Government Law

Municipalities find new funding source by filing class-action suits

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A growing number of municipalities throughout the country have found an innovative way to add to their bottom lines—joining class-action suits on a contingency-fee basis.

Providence, Rhode Island, has filed 15 securities cases against banks and corporations as an institutional investor since 2011, reports the Wall Street Journal (sub. req.).

Former city attorney Jeff Padwa tells the newspaper that Providence has recovered $200 million from lawsuits. Often, Providence has been represented by Motley Rice.

Other municipalities have focused on environmental and pharmaceutical issues as they pursue litigation that requires them to pay legal fees from an award only if they win. A standard contingency fee is about one third of the award.

Perry, an Iowa city with a population of 8,000, filed suit last year against makers of so-called flushable wipes. Such wipes have sparked widespread complaints that they in fact clog up plumbing systems.

Chicago has sued drug companies, contending that they drove up the city’s costs by pushing painkillers.

Proponents say such suits fill in gaps created by uneven state and federal enforcement.

Opponents, including the U.S. Chamber of Commerce, question relationships between some municipal officials and their legal counsel, arguing that issues such as political contributions can create a conflict of interest, the WSJ reports.

“Cities and counties are very, very ripe for these kinds of sales pitches, because there is the promise of millions of dollars at a time when a lot of them are really very cash-strapped,” said Lisa Rickard. She is president the U.S. Chamber Institute for Legal Reform.

Related coverage: “Can Chicago deputize law firm to do city’s job? No, say companies sued in painkiller-marketing case”

See also: “Man sues moistened-wipes makers over plumbing bills; defendant stands by product’s ‘flushability’”

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