NC Chamber, Business Leaders Ahead of the Curve in Fighting “Regulation by Litigation”

You have heard from us many times about how a lack of transparency and certainty in a state’s legal climate can harm economic competitiveness and drive job creators elsewhere. Writing in a recent Washington Times editorial, Mark A Behrens, a partner in the Washington, D.C., law office of Shook, Hardy & Bacon L.L.P. and co-chair of that firm’s Public Policy Group, detailed one of the biggest threats to legal transparency facing many states. According to the article, the veil hanging over state-sponsored private attorney contracting in most states can lead to conflicts of interest and allow state executives to wield litigation as a public policy tool.

State executives adopted widespread use of such “regulation by litigation” after 1998, when more than forty state attorney generals contracted with private firms to successfully sue tobacco companies for $246 billion in Medicaid recoupment fees. This tactic serves to bypass state legislatures and silence the electorate’s voice in important policy issues. Further, the common use of contingency-fee contracts for state-sponsored litigation only compounds the problem, as these agreements add to public interest concerns by incentivizing lawyers to inflict larger penalties or expand liability.

Fortunately for North Carolina, a bill passed in 2014 with strong support from the NC Chamber gave our citizens and job creators a legislative victory in the fight for transparency in policy-driven litigation. Senate Bill 648 (NC Commerce Protection Act) implemented a number of Transparency in Private Attorney Contract (TiPAC) measures, including requiring the attorney general’s office to award contingency-fee contracts through an open and transparent process and ensuring the state receive the maximum practicable amount of any settlement or award.

The Chamber’s advocacy and the work of other groups to support the Commerce Protection Act helped put our state ahead of the curve in 2014, placing us among the roughly one-third of states to have adopted laws addressing TiPAC concerns. As with many issues impacting our state’s future competitiveness, however, refining our legal climate is an ongoing process. In 2015, we remain engaged in the fight to increase transparency and certainty in our legal climate and continue making North Carolina the best place in the world to do business.

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