Drugmaker urges big cut in lawyer bill

Legal-fee hearing finishes in state’s Risperdal suit

— Forcing Johnson & Johnson to pay $181 million in legal fees would mean the Texas attorneys who won a $1.2 billion Medicaid-fraud fine for Arkansas would be paid $11,224 to $19,720 per hour, a defense expert testified Wednesday.

The appropriate payment for the work they did is $2.2 million to $3.5 million, not $181 million, lawyer David Donovan, a founder of the Little Rock law firm Watts, Donovan & Tilley, told Pulaski County Circuit Judge Tim Fox on behalf of Johnson & Johnson.

Representatives of Arkansas Attorney General Dustin McDaniel are trying to persuade the judge to force the New Jersey drugmaker to pay an additional 15 percent of the $1.2 billion fine to cover state’s legal fees and expenses, money that would go to the Bailey Perrin Bailey firm of Houston. The drug company lawyers described the amount as a “windfall” for the Texas lawyers, who in turn, described their position as having won the biggest award in state history while charging the lowest rate ever seen in Arkansas.

The decision on what fees are reasonable is up to the judge. A ruling is not expected before late next month. Fox agreed to consider written arguments when the two-day hearing left him with questions on how Medicaid regulations, which give federal authorities a stake in the fine money, can affect how much Arkansas would actually collect.

McDaniel, with approval from the governor and the Legislature, hired the firm in 2007 to represent Arkansas in Medicaid fraud and deceptive trade practices litigation against three drug companies, with the promise McDaniel would seek payment for the firm equal to 15 percent of any award it won for the state. McDaniel was not called as a witness and did not attend the two-day hearing, which concluded Wednesday.

Two companies settled, but the Johnson & Johnson case involving the medication Risperdal went to trial in March. Jurors sided with the Texas lawyers, who argued the company, via its Janssen Pharmaceutica subsidiary, violated the state’s Medicaid fraud and deceptive trade practices laws in its marketing and labeling of the antipsychotic medication over a 31/2 year period.

The resulting $1.2 billion fine imposed by the judge in April was based on the number of Risperdal prescriptions paid by Medicaid during the time in question. The case is on appeal to the Arkansas Supreme Court.

Proceedings ended Wednesday with dueling experts, pitting Donovan against Gordon Rather Jr., a partner in the Wright, Lindsey & Jennings firm of Little Rock, who testified for the state. Although the two men disagreed on whether the $181 million sought represented “reasonable” legal fees based on the Chrisco guidelines put forth in a 1990 ruling by the Arkansas Supreme Court, they agreed their research showed that the $1.2 billion judgment, which will go to the Medicaid trust fund, appears to be the largest in Arkansas history and that the Medicaid Fraud False Claims law has never been applied at trial before.

Rather, on the stand for about 90 minutes, told the judge the state demand for legal fees representing 15 percent of the $1.2 billion judgment is “reasonable and appropriate and fair.”

In contingency fee cases, Rather said, Arkansas lawyers usually charge anywhere from 25 percent of any settlement — if they can get an agreement before filing suit — to one-third of a judgment if the case goes to trial to up to 40 percent for an award resulting from an appeal. He said he’s never seen a firm agree to a fee as low as Bailey Perrin accepted from the state. In that light, he said, it’s hard to find any grounds to criticize lawyers who have won $1.2 billion.

“I’ve never seen a contingency fee as low as 15 percent,” he said, saying the Texas lawyers did a “firstrate” job while expending an “enormous amount of time and effort” to develop a first-of-its-kind case and bring it to trial. “It’s hard to argue whether the legal service was properly performed.”

Rather said one of the best ways to measure the abilities of the Bailey Perrin lawyers — one of the Chrisco factors — was to consider how well they had done while opposed by the Little Rock attorneys who represented Johnson & Johnson — Jim Simpson and Laura Hensley Smith, who he said are considered two of the state’s top defense lawyers.

Arkansas is asking for too much from Johnson & Johnson, Donovan said during his 90 minutes of testimony.

“I think $181 million is too high and out of proportion” for the work done by Bailey Perrin, he told the judge.

Donovan’s analysis of the operations of the Bailey Perrin lawyers — he described his findings as being “generous” to the lawyers and developed through “very rough science” — reflected two of the drug company’s recurring arguments against the state demands for $181 million:

The Bailey Perrin firm has not produced sufficient documentation, such as time sheets, to show how much work was done on behalf of the state to justify such a payout.

The Texas lawyers are attempting to collect payment for work they had already been paid for in at least two other states and possibly as many five others pursuing other Risperdal litigation.

The judge also appeared to look askance at the deliberate lack of record-keeping. There’s no requirement such records be maintained to justify a fee award, Fox said, but not keeping track of time worked is “not the best practice” when the state lawyers knew that the amount they were seeking would be an issue.

Fox also questioned whether the attorney general’s office would ever have the financial and legal resources to devote to pursuing complex multiyear litigation without hiring outside counsel.

Arkansas, Pages 9 on 12/13/2012

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