Contingent Fees Do Not Violate Separation of Powers, Period.

In a story in yesterday's NY Times, Adam Liptak reports on what he seems to think is a new phenomenon and a new objection to it. (You can read the story here if you have Times Select.) In states with limited enforcement budgets, Attorneys General have been awarding contingent fee contracts to private lawyers who sue violators of various legal obligations. In his opening example, Liptak notes that the Oklahoma AG struck such a deal with private law firms to sue poultry farms for polluting waterways. Overall, the story reads more like a talking points memo by the U.S. Chamber of Commerce than like Liptak's usually reliable news analysis.

Critics of the contingent fee practice say that it violates principles of separation of powers, either because it vests executive power in private parties or because it appropriates funds (the private lawyers' cut of a successful verdict) without the express consent of the legislature. These are very weak objections. The federal constitutional doctrine of separation of powers has no force in the states. Although most state constitutions have their own principles of separation of powers, most are weaker than the separation-of-powers principle applicable to the federal government. And that principle certainly would not bar this practice.

How do I know that? Well, for one thing, despite Liptak's belief to the contrary, this is not a new phenomenon. In a continuing tradition that pre-dates the American republic, private parties, called "relators," have been able to bring so-called qui tam actions on behalf of the government and recover part of the proceeds. These days, qui tam actions are brought to enforce the False Claims Act, but at the time of the Founding private suits, including even private criminal prosecutions, were brought to enforce a wide variety of legal duties. Moreover, we can think of much ordinary contemporary civil litigation---in which private parties sue in their own name---as private enforcement of public obligations. Indeed, there's a very common term for such cases. They're called "private attorney general" actions. There is no constitutional difference between, on the one hand, qui tam and private attorney general suits, and on the other hand, private attorney contingent fee cases, at least so far as derogations from executive power are concerned.

What about the claim that contingent fees to private lawyers infringe on the legislature's role in appropriating funds? This claim is equally silly, unless the legislature must individually approve all individual contracts of every sort. Of course, a legislature could pass a law forbidding contingent fee arrangements---or perhaps more sensibly, setting guidelines for them---but absent legislation, it's simply bizarre to think that the general principle of separation of powers forbids such arrangements. Bizarre, and yet one state supreme court, has accepted this argument. In 1997, in Meredith v. Ieyoub, the Louisiana Supreme Court held that the state constitutional principle of separation of powers bars the state Attorney General from entering into contingent fee arrangements unless specifically authorized to do so by the state legislature.

The Meredith case contains almost nothing that counts as analysis. (Don't believe me? Read the opinion yourself.) It simply equates a private firm's collection of its contingent fee with an appropriation, even though, of course, such funds do not come out of revenues raised by taxation. No other state high court has yet adopted the Meredith rule, but the Times article makes clear that lawyers are pushing it.

Whether government should hire private lawyers working on contingent fees, and if so, on what terms, is a difficult policy question that depends on many factors, including other available resources for enforcement. The Bush administration has barred contingent fee arrangements by executive order under the preposterous pretext that it is "protecting American taxpayers." This is a preposterous pretext because there is no reason to assume that contingent fee arrangements will always cost the government more than hourly wages paid to government employees. Indeed, one might think that conservatives and certainly the Bush administration---which has privatized such seemingly essentially governmental functions as fighting much of the Iraq War (as explored here)---would be enthusiastic about the idea of contingent fee arrangements for civil justice enforcement. After all, they bring the discipline of the profit motive to the government. But apparently privatization ceases to be a good idea when it results in too many businesses being made to comply with the law.

Whether hypocritically or not, the administration is entitled to eschew contingent fee arrangements for federal law enforcement, except where statutes like the qui tam provisions of the False Claims Act specifically require their equivalent. But that policy judgment is a far cry from the far-fetched constitutional arguments against contingent fee arrangements that Liptak and the Louisiana Supreme Court take seriously.