A personal-injury lawyer and former president of the Texas Trial Lawyers Association, Perry helped organize plaintiff attorneys in a suit alleging faulty side placement of gas tanks on General Motors pickup trucks. Perry described the trucks as "mobile landmines." His wife, attorney Rene Haas, was defeated in a hotly contested race for the Texas Supreme Court in 1994 that cost nearly $ 5 million and set a spending record for a Texas judgeship.
4. Walter Umphrey, $ 759,351
Umphrey is a top player in asbestos litigation, from which he and his Texas firm are estimated to have earned more than $ 100 million in the last decade. Also a pioneer in alcohol litigation, he has argued that distillers should have warned alcoholics of the pitfalls of drinking. Umphrey has been hired by Texas attorney general Dan Morales as "attorney in charge" of the state's $ 4 billion lawsuit against tobacco companies. Umphrey has given $ 65,000 to Morales over the period.
5. Harold Nix, $ 675,200
Nix is a small-town Texas lawyer who has embroiled more than 500 defendants in a massive toxic tort centered on the bankrupt Lone Star steel paint. Nix alleges without evidence that hundreds of industrial products shipped to the plant cuased "chemical AIDS" among more than 3,000 plaintiffs who once worked there. Nix made up the term to describe the effects of what he calls in his suit "a visible fog or mushroom-shaped cloud of pollution made up of toxins, fumes, particulates." Texas Monthly noted that one plaintiff was 94 years old, hadn't worked at the plant 28 years, and was claiming that "chemical AIDS" had shortened his life expectancy.
The suit began in 1987 and has yet to go to trial, but so far it has earned Nix an estimated $ 26 million from $ 69 million in settlements.
6. Frank L. Branson, $ 572,430
Branson is a flamboyant Dallas personal-injury lawyer known for winning multimillion-dollar judgments in medical malpractice suits. He has sued convenience stores for inadequate security and is a big contributor to state judges. Clinton appointed his wife, Debbie Dudley Branson, vice chairwoman of the board of the Securities Investor Protection Corp., a quasi-federal agency that manages a nearly $ 1 billion insurance fund for broke-dealers.
7. J. Donald Bowen, $ 569,091
Bowen is a Houston lawyer and former president of the Texas Trial Lawyers Association active in fighting state tort reform. A big contributor to former governor Ann Richard's ($ 56,281) and Clinton ($ 10,500).
8. Philip H. Corboy, $ 550,701
A Chicago personal-injury lawyer who made his fortune representing plane- crash victims, Corboy is reportedly close to Hillary Rodham Clinton and a member of the Inner Circle of Advocates, an exclusive 100-member club of the nation's most successful trial lawyers.
9. Lanny Vines, $ 484,845
Vines is an Alabama personal-injury lawyer who publishes a periodic newsletter about himself; a 1993 edition describes a gourmet dinner prepared by Ralph Nader and Nader associate Joan Claybrook for Vines and friends at Claybrook's home, a dinner Vines won for $ 10,000 at an American Trial Lawyers Association fund-raising auction. An automaker settled with him for $ 312,000 for an allegedly defective door latch on a 10-year-old involved in a high-speed wreck. In a $ 215,000 settlement, an allegedly defective switch was 40 years old. One woman got $ 50,000 when she broke her leg bowling. The " theory of recovery," the newsletter said, "was that the floor was not smooth enough to prevent her foot from sticking."
10. Stanley Chesley, $ 447, 775
Chesley is an Ohio lawyer famous for pioneering huge class actions in personal-injury lawsuits. Self-styled "master of disaster," Chesley co- chaired the plaintiffs committee in the $ 4.25 billion breast-implant settlement for 400,000 plaintiffs (since collapsed). He made his reputation litigating the Union Carbide chemical leak in Bhopal, India, the MGM Grand Hotel fire in Las Vegas, Agent Orange, and the anti-nausea pregnancy drug Bendectin, along with assorted fires and railroad accidents. His firm is now active in litigation against the Norplant contraceptive.
Chesley is a big Democratic contributor who this year helped raise $ 2 million for the Clinton/Gore campaign, according to the Cincinnati Enquirer. Reports by Common Cause and the Center for Responsive Politics show Chesley making $ 100,000 in soft-money contributions during the current election cycle. The Cincinnati Post reported that Chesley "dines at least every other month at the White House and is on a first-name basis with the Clintons and Gores." Clinton appointed Chesley's wife, Susan J. Dlott, to a federal district court judgeship.
Sources: Contributions Watch, newspaper and periodical reports.
Carolyn Lochhead is a Washington correspondent for the San Francisco Chronicle.