Amid an ethics epidemic, states should kick the tires on outside counsel contracts.
W hen I served as attorney general of Nevada, the question of whether states should ever hire outside lawyers to assist with complex litigation came up often. The answer is obvious: They should — especially smaller states going up against corporate giants. The real issue isn’t whether to hire outside counsel but the need to verify that their contracts are written in a way that safeguards the state’s interests.
That part of the debate has been neglected for too long, and with the growing number of ethics-related headlines about outside counsel arrangements that have proliferated in recent years, it can no longer be ignored. This raises an important but rarely asked question: Are states adequately protecting themselves on the ethics front to guard against troubling conflict-of-interest questions that can arise when firms represent both private clients and state governments in overlapping cases?
The warning signs are already here. The ongoing ethics fight between OptumRx, a pharmacy benefit manager, and the trial firm Motley Rice, one of the most notable outside firms for state contracts, is a prime example. Earlier this month, OptumRx sought to disqualify Motley Rice in Utah, alleging that the firm “obtained confidential information about how the company works through its prior representations of Chicago, the District of Columbia, and Hawaii in other investigations, and then began actively litigating against OptumRx in opioid cases around the country.” That kind of “double-dipping” could run afoul of the American Bar Association’s Rules of Professional Conduct, which forbid using confidential information from government service to privately pursue a defendant. Last year, an Ohio district court judge reviewing a similar motion said he was “very uncomfortable” with Motley Rice’s arrangements with government clients and warned other firms to “carefully take this into account going forward.”
The observation of the Ohio judge and a Wall Street Journal editorial drawing attention to the “double-dipping” phenomenon aren’t the only warning signs for state offices. This summer, mega-firm Morgan & Morgan drew headlines after Kansas terminated its contract with the firm because of allegations by state officials that Morgan & Morgan attorneys attempted to withhold work product, case files, interview notes, and other materials that belonged to the state as a former client, triggering threats of potential bar complaints from exasperated state staff members.
The Kansas situation raised more than a few eyebrows in the legal world. But what is more striking about the incident is how the apparent actions of Morgan & Morgan were consistent with the allegations being made by OptumRx against Motley Rice. In both instances, the core concern is that outside counsel could be taking information obtained in state investigations and using it for their own private purposes, potentially including other, private representations on the same topic. It remains unclear how the motion in Utah concerning Motley Rice will ultimately play out, but it appears that Morgan & Morgan eventually acceded to its former client’s request and provided the materials in question to the Kansas attorney general.
This is why every attorney general’s office — especially those using contingency counsel — should proactively review their existing contracts and take a hard look at the protections they offer or omit. Are conflicts-of-interest provisions strong enough? Are states protected if firms try to withhold materials? Have officials scrutinized any waivers that could expose them to risk from outside counsel having private clients in a related case? Too often, states rely on assumptions or assurances rather than demanding proper protections.
Hiring outside counsel will always be part of the job, but given these recent developments, state officials can no longer treat contracting as routine. It is time for officials to take a closer look under the hood, kick the tires, and ensure that their states are fully protected before the next conflict lands them in court or the headlines.