When opponents of a Louisiana levee board’s lawsuit against energy-related companies wanted to kill the ill-advised legal action last year, they were right to be frustrated by a hideously expensive, so-called “poison pill” in the board’s contract with its lawyers. But if the poison pill was bad, there’s a separate, perfidious provision that’s even worse.
Both the levee board — the Southeast Louisiana Flood Protection Authority-East — and the law firm of Jones, Swanson, Huddell and Garrison should be ashamed of how the poison pill and perfidious provision together could cause coronaries for taxpayers.
The good news is that the poison was so sloppily concocted that it might not be so deadly after all.
The poison pill in this case is a clause that transforms the lawyers’ standard contingency fee arrangement (they get paid only if they win the suit) into a fee-per-hour mandate if the levee board drops the suit before a court judgment. By last summer, rough estimates put the total due the lawyers at more than $7 million, if the board (or a third party) pulled the plug. One can only imagine how many more billable hours the lawyers have added since then.
One would think that clause is moot, now that a federal judge (two weeks ago) devastatingly dismissed the lawsuit, on every count, as being not even “plausible.” Unfortunately, one might think wrongly. This is where the perfidious provision comes in. Buried in all the verbiage is this truly bizarre stipulation: “In the event of a judgment unfavorable to the Client or the Levee Districts … JSHG will, in consultation with client, and if in JSHG’s sole opinion good grounds exist, appeal [the unfavorable decision] to the appropriate court of appeals [emphasis added].”
If this seemingly unethical provision is enforceable, it means that even after losing overwhelmingly, the lawyers can decide (“sole opinion”) to appeal even if the levee board wants to quit. At the board meeting after the judge threw out the suit, levee board member Jeff Angers, long an opponent of the lawsuit, asked the lawyers the relevant question: “Are we the client or are you?”
Alas, the question was mostly rhetorical. The provision clearly allows for a runaway law firm to be both lawyer and its own client, running up a tab the levee board must pay if the board ever tries to stop the madness before years of appeals run out.
It is the combination of this provision with the poison-pill clause that is so devastating. If the poison pill weren’t there, the levee board wouldn’t be on the hook for millions in legal fees if it decides not to embark on time-consuming appeals. If only the poison pill, but not the perfidious provision, were there, then the board could right now accept the federal district court’s judgment, decline an appeal and walk away without owing lawyers’ fees — just as is the case with most plaintiffs in tort cases.
But together, these two elements of the contract leave appeals to the lawyers’ discretion but potentially at the expense of the levee board — meaning, in the end, of the taxpayers who provide the board’s funding.
Here’s the one silver lining: The poison pill is badly written. It says that if the suit is “terminated prior to full and final recovery and payment of attorney’s fees, costs and expenses owed to JSHG under this agreement, Client will be responsible” for those fees. This is little more than a tautology. It says the levee board will be responsible for any fees for which it is responsible. And if there is no “full and final recovery” to be made, because a court judgment (in this case, a dismissal) has found the suit meritless, then, at least arguably, the board is responsible for no fees at all if it terminates the contract before the law firm can, on its own discretion, file the appeal.
If the board withdraws from the contract now and refuses payment, the firm probably would sue the board — but the firm’s case would be, well, iffy. A settlement might be in order but one with final payment far closer to zero than to the $7 million-plus the law firm may purport to be owed.
New Orleans native Quin Hillyer is a contributing editor for National Review. You can follow him on Twitter, @QuinHillyer. His email address is firstname.lastname@example.org, and he blogs at blogs. theadvocate.com/quin-essential.