New Law Promotes Transparency in State’s Hiring of Outside Counsel

March 5, 2014

Co-Author: Andrew Lang

Last year, the Wisconsin Legislature enacted the Transparency in Private Attorney Contracting Act, 2013 Wisconsin Act 105. This act does a number of things, all intended to promote government transparency and create good practices for the state government’s hiring of outside counsel. Typically, the state relies on the office of the Attorney General to represent its interests in legal cases. When the legal question appears to be too big in terms of expense, time commitment, or complex issues that require specialized legal experience, the state will consider hiring in attorneys from private practice on a contingency fee basis. Many attorneys in civil litigation work on a contingency fee basis, meaning they are paid a percentage of the award only if their clients win at court.

Under the new law, when considering whether to hire outside counsel, the Governor must make a written determination that this decision is in the public’s best interest and that it will be cost-effective. This should promote good government by requiring the state to show that there is a good reason to hire outside legal counsel. After making this showing, the state’s Department of Administration invites bids from private law firms that are looking to be hired on a contingency fee basis.

The new law also imposes limits on the maximum contingency fees that attorneys can claim while working for the state.

  • For a recovery of less than $10 million, the fee cannot exceed 25% of the recovery.
  • For a recovery between $10 million and $15 million, the fee cannot exceed $2,500,000 plus 20% of the amount by which the recovery exceeds $10 million.
  • For a recovery between $15 million and $20 million, the fee cannot exceed $3,500,000 plus 15% of the amount by which the recovery exceeds $15 million.
  • For a recovery between $20 million and $25 million, the fee cannot exceed $4,250,000 plus 10% of the amount by which the recovery exceeds $20 million.
  • For a recovery of at least $25 million, the fee cannot exceed $4,750,000 plus 5% of the amount by which the recovery exceeds $25 million.
  • No fee for a single action can ever exceed a total of $30 million.

These aggregate fees do not include reasonable costs and expenses, which law firms may be able to claim on top of these fees. The limits ensure that more of the money recovered on behalf of the state will return to the state and the taxpayers. In creating these limits, Wisconsin joins a number of other states that have enacted similar legislation as part of a larger movement of tort reform.

The primary benefit of the new law is increased government transparency. Under the new law, any time the state hires an outside attorney on a contingency fee basis, the contract and contingency fee payments must be posted on the State’s Government Accountability Board Website. This allows the public to monitor the state’s use of outside counsel and the payments that these attorneys receive.

Critics of the new law fear that placing fixed caps on contingency fee awards may prevent the state from obtaining the best legal representation possible by reducing the private profit incentive for law firms to take on work for the state. While it is true that contingency fee arrangements encourage attorneys to advocate zealously for their clients, the new system seeks to balance the private profit incentive with the motivation to promote the public good.

For more information about this law, see:

2013 Wis. Act 105, available at http://docs.legis.wisconsin.gov/2013/related/acts/105/_1

Memorandum from the Wis. Legislative Council, 2013 Wisconsin Act 105: Contracts for Legal Services on Contingent Fee Basis (Jan. 10, 2014), available at https://docs.legis.wisconsin.gov/2013/‌related/‌lcactmemo/‌ab27.pdf

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