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WV Supreme Court takes up cases challenging AG outside counsel

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Photo courtesy of the West Virginia Supreme Court Photo courtesy of the West Virginia Supreme Court
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Did West Virginia's previous attorney general have the authority to hire special outside counsel under the West Virginia Consumer Credit and Protection Act, and could he appoint such private counsel to prosecute government civil penalty actions on a contingent fee basis?

These are just two questions in two consolidated cases heard May 13 by the West Virginia Supreme Court.

In one of the cases, the attorney general initiated an action in March 2012 against GlaxoSmithKline LLC asserting unfair and deceptive acts in its marketing of the diabetes drug Avandia.

The state maintained the petitioner spent "hundreds of millions of dollars" promoting the drug's benefits but say those who took the drug experienced serious effects.

According to court documents, the state sought a disgorgement of funds the company received as a result of West Virginia Medicaid and PEIA reimbursements for prescriptions of the drug.

The company made a motion to disqualify private counsel, but the circuit judge denied it, saying the West Virginia Consumer Credit and Protection Act does not limit the attorney general's authority to hire private counsel.

In the second case, former West Virginia attorney general Darrell McGraw filed the action against Discover Financial Services Inc., Discover Bank, DFS Services LLC, American Bankers Management Company, Bank of America Corp., FIA Card Services, Citigroup Inc, Citibank NA, GE Money Bank, World Financial Network National Bank, CSI Processing LLC, CPP North America LLC, HSBC Bank Nevada NA, HSBC Card Services Inc, JP Morgan Chase & Co and Chase Bank USA.

These credit card issuers were listed as defendants in seven consumer protection cases filed in August 2011. The state asserted the companies violated the West Virginia Consumer Credit and Protection Act by deceiving West Virginians into paying for credit card service plans they didn't sign up for.

In GSK's petition for writ of prohibition, the company maintains the attorney general did not have the authority to bring an action "based upon conduct that is ancillary to the general business of buying and selling securities."

And GSK continues, saying the Legislature prohibits the attorney general from using private counsel to prosecute such claims under this act.

"The consequence of the trial court's clear legal error is that GSK will be subjected to the pursuit of civil penalties and other damages by attorneys motivated by completely different incentives — particularly financial incentives — than those of the lawyers in the AG's office that are supposed to be handling this case," GSK argues in its court brief.

In its brief, GSK asserts the lower court's order "ignores the plain language" of state code, which it says provides the attorney general to use "qualified personnel in his office," not outside counsel, to litigate disputes under the act.

Additionally, GSK says if the Legislature wanted the attorney general to use outside counsel in these actions, then "it knew how to do so." 

GSK also argued state code provided compensation for assistant attorneys general to be within the limits of Legislature-appropriated amounts.

"Unlike salaried attorneys in the attorney general's office, who would litigate this case without any influence of personal gain depending on the outcome, the ‘special assistants' have a direct financial stake in the outcome of this case,'" the brief states.

In its response to the petition, the state said GSK does not have standing because it did not suffer an injury that would be corrected by counsel's disqualification. 

"This petition is the latest in a string of failed attempts by defendants in consumer protection lawsuits to disqualify private counsel appearing on behalf of the attorney general of West Virginia," the response states.

Additionally, the state said even if GSK prevailed, outside counsel could represent the state in the lawsuit pursuant to another statutory authority.

Addressing the phrase "personnel in his office," the state maintains this statement encompasses "all individuals who the attorney general permits to act as his agents."

The response also says this would include outside counsel who the attorney general remains control over.

In the credit card case, the companies contend the rules of professional conduct prohibits attorneys from representing clients when lawyers' personal interest conflicts with clients' interests.

As in the first case, the companies say the special assistants have an incentive to maximize civil penalties in order to increase their own fee.

"Because the special assistants are part-time ‘public employees' as defined in the ethics act, their engagement pursuant to a contingent fee arrangement violates this most basic command among other provisions," the petition for writ of prohibition states.

Companies also contend the Legislature limited the attorney general to paying assistants only from legislative appropriations.  

However, the state questioned whether the companies have standing to challenge how counsel is appointed.

"This petition amounts to nothing more than an improper attempt to put before this court a policy question that properly rests with the Legislature," attorneys said in the response to the companies' petition. "By their own admission, petitioners are asking this court to wade into a policy debate among ‘academics and the media' over the wisdom of using private counsel in government consumer protection actions under certain non-hourly fee arrangements."

Additionally, the response says companies are seeking to "interfere with the attorney general's prosecution of consumer protection cases."

The response also says the companies do not have an injury and the attorney general can use whatever fee arrangement he thinks is best for outside counsel.

"Additionally, because petitioners challenge only one particular fee arrangement, any injury would not be redressed by the issuance of the writ. The attorney general could simply rehire the same private counsel under a different fee arrangement and continue prosecuting the underlying cases."

Daniel Greear, who represented the attorney general's office, said if the court accepted the opposite side's argument, it would "eviscerate the attorney general's office." He also said the attorney general has the authority to hire special outside counsel in these types of cases.

Justices asked petitioners several times why they chose to bring this before the court instead of filing an ethics complaint.

"This court can fix the problem," said credit card issuers' attorney, Robert W. Trenchard, in response to why he thought the court was the right venue.

However, Chief Justice Brent Benjamin asked whether this would "deprive the attorney general of hiring specialists to challenge (them) on even turf."

Trenchard said companies want a fair hearing and not one with biased outside counsel who are not acting in the public's interest.