Drug companies question McGraw's use of special assistant AGs

By Chris Dickerson | Jul 25, 2006



CHARLESTON -- Two drug companies are tackling the issue of whether Attorney General Darrell McGraw's office has the authority to hire private lawyers.

Janssen and Johnson & Johnson filed the appeal July 17 in Brooke Circuit Court. The petition for appeal to the state Supreme Court stems from a March 15 order by Judge Martin J. Gaughan granting McGraw's motion to dismiss their counterclaim against him.

The case (Brooke Circuit Court case number: 04-C-156) was filed in 2004 by Wheeling attorneys Barry Hill and Teresa Clark Toriseva, who the two companies say "purport to represent the Attorney General in pursuing claims against petitioners under the West Virginia Consumer Credit and Protection Act."

The original suit claims Janssen and Johnson & Johnson deceptively marketed two prescription drugs – Risperdal and Duragesic – to West Virginia residents and seeks statutory penalties under the WVCCPA for each prescription written in the state that allegedly was prompted by such deceptive marketing.

The companies' appeal mentions that McGraw's office has "on several occasions in the past" retained private counsel to bring WVCCPA actions against companies doing business in the state "pursuant to contingency fee agreements." It also says that practice has been criticized as violating the WVCCPA, other state laws and constitutional requirements.

"Private counsel are not salaried government employees, but private plaintiffs' lawyers whose standard compensation method is contingency fee," the appeal states.

It also includes the language of the Aug. 16, 2004, engagement letters sent to Hill and Toriseva. Those letters state that counsel "will advance all expenses associated with maintenance of this action. Subject to the approval of the court, it is contemplated that (private counsel) should earn a proper, reasonable and customary fee."

"A number of lower court decisions have been entered concerning the propriety … of such retentions, and the issue has been the subject of comment by government officials and the press," the appeal also states.

Special Assistant AGs in the news

This appeal isn't the first time McGraw's use of special assistant AGs has been in the news.

McGraw has drawn criticism of late over the practice of hiring outside attorneys to work on cases for his office. Others have complained that these attorneys he's appointed to serve as Special Assistant AGs have made significant contributions to his political campaigns.

In this year's legislative session, a House of Delegates bill that would have tightened the belt on the state Attorney General office's contracts with outside attorneys died on the Rules Committee table.

In April, McGraw's office terminated the January appointments of Weirton attorneys M. Eric Frankovitch and Michael Simon as special assistant Attorneys General in a case they already were working as private attorneys.

Their terminations came after Cooper Wiring Devices and Leviton Manufacturing both filed complaints in March stating that subpoenas issued by Frankovitch and Simon in February requesting safety testing records regarding an electrical outlet the companies produced were without power.

Cooper and Leviton said McGraw overstepped his constitutional boundaries with the appointment of outside attorneys. Frankovitch and Simon were working on a civil case in Marshall County, and they were appointed by McGraw to act on behalf of the Attorney General's office.

In their appeal, Janssen and Johnson & Johnson write that they filed their counterclaim because it appeared "that the Attorney General's delegation of authority and retention agreement with private counsel in this case was in violation of these statues and constitutional requirements."

The companies sought to enjoin the pursuit of the action by the special assistant AGs because the AG "unlawfully delegated to private counsel, via a contingency fee-based retention agreement, his constitutional and statutory authority to prosecute regulatory enforcement actions."

In particular, the companies contend that action "violates the WVCCPA provision limiting enforcement actions to the Attorney General and his staff; violates the West Virginia Constitution and the body of statutes that establish the powers, duties and responsibilities of the Attorney General; violates the due process rights of the petitioners; confers an unlawful benefit to private counsel; and other wise violates the public policy of this state."

The counterclaim also alleged that the companies were suffering injuries "because this case is being prosecuted against them by unlawfully appointed private counsel with private pecuniary interests in this case rather than by publicly appointed and accountable employees of the Attorney General's office acting exclusively in the public interest."

The companies also say this contingency fee agreement "impedes the role of the state Legislature" and is contrary to state laws about how public officials spend state monies.

"By promising future state funds to private counsel in lieu of an appropriation by the Legislature for their payment, the Attorney General proposes to usurp the appropriations power of the Legislature and thus violate the separation of powers principle that is at the core of the West Virginia Constitution," the appeal states.

McGraw's argument

McGraw's office moved to dismiss the counterclaim arguing that the companies lack standing to assert their counterclaim and that "private counsel were validly appointed to represent the Attorney General in this action."

One example noted in the appeal is that the AG's office denied that the appointment letters were contingency fee agreements, even though the AG's office acknowledged the letters contained a "contingent element in the sense that the issue of determining a reasonable, customary fee will not arise unless there is a disposition in favor of the state."

On Thursday, Chief Deputy Attorney General Fran Hughes defended the office's use of outside counsel as Special Assistant AGs.

"Other circuit courts -- and there have been several -- have decided on this issue," she said. "And they have ruled in favor of the Attorney General's office."

Hughes also noted that the issue went before the state Supreme Court in the Capital One case last year on a writ of prohibition. The Justices refused 5-0 to hear the case.

Since the drug companies' suit was filed, Hill has notified the companies that Toriseva was withdrawing from the case because she no longer is with Hill's firm and will be replaced by Robert Goldberg. However, in their appeal, the companies say they have seen no appointment letter from the AG's office authorizing this change of counsel.

According to McGraw's 2004 campaign finance reports, Toriseva contributed the maximum $2,000 herself. Someone named Paul Toriseva also contributed $1,000.

Steve Cohen, executive director of West Virginia Citizens Against Lawsuit Abuse, criticized the actions of the AG's office.

"So, our Attorney General Darrell McGraw has deputized another personal injury lawyer friend and campaign contributor to conduct a 'state investigation' for personal profit," he said. "Come on! This blatant abuse of power to help campaign contributors make money drives home the urgent need for a Sunshine law to keep political cronyism out of West Virginia courts."

Back to the case, Gaughan issued an opinion and judgment order favoring the AG's office and the appointment of the special assistant AGs on Oct. 12, 2005. In their appeal, however, the companies claim the court "adopted nearly verbatim the nineteen-page 'Opinion and judgment order' drafted and proposed by private counsel."

It goes on to say that the opinion and judgment order included findings not supported by "any evidentiary record, and came notwithstanding petitioners' request (never accommodated) to test the Attorney General's representations through discovery."

For example, the appeal says one such finding related to a 2003 newspaper report of an alleged rebuke by the AG of an appointed special assistant AG for exceeding authority.

"Nowhere in the record relating to the motion to dismiss does this 'fact' appear," the appeal states. "The circuit court nonetheless relied on this 'fact' as establishing the Attorney General's control over the litigation, a point which the circuit court relied on in determining the standing issue in the initial Oct. 12, 2005, order."

The companies filed a motion to alter the opinion and judgment order, questioning the court's conversion of the private counsel draft order and its improper findings of fact.

On March 15, 2006, the circuit court acknowledged it had "needlessly and ill-advisedly" converted the motion based on evidence not in the record. So it set aside the Oct. 12 order.

Still, in that same March 15 order, the court granted the AG's motion to dismiss on the grounds that the companies lacked standing to challenge the AG's appointments of private counsel to the case.

"The circuit court only addressed the standing issue in the context of petitioners' due process claim, and failed to address in any way the other constitutional and statutory claims implicated by the Attorney General's appointment of private counsel that are asserted" in the counterclaim, the appeal states.

Also, the appeal says the court "again improperly rested its dismissal on pro-Attorney General factual assumptions contained nowhere in the pleadings."

The companies say the court's order was "the product of clear legal error" because the circuit court failed to apply the proper standard when it considered the AG's motion to dismiss the counterclaim, failed to consider all legal claims asserted in the counterclaim and based its dismissal order on unsupported factual findings.

So, the companies ask the Supreme Court to reverse Gaughan's March 15 order dismissing their counterclaim and remand it back to Brooke Circuit Court.

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