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Many agencies use outside counsel

Attorney general decides when in-house most efficient, best choice

– The Indiana Attorney General’s Office has 144 lawyers on staff but in the past few years has approved more than 150 contracts for $39 million worth of outside legal counsel.

The hired law firms are working on a variety of litigation, such as the State Fair collapse lawsuit, defense of the school voucher program, complying with federal highway-building regulations and defending medical malpractice cases.

Chief Deputy Attorney General Gary Secrest approves the outside counsel requests from other agencies and points out they represent a small percentage of the state’s overall legal work.

The state has about 3,000 pending civil cases at any given time, plus a raft of criminal and administrative legal duties.

“The question of whether to grant (an outside counsel request) is a question of legal policy,” Secrest said. “It depends on what is best for the state, what is the most efficient manner.”

Cases that aren’t sent out, meaning they will be handled by the staff in the Attorney General’s Office, include defending criminal conviction appeals, professional licensing actions and standard civil rights cases.

Other matters – like writing or complying with state or federal rules and regulations; constitutional lawsuits; or out-of-state collections – often involve use of outside counsel.

The Journal Gazette requested four years worth of information regarding outside legal contracts approved by the office. A database of related documents was turned over, sometimes going back further than 2009 because of amendments to pre-existing contracts. Most of the legal contracts are negotiated using a cap for services.

Secrest said often it’s all about expertise. If his deputies don’t have skills in a certain area of law, it might be best to seek an outside attorney. Or, he noted, if a case is so large that multiple attorneys will be needed full-time, it makes sense to ship the work outside.

The Attorney General’s Office itself uses outside counsel most often – more than 40 times in recent years at a cost of almost $7 million.

The Family and Social Services Administration has called for outside help less often but has spent more – about $16 million worth of contracts.

The Indiana Department of Transportation and Indiana Department of Insurance also ranked high for outside counsel contracts.

The process is generally that the state agency sends a request to the attorney general to hire outside counsel. The request itself is not public record but the approval letter and contracts are.

Secrest said if the Attorney General’s Office handles a case under normal circumstances, the costs would come from that office’s budget. But when outside counsel is sought by an agency, then that agency has to pay for the legal services out of its budget.

“Ultimately, it’s all taxpayer dollars,” he said.

IBM litigation

The biggest case in recent years to use outside counsel was when the state sued IBM over a $1 billion contract to modernize Indiana’s welfare intake system. The state was then countersued.

The Barnes and Thornburg contract for work on that case has now topped $10 million, and the state lost the initial ruling, which is under appeal.

Michael Carter, general counsel for FSSA, said outside counsel was needed in the case because of the sheer volume of the litigation, not to mention expertise in contract law.

And consider the work on this case alone – 115 depositions; 12 motions for summary judgment; expert testimony; 15 million pages of documents; a six-week trial with 97 witnesses; 7,500 exhibits.

FSSA has 14 lawyers on staff, but they usually focus on drafting rules and regulations for public assistance; legal interpretations; and defending the agency when sued about benefits that have been denied.

Right now, the agency has 150 pending cases.

“We get sued a lot,” Carter said. “And outside counsel handles only a small percentage. The cost is a consideration. But sometimes to spend money on attorneys’ fees rather than lose a $20 million judgment is certainly in the state’s best interest.”

In the past few years, FSSA has also used some outside attorneys to analyze and prepare for the federal health care law and to try and obtain a waiver for the state’s popular health insurance program for the working poor.

The attorney general’s largest contract dates to 2007 and has been amended eight times since. Lewis and Wilkins was hired to handle state tort claims, and the contract now totals $3.4 million. Tort claims are lawsuits filed against the state, such as wrongful death cases stemming from highway fatalities.

The contract was originally bid out competitively but was controversial because the winning firm is made up of two former deputy attorneys general. The contracts’ size has grown each year. Both men were recently sworn as Special Deputy Attorneys General to represent the state in litigation arising from the Indiana State Fair stage collapse.

Bryan Corbin, spokesman for Attorney General Greg Zoeller, said if the same work were done in-house today, an additional nine positions would be needed within the office. He noted cost savings are achieved by not paying salaries, benefits and overhead.

“This is highly specialized legal work, varying from state to state, for which this firm has unique expertise in Indiana,” he said.

Corbin noted several outside counsel contracts are expiring in 2013. Because other firms haven’t shown an interest – and the office doesn’t want to switch attorneys in the middle of the State Fair case – Lewis and Wilkins’ contract will be renegotiated.

Other Indianapolis law firms that received a large amount of outside counsel work include Faegre Baker Daniels; Ice Miller, Bingham Greenebaum Doll; and Perkins Coie.

Road, bridge preps

Perkins Coie has contracts worth more than $5 million with the Indiana Department of Transportation.

INDOT spokesman Will Wingfield said most of that work has been preparation of complex environmental documents for the Interstate 69 extension and an Ohio River bridges project. Outside counsel also helps with property acquisition.

“These projects are hundreds of millions of dollars, so the scope of legal fees is not out of bounds,” he said. “Also, the stakes if the litigation is not successfully defended would be much more costly for the state in terms of contractor claims and lost productivity.”

He described the environmental documents needed to build major state projects as thousands of pages in length, not something in-house attorneys can handle.

Wingfield noted that Perkins Coie has highly specialized expertise and has been working with the state since before Gov. Mitch Daniels’ administration.

Insurance issues

One agency you might not expect to have a lot of outside legal work is the Department of Insurance. In recent years, though, the federal health care law has required some rate analysis and other legal work.

And outside counsel also handle the Indiana Patient’s Compensation Fund, which provides medical malpractice payouts to Hoosiers.

Tina Korty, general counsel for the Department of Insurance, said the agency pays out twice a year, and each time there are about 75 claims. A maximum claim could receive more than $1 million.

She said the payout has almost doubled, which has made the cases more difficult to handle.

The agency has four in-house attorneys, but that is not enough to keep up with the demand of the fund. So they also use outside firms.

Korty said that finding experts to testify quickly enough to meet court deadlines is somewhat difficult using the state’s procurement system. That’s why it’s easier to hire the attorneys and let them handle the experts.

“We have to make sure things move efficiently through the system,” Korty said, noting injured Hoosiers deserve the money.

Secrest said he has not approved only a few outside counsel requests – three in the database given to The Journal Gazette. And if a conflict is found with the outside firm, the state has to waive that conflict to hire.

at a glance

How much top state agencies have spent on outside counsel in the last five years:
Family and Social Services Administration…$15.9 million
Indiana Department of Transportation…$8.9 million
Office of Attorney General…$6.7 million
Department of Insurance…$2.2 million
Source: Attorney General’s Office

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