Friday, April 11, 2003

How to steal money twice

Lawyers are hardly my favorite profession, but even they have a right to fees they validly earned. Republican senators Jon Kyl and John Cronyn disagree, however, and have introduced the "Intermediate Sanctions Compensatory Revenue Adjustment Act of 2003," a bill which would apply the tax code retroactively to punish lawyers who accept "unreasonable" fees.

If you're wondering why this is a priority for Messrs. Kyl and Cronyn, the answer is contained in the title of Kyl's press release: "Kyl Bill Would Give Billions To States." Specifically, it would give $9 billion to state governments from the notorious federal tobacco settlement that currently belong to private lawyers hired to handle the case. Kyl justifies this by claiming the states really need the money:

“We should not unreasonably enrich trial lawyers at the expense of states suffering severe financial crises. Like any other client, taxpayers in states that participated in the tobacco lawsuits deserve a fair share of the settlement reached. Yet attorneys’ fees in this case far exceed even the most generous standards awarded in other lawsuits of similar magnitude.”

This is all well and good, except the states agreed to pay the lawyers' contigency-based fees, a percentage of the total settlement, and now are Kyl wants to go back on that contract. If the states didn't want to pay such high fees, they should have bargained for a better fee deal before they hired their lawyers.

The bill itself limits attorney fees to 500% of "standard hourly rates," whatever that means, and uses the tax code to punish (i.e. take) compensation in excess of that limit. Once again, Kyl says this is justified because of current state budget shortfalls—the government just needs the money more than the lawyers. At least Kyl can be credited for his honesty in admitting this is about taking private funds for state use.

Then again, the lawyers bear some blame for this. After all, the tobacco settlement itself was not a product of honest legal work, but of government coercion aided and abetted by the trial lawyer profession. In one sense, this is just desserts for the attorneys: money they stole from tobacco companies is being stolen from them. But having said that, the Kyl-Cronyn bill is a violation of contract rights, and it would set a far worse precedent than even the tobacco settlement.

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