In recent testimony before the Texas Senate Finance Committee, Texas Attorney General Ken Paxton testified that his office needed to hire outside lawyers to sue tech giants such as Meta and other large businesses under contingent-fee contracts because his office did not have the necessary appropriations to undertake the litigation.
However, this was not the reason Paxton gave to the Legislative Budget Board when he provided it legally mandated notifications of his office’s intent to hire outside law firms on a contingent-fee basis.
In his testimony before the Texas Senate Finance Committee on January 28, Paxton discussed the contingent fee contracts his office has awarded several outside law firms in recent years to handle litigation against companies such as Meta. Under a contingent-fee contract, the outside lawyers advance litigation expenses and are only paid if they make a financial recovery. If successful, the outside lawyers stand to earn a big payday.
“We didn’t have an appropriation for most of these cases,” said Paxton. “We didn’t have time to wait. We had authority to use an outside counsel contract.”
As previously reported by The Texas Voice, the two law firms hired by Paxton to sue Meta have billed the state for nearly $136 million in fees and more than $6.6 million in expenses. The hourly rates billed by the lawyers in this case run as high as $3,780 per hour for lawyers and $800 per hour for paralegals. Last year, Meta agreed to pay a $1.4 billion settlement to resolve the claims brought against it by the state.
Section 2254.103 of the Texas Government Code requires a state governmental entity, such as the Office of the Attorney General, to provide certain findings to the Legislative Budget Board before it can hire outside counsel on a contingent-fee basis.
In notifications provided to the Legislative Budget Board regarding the contingent-fee contracts for legal services used by his office, Paxton provided findings that included, “The legal services cannot reasonably be obtained from attorneys in private practice under a contract providing only for the payment of hourly fees, without regard to the outcome of the matter, because of the nature of the matter for which the services will be obtained.”
Although this statute requires that the Legislative Budget Board be provided with information demonstrating that those conditions existed, Paxton did not provide any such information other than his assertion that outside counsel could not be “reasonably obtained” on an hourly fee basis.
Paxton’s testimony before the Senate Finance Committee did not reference the inability to retain counsel on an hourly fee basis, as he claimed to the Legislative Budget Board, but rather on the lack of appropriations to pursue the cases without the aid of outside counsel.
Had Paxton notified the Legislative Budget Board that the contingent fee agreements for outside counsel were necessary because his office did not have appropriated funds available to hire outside counsel on an hourly fee basis, the Legislative Budget Board would have been required to agree with that finding before his office would have been able to enter into a contingent-fee contract with outside counsel.
Paxton is currently seeking an appropriation to pay the fees and expenses billed by the outside law firms hired in the Meta litigation, something that Lt. Governor Dan Patrick’s office expects will occur.
“Thanks to the great work of Attorney General Paxton and the outside counsel he hired, Texas received a sizable settlement that will hopefully correct Meta’s behavior. The funds to pay the outside counsel must be appropriated, per Government Code Section 2254.108. There will be an appropriation made by the Legislature to cover the amounts due,” said Steven Aranyi, Communications Director for Patrick’s office.
Paxton’s office isn’t alone in awarding lucrative contingent-fee contracts to politically connected lawyers. Six outside law firms hired by Harris County to sue the vaping company JUUL billed more than $4 million for their work on the litigation, charging rates as high as $3,600 for work billed by attorneys.
One of the firms hired by Harris County for the JUUL litigation, Reich & Binstock, donated $50,000 to Texans for Insurance Reform- a political action committee that supports Democratic candidates- in 2020. Another one of the firms hired by Harris County, Richard Schechter, P.C., is owned by Richard Schechter- whose daughter, Lillie Schechter, is a political consultant who works for several Democratic elected officials in Harris County. Lillie Schechter, who formerly served as Chairwoman of the Harris County Democratic Party, is currently running for Chairwoman of the Texas Democratic Party.
Local governments must receive approval from the Office of the Attorney General before hiring outside counsel under a contingent-fee contract. While Harris County did receive approval from the Attorney General’s office for an initial contract hiring four law firms to handle the JUUL litigation, it does not appear that Harris County received approval for an amended agreement to hire two additional firms.
One of the law firms hired by Harris County on the amended contract for the JUUL litigation was J. Jackson Law Office, PLLC. That law firm, owned by attorney Jonathan Jackson, shares an office with a law firm owned by Houston City Controller Chris Hollins. Court records indicate that Jackson’s law firm also took over representation of many of Hollins’ clients when Hollins decided to run for office in Houston.
