Kris Kobach hires new law firm after losing natural gas price gouging case on technicality

Kansas Attorney General Kris Kobach hired a new law firm to represent the state in natural gas price gouging litigation a day after a federal court tossed the state's case.

The contract between Kobach's office and law firm Hilgers Graben was awarded Oct. 6, but did not become public in the state contract database until later. The contract specifies that the law firm will represent Kobach in a federal lawsuit against Macquarie Energy, as well as ancillary matters.

U.S. District Judge Daniel Crabtree dismissed that case on Oct. 5 on a technicality. He cited a mistake in the original lawsuit filed in Shawnee County District Court that prevented the federal court from having jurisdiction.

Will new attorneys refile Kansas natural gas price gouging lawsuit?

Crabtree seemingly invited Kobach to refile the lawsuit, writing that his ruling "in essence, will require a reboot of this case." It is unclear if any of the claims would be barred by a statute of limitations.

"We are now working with a different law firm and are committed to getting restitution from the companies who took advantage of Kansans during a winter storm emergency," Kobach said after the decision.

A Macquarie Energy spokesperson said the company "will continue to vigorously defend any claims brought against it."

Court records as of Monday did not show an appeal or a notice of an appeal, which would have to be done within 30 days of the decision. No new case has been filed in federal court. It is not public whether a new case has been filed in Shawnee County District Court because online state court records remain inaccessible due to a "network security incident."

Hilgers Graben was only bidder after Kobach fired Morgan & Morgan

The lawsuit against Macquarie alleged that one of the country's largest natural gas marketer manipulated the market, causing more than $50 million in added costs to Kansans on top of natural supply and demand forces during February 2021's Winter Storm Uri. The excess costs of the storm are currently being paid by utility customers through added charges on their monthly bills.

Former Attorney General Derek Schmidt had been investigating the seemingly unjustified price spikes and brought on Florida law firm Morgan & Morgan to provide more expertise and resources.

Prior to his election in November 2022, Kobach declined to comment on how he would hand the case. After he took office in January, staff attorneys in his office filed the lawsuit against Macquarie in February. The Morgan & Morgan attorneys were left off the filing, and the law firm was notified in March that Kobach had terminated the contract for no stated reason.

Hilgers Graben was the only bidder to respond to a request for proposals, which closed in June. Meanwhile, the attorney general's office sought delays on their filing deadlines.

The contract awarded this month specifies the Hilgers Graben will provide legal services specifically for the federal case that was dismissed. It also allows for representation, advice and consultation on "such related or ancillary matters as are reasonably necessary to such representation," including the ongoing subpoena enforcement action against Macquarie.

Hilgers Graben added a provision specifying that their firm "has made no promises about the outcome, including the costs and expenses of litigation."

Kansas taxpayers will pay new law firm, even if they don't win

Hilgers Graben will be paid "substantially discounted rates" of $340 per hour for attorneys and $230 for paralegals for litigation, with $295 per hour for eDiscovery counsel and $190 per hour for reviewers. There may be additional costs billed to the state for expenses incurred by the law firm.

Hilgers Graben will also be entitled to a contingency fee. If the state wins and recovers any money, the law firm will be entitled to 12% of the award minus what was paid for services billed.

The contract with Hilgers Graben notes that its 12% contingency fee would be prorated to account for Morgan & Morgan's work "to the extent former counsel is owed a portion of any monetary recovery."

Morgan & Morgan and its subcontractors were not paid for $2.8 million in billable hours, and the law firm has asserted an attorney's lien.

Hilgers Graben's contingency fee starts smaller than Morgan & Morgan

Attorney compensation was a sticking point of the last contract.

Morgan & Morgan did not charge Kansas taxpayers an hourly rate. Instead, the law firm was working on a contingency fee, meaning the lawyers would only get paid if they won. The money would then come out of the judgment awarded to Kansans.

That meant Morgan & Morgan was taking on greater risk that Hilgers Graben, which will still be paid its hourly rates even if it loses. But Hilgers Graben could still reap the rewards of a large payday, albeit at a lower percentage, if it wins.

The attorney general's office was critical of the contingency fee, with public comments from staff and the request for proposals discouraging bidders from proposing one. Kobach ultimately agreed to a 12% contingency fee with Hilgers Graben.

Morgan & Morgan's contingency fee depended on the size of the award. The law firm would keep 20% of recoveries up to $100 million, with the fee decreasing to 15% then 10% on any additional money awarded to Kansas.

Their fee was the lowest of three bidders. Overland Park firm Gates Shields Ferguson Swall Hammond proposed a fee range of 35% to 45%. Polsinelli, of Kansas City, Mo., proposed 15% to 35%. Neither of those law firms submitted bids on the RFP with Kobach's office.

Kobach hires law firm founded by Republican after criticizing Morgan & Morgan's politics

Hilgers Graben, of Lincoln, Neb., was founded by current Nebraska Attorney General Mike Hilgers, a Republican, and his wife, Heather Hilgers. Mike Hilgers has since divested his ownership stake, though his wife remains a founding partner.

Kobach, who is also a Republican, had been critical of the political leanings of Morgan & Morgan.

So was the Wall Street Journal editorial board, which broke the news of Kobach firing Morgan & Morgan the same day the Kansas Department of Administration sent the termination notice. The newspaper's editorial board tied the contract's termination to performance, political donations to Democrats and contingency fees for "junk lawsuits."

John Morgan, the Morgan & Morgan founder, has accused Kobach of playing political games. The law firm has filed an open records request seeking communications by the attorney general's office about the contract, including with news media and the Republican Attorneys General Association, among other entities.

Kobach has admitted to having political considerations in mind, but denied that they factored into his decision to cancel the contract.

"It is of interest that yeah this firm does have, you know, heavy leanings in the Democrat direction in terms of their own politics," he previously said. "But no, if they had been performing satisfactorily, then we would not have terminated."

Legislative committee could review contract

Under state law and the terms of the contract itself, the contract will be submitted to the Legislative Budget Committee because attorney fees could exceed $1 million. The committee could hold a public hearing and issue a report noting any concerns.

No such committee meeting has been scheduled.

The committee reviewed the RFP in April.

Subcontractors banned

The contract lists Grant Schmidt and Alice Shih LaCour as co-lead counsel, with support from Andrew Graben, Jonathan Musch and Tom Swanson. Other partners, associates and "of counsel" attorneys may be permitted after consulting with Kobach.

Kobach's staff are also expected to act as co-counsel.

Hilgers Graben is explicitly barred from using lawyers outside the law firm.

Subcontractors had been among Kobach's complaints with Morgan & Morgan, even though their contract allowed them to do so.

Can Kansas fire the new law firm?

Despite Kobach's allegations against Morgan & Morgan, the state terminated the contract "for convenience," not "for cause." That left unanswered questions, including whether the law firm was entitled to payment for services rendered or to a full or partial contingency fee on any eventual award. Dan Burrows, the chief deputy attorney general, has suggested the state could be sued by its former law firm.

The new contract with Hilgers Graben lays out more details on what would happen if their contract is terminated.

The contract specifies that Kansas has "the right to terminate the attorney-client relationship with Hilgers Graben at any time and for any reason." Likewise, "Hilgers Graben has the right to terminate the relationship with you should the relationship require or permit termination pursuant to the rules of ethics and conduct for attorneys."

Hilgers Graben would still be paid for any hours worked, and it will would still be entitled to a prorated contingency fee.

The law firm could also withdraw from the case without cause, at which point it would give up the contingency fee.

If the contract is terminated, Hilgers Graben must turn over its complete file, including lawyer work product. That had been a point of contention when Kobach fired Morgan & Morgan, with the law firm arguing it was not obligated to turn over its work product.

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Jason Alatidd is a statehouse reporter for the Topeka Capital-Journal. He can be reached by email at jalatidd@gannett.com. Follow him on X @Jason_Alatidd.

This article originally appeared on Topeka Capital-Journal: Kansas AG Kris Kobach hires firm founded by Nebraska AG Mike Hilgers