Trial lawyers' gun for their own loophole

Washington Examiner Staff Writer

Tough economic times are usually no problem for trial lawyers. Pain, suffering and liability abound even in a bad economy. Vioxx, defective products, bad hip replacement joints, video games that "cause" violence, perhaps even foods that "make" people fat -- you name it.

Even so, the trial lawyer lobby is looking for a bailout of sorts. In exchange for the billion dollars that the legal profession has contributed to lawmakers since 1990 -- the vast majority of it to Democrats -- trial lawyers are gunning for a tax break that applies only to them, worth some $1.6 billion.

Their top lobbyist, Linda Lipsen of the American Association for Justice, remarked at a recent conference in San Francisco that the provision would have to be attached to another bill.

"You cannot have a stand-alone bill to help lawyers," she explained, "so we have to tuck it into something."

The bill is already in Congress, waiting to be "tucked into" something else. Sen. Arlen Specter of Pennsylvania, the recipient of $309,000 from lawyers this year, introduced it in February before becoming a Democrat.

Specter's bill, S 437, would allow trial lawyers to deduct immediately on their taxes the up-front expenses they incur when investing in contingency lawsuits -- the kind of suits where they collect a fee only if they win a judgment or a settlement. Currently, the IRS treats the expenses as a loan to the client.
Specter's bill has appeared in Congress before. But only now, with complete Democratic control of the federal government and a few friendly Republicans in the Senate, does it have a serious chance of passage.

This single provision would more than repay the legal industry for its roughly $762 million in political contributions to Democrats over the last two decades. That would, in turn, mean more money could be recycled through plaintiffs' law firms and funneled back to Democrats.

An Examiner analysis of National Law Journal's "2008 Plaintiff's Hot List " shows that in the first six months of 2009, employees of the top 15 trial firms contributed $636,305 to federal politicians and political action committees.

Only $4,875 of that went to Republicans, meaning that trial lawyers at the nation's top firms are giving more than 99 percent Democratic this year. Similarly, AAJ's PAC gave Democrats 96 percent of its $627,000 in contributions in the first half of this year.

Trial lawyers are concentrating on the Senate, with the top 15 firms giving $236,000 to the Democratic Senatorial Campaign Committee and $54,000 to Senate Majority Leader Harry Reid, D-Nev., a former trial lawyer who faces a potentially difficult re-election. Reid collected $978,000 from the legal industry as a whole between January and June.

Trial lawyers have suffered an image problem lately -- worse than the usual one that prompts all the lawyer jokes. Their political standard-bearer, former Sen. John Edwards, admitted to cheating on his cancer-stricken wife, and is being investigated for his presidential campaign's $100,000 payment to his mistress.

Last spring, four senior partners of Milberg Weiss, formerly New York's pre-eminent class action securities firm, were fined and imprisoned for bribing plaintiffs in cases that had netted them $250 million in fees. (The firm since reorganized, and its remaining partners and employees have made $36,537 in political contributions this year, all to Democrats.)

And Dickie Scruggs of Mississippi, a master trial lawyer and architect of the billion-dollar tobacco settlement in 1998, received a seven-year prison sentence earlier this year for bribing a judge.

Trial lawyers make their living as populists, inciting public anger in juries against faceless, greedy corporations. But what happens to their populist image when they become yet another outstretched hand, begging Uncle Sam for yet another bailout?

David Freddoso is an Examiner commentary staff writer.


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