- From LexisNexis® Mealey’s™ Daily Legal News
An Arkansas state court judge on Jan. 31 ordered Johnson & Johnson to pay $ 181.1 million to a law firm that last year got the state government a record $ 1.2 billion verdict for alleged violations of state law in the marketing of the atypical antipsychotic drug Risperdal (State of Arkansas, ex rel. v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., et al., No. CV 2007-14345, Ark. Cir., Pulaski Co.).
In 2007, Arkansas sued Johnson & Johnson subsidiary Ortho-McNeil-Janssen Pharmaceuticals Inc. and related entities in the Pulaski County Circuit Court. The state alleged that the defendants violated the Arkansas Deceptive Trade Practices Act (DTPA) and the Arkansas Medicaid Fraud False Claims Act (MFFCA) by marketing Risperdal in a way that forced the state Medicaid program to pay claims it otherwise would not have had to pay.
The Arkansas attorney general, with the consent of the Arkansas Legislative Counsel, hired Bailey Perrin Bailey in Houston to prosecute the state’s case. The law firm agreed to a 15 percent contingency fee.
Arkansas sought a separate award of attorney fees and costs, noting that state law allows for the recovery of both.
‘Largest Verdict In State’
Judge Timothy Davis Fox noted that Bailey Perris “has been and currently remains the preeminent law firm in the entire nation concerning the prosecution of these types of cases against various drug companies,” the judge said.
The judge also noted that the $ 1.2 billion verdict was “the largest verdict in the history of the State of Arkansas.” He also noted that the litigation was “cutting edge” and involved issues of first impression about the interpretation of the DTPA and the MFFCA.
He said the case was the most complicated of hundreds he has tried in the last 10 years, including other complex litigation.
Defense: Up To $ 3.8M
Applying factors found in Chrisco v. Sun Industries, Inc. (304 Ark. 227, 800 S.W.2d 717 ), Judge Fox agreed with state expert David Donovan that the reasonable hourly fees for lead counsel in a complex case of this nature would be $ 350.
Johnson & Johnson argued that the court should base its fee award entirely on hourly fees and suggested a range of $ 2.2 million to $ 3.8 million. Judge Fox said that position is “without merit, and unsupported by any case precedent.”
“No attorney agrees to advance costs contingent upon recovery with the fee to be at a regular hourly rate, also contingent upon recovery,” the judge wrote. “Neither in their arguments prior to the fee hearing, nor in their post-hearing filings have the defendants ever taken the position that the award should be a formula of an hourly amount times some level of lodestar multiplier.”
Judge Fox agreed with the plaintiff’s witnesses that customary contingency fee percentages in Arkansas are correct. “The defendants’ argument is apparently that for the court to determine that a contingency fee is reasonable it has to be the absolute lowest percentage fee anywhere in the nation.”
Legislative Intent On Fees
The judge said that by agreeing to a contingency fee, Bailey Perrin risked ending up with no recovery and no fee.
In addition to the Chrisco factors, Judge Fox took into consideration legislative intent found in the MFFCA and DTPA that attorney fees “may” or “shall” be awarded. He said the Legislature determined to shift costs in the DTPA and MFFCA.
“It is a legislatively expanded listing, the purpose of such expansion being that the taxpayers will recover all costs incurred by the Attorney General,” the judge wrote. “The taxpayers are not to be out any monies for costs incurred in bringing DTPA or MFFCA actions against wrongdoers.”
He added that legislative intent was that “every dollar of the penalties” should go to the Medicaid Trust Fund.
Federal Cut Effect
During the fee hearing, Judge Fox asked what effect the federal share of the Medicaid recovery would be on a fee award. He said that after taking judicial notice of federal regulations, he is unable to determine the amount of the federal share and how attorney fees would factor into that amount.
If the federal government declines a proportionate interest in attorney fees, Judge Fox said, the defendants may petition the court to reduce the fees at that time.
Judge Fox said that although the fee agreement did not require Bailey Perrin to keep detailed time records, he urged the firm to reconsider its policy of not requiring its attorneys to keep contemporaneous time records for cases of that nature.
The judge reduced the award fee by $ 17,500 to adjust for the lack of time records.