Ethics Commission says procurement code should apply to state agencies' hiring of legal services

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Nov. 15—The state Ethics Commission has issued an advisory opinion on contracts entered into on a contingency basis after a report revealed the New Mexico Attorney General's Office paid outside lawyers nearly three times as much as other states to negotiate opioid settlements.

The 11-page advisory opinion concluded the state's procurement code generally applies to a state agency's or local public body's procurement of contingent-fee contracts for legal services.

"The Commission was not asked to opine on, and did not opine on, any particular contract," Jeremy Farris, executive director of the commission, wrote Wednesday in an email.

The advisory opinion comes on the heels of a damning report in Legal Newsline, which covers high-profile civil litigation lawsuits across the country.

The outlet reported in June the state Attorney General's Office is paying three law firms — including an Albuquerque-based outfit whose managing partner is a longtime friend of former AG Hector Balderas — about $148 million out of a $453 million opioid settlement with Walgreens.

The contingency fee for Baron & Budd, Levin Papantonio and Robles Rael Anaya, which received considerable business during Balderas' tenure, is "nearly triple the rate other states paid their lawyers to negotiate agreements with major pharmacy chains," Legal Newsline reported.

The outlet also reported New Mexico "for unexplained reasons pulled out of a $4.7 billion national settlement with other states under which the contingency fee rate is 12%" — significantly lower than the roughly 33% rate the state paid the three law firms.

The story apparently prompted the request for an advisory opinion. It's unknown who made the request since such requests are confidential and not subject to the Inspection of Public Records Act.

A contingent-fee agreement "occurs when a law firm does not bill or expect payment until and unless the contingency is achieved, according to the advisory opinion.

In examining whether contingent-fee contracts fall under the procurement code, which applies to "every expenditure by state agencies and local public bodies for the procurement of tangible personal property, services and construction," the commission looked at whether a government entity makes an expenditure in the end.

"We believe the answer is yes," the advisory opinion states. "Upon the conclusion of a contingent-fee matter in which a lawyer represents a state agency or a local public body, the lawyer's fee is paid from funds belonging to the government-entity client.

"Considering both the significant representations that attorneys take under contingent-fee agreements (e.g., pursuing New Mexico's recovery from the opioid-abuse epidemic in this state) and the large sums that contract attorneys may recover in these representations (e.g., a $148 million fee in one opioids-related case alone), the Procurement Code should apply to constrain how state agencies select law firms," the commission wrote.

Balderas, now president of Northern New Mexico College, said in a statement he agreed with the commission's conclusion, "which is why my office used a competitive bid process under the Procurement Code to hire all outside legal counsel, including those that the State paid no fee to."

Lauren Rodriguez, a spokeswoman for the Attorney General's Office, said the contingency fee allocated as a part of the recent settlement with Walgreens "was paid pursuant to a contract that contained no limit on fees" that was executed before Raúl Torrez, Balderas' successor, assumed office.

"While Attorney General Torrez was obligated to honor the commitments made by his predecessor for the fees associated with this particular case, he has also instituted a new policy that sets strict limits on contingency fee cases moving forward, and will follow the practice of other state attorneys general in relying on in-house attorneys as local counsel whenever possible," she said in a statement.

Rodriguez said the AG's Office didn't receive the commission's advisory opinion until Tuesday and is still reviewing the rationale and analysis.

"However we recognize that the conclusion reached by the Commission represents a substantial change in how state agencies have historically contracted for legal services and may hinder the state's ability to secure specialized legal representation when a case involves proprietary information or information that would jeopardize impending litigation if publicly revealed through the procurement process," she said.

"Nevertheless, the Attorney General supports the goals of transparency and fairness in state contracts and will work closely with other stakeholders to ensure that those goals are maintained while also ensuring that the state's interests can be vindicated by securing representation by the most qualified lawyers we can find."

Farris, the commission's executive director, noted the commission has a close working relationship with the Attorney General's Office.

"The Commission is happy to discuss its advisory opinion with the Office of the Attorney General and how the Procurement Code might apply to any particular expenditure of public funds," he wrote.

Asked whether the commission was taking a closer look at the lucrative contracts involving the settlement with Walgreens, Farris said no.

Follow Daniel J. Chacón on Twitter @danieljchacon.