Kinder v. Nixon
| Decision Date | 30 May 2000 |
| Docket Number | WD56802 |
| Parties | State Senator Peter Kinder and Rickey Jamerson, Appellants, v. Jeremiah W. (Jay) Nixon, Attorney General, and Thomas Strong, Respondents. WD56802 Missouri Court of Appeals Western District 0 |
| Court | Missouri Court of Appeals |
Appeal From: Circuit Court of Cole County, Hon. Thomas J. Brown, III
Opinion Summary: Certain taxpayers challenged the validity of a contract for legal services between the Attorney General and a private attorney to negotiate settlement in litigation against tobacco companies. The contract provided for attorneys to be paid on a percentage basis plus reimbursement of expenses, contingent upon a resolution of the litigation favorable to the State. The taxpayers alleged that the contract was unlawful and unconstitutional, and sought injunctive relief and declaratory judgment.
Division IV holds: (1) The taxpayers have standing to bring suit challenging the legality of a contract for the expenditure of public funds, even though private pecuniary loss is remote. The taxpayers also have standing to seek declaratory judgment where a judgment would remove uncertainty or terminate a controversy. The taxpayers in the instant case had standing to bring the action.
(2) The motion to dismiss the appeal for mootness is denied, since final approval of the settlement agreement has not occurred, given that case is pending on appeal. Release is not effective to relieve the state of potential liability under the contract.
(3) A contract for services does not violate the statutory appropriations requirement because it does not require fees to be paid from the state treasury, it gives no interest in the potential recovery to the lawyers, it does not bind the state to pay the fees without appropriation, and the contract states its terms are governed by the laws of the state.
(4) The contract for legal services does not violate state statute prohibiting officials from receiving personal pecuniary benefit from favorable actions. The statute pertains to conflicts of interest, and the subject contract provided for Attorney General control over litigation, where the attorney provides services subject to the client's approval.
(5) A declaratory judgment is not proper to seek enforcement of criminal law through civil action.
(6) No general rule exists prohibiting attorneys hired by the state from being paid fees from funds recovered in litigation for which they were hired. Equitable principles provide that an attorney is entitled to a lien on the fund created for the benefit of claimants for attorneys' fees. However, in this case, the contract does not provide for payment of attorneys' fees from any funds recovered but, rather, from the state treasury after appropriation or directly by the tobacco defendants.
(7) Following judgment on the pleadings, the trial court's judgment dismissing the petition with prejudice is mere surplusage and is disregarded.
Claiming standing as taxpayers, State Senator Peter Kinder and Rickey Jamerson ("Appellants") filed a two count petition against Attorney General Jay Nixon and Thomas Strong ("Respondents") challenging the validity of a contract for legal services entered into by the Attorney General with Mr. Strong, a private attorney. The petition alleged the contract was illegal and void for a variety of reasons, and sought injunctive relief in Count I, and a declaratory judgment in Count II. By agreement, all parties filed motions for judgment on the pleadings. Thereafter, the trial court denied the plaintiffs' motion, and granted the defendants' motion. Senator Kinder and Mr. Jamerson appeal.
In 1997, Attorney General Nixon filed a multi-count petition against companies manufacturing and selling tobacco products in the State of Missouri. The case, State ex rel. Nixon v. American Tobacco Co., et al., No. 972-1465, sought monetary, equitable and injunctive relief, including health care expenditures from "smoking-attributable" diseases. This case was ultimately one of forty-six state cases pending against the tobacco companies in early 1998. A tentative global settlement of the cases was reached, but it suffered defeat in the United States Congress in the Spring of 1998. Thereafter, on or about June 15, 1998, the Circuit Court of the City of St. Louis entered a scheduling order requiring trial of the Missouri tobacco case to commence in January, 2000.
On June 29, 1998, with less than 19 months remaining before the commencement of trial, Attorney General Nixon entered into a "Contract Agreement For Legal Services" with Attorney Strong. The contract appointed Mr. Strong as "Lead Special Assistant Attorney General" for the tobacco litigation. Under the terms of the contract, Mr. Strong was required to provide all the financial and personnel resources to bring the case to trial in accordance with the trial court's scheduling order. The contract recognized the need for, and authorized, Mr. Strong to retain additional counsel to assist him in the preparation for and conduct of the trial. However, it provided that compensation of such additional counsel, as well as reimbursement of their expenses and costs, was to be paid by Mr. Strong from any amounts due him under the contract. Nonetheless, the Attorney General retained final authority over all aspects of the litigation.
The contract contained alternative provisions for compensation of Mr. Strong. It called for fees to be paid to Mr. Strong (1) on an hourly basis in the event that settlement or judgment favorable to the state is obtained, or if the tobacco litigation is preempted by an act of Congress favorable to the state, either condition occurring on or before January 1, 1999; or (2) on a percentage basis in the event of settlement, judgment or preemption by act of Congress, favorable to the state, after January 1, 1999. If the settlement or judgment occurred after January 1, 1999 and before January 1, 2000, the fee percentage was 6.15% of the settlement or judgment; if after the latter date, the percentage was 7.15%. The agreement also provided for reimbursement of expenses. Notwithstanding the alternative bases for payment, all compensation and reimbursement of costs and expenses was contingent on a resolution of the litigation favorable to the State of Missouri and resulting in recovery and collection of money from the tobacco companies.
The contract provided for payment of hourly fees to be made within 90 days of the beginning of the state fiscal year following occurrence of the qualifying contingency. Any percentage fees were to be paid in five equal installments, beginning 90 days after the beginning of the fiscal year following the occurrence of the appropriate contingency. Finally, the Attorney General reserved on behalf of the State of Missouri the right to petition any court before payment to determine the reasonableness of fees and costs.
On July 17, 1998, the Attorney General amended the state's petition in the tobacco litigation to include Count XIII, a declaratory judgment action. Count XIII alleged the Attorney General had determined that additional resources and expertise would be necessary to maximize the State's potential for recovery in the tobacco litigation, and therefore the Attorney General had entered into a contract for legal services with Mr. Strong whereby Mr. Strong was to serve as Lead Special Assistant Attorney General in such litigation. The Count further alleged that under the contract, Mr. Strong obligated himself to provide all necessary resources and expertise, and to advance all costs, to prosecute the litigation. Count XIII also contained allegations that it was anticipated that Mr. Strong would be required to advance expenses for the litigation in excess of $10 million ($10,000,000) and that he would be required to assemble a team of 40 or more attorneys to pursue the State's claims. The Count then set forth the contingent nature and details of the contract's compensation provisions, and incorporated a copy of the contract by reference. Finally, the Attorney General alleged:
353. The defendants in this litigation are or have been defendants in similar litigation in a number of foreign jurisdictions and, as part of a coordinated effort to block, hinder and delay recovery by states, have consistently and repeatedly challenged the validity of contingent fee contracts entered into by those states with special assistant attorneys general or other counsel, claiming that such contracts violated the constitution, laws, and/or the public policy.
354. The state reasonably anticipates that the defendants will challenge the contract [with Mr. Strong] as being in violation of the constitution, laws or public policy of the State of Missouri.
355. A genuine controversy therefore exists between the State of Missouri and the defendants with respect to whether certain elements of the contract between Strong and the State is [sic] fair, reasonable, constitutional, lawful and consistent with the public policy of the State of Missouri....
The pleading went on to pray for a judgment declaring that the contract was fair and reasonable and consistent with the constitution, laws and public policy of the State of Missouri and Missouri Supreme Court Rule 4.
On August 5, 1998, Senator Kinder and Mr. Jamerson filed the instant action in the Circuit Court of Cole County. They brought the suit in their individual capacities, asserting standing as taxpayers. In their first amended petition, they generally alleged (a) that the compensation provisions of the contract, to the extent they call for the State of Missouri to pay out funds which have not been appropriated by the General Assembly, are unlawful and unconstitutional; (b) that "[t]he hourly fee portion of the contract lacks mutuality and is therefore void and unenforceable"; (c) that "[t]he portions of the contract calling for Defendant...
To continue reading
Request your trial