1Amending Title 62 (Procurement) of the Pennsylvania Consolidated
2Statutes, providing for <-contingency fee legal services
3contracts.

4The General Assembly of the Commonwealth of Pennsylvania
5hereby enacts as follows:

6Section 1.  Title 62 of the Pennsylvania Consolidated
7Statutes is amended by adding a section to read:

<-8§ 544.  Contingency fee contracts.

9(a)  Scope.--Nothing in this section shall be construed to
10expand the authority of the Commonwealth to enter into contracts
11if the authority never previously existed.

12(b) Procurement determination.--When the head of the
13purchasing agency determines in writing that it is in the best
14interests of the Commonwealth for the agency to pay for legal
15services on a contingent fee basis, the determination shall be
16part of the contract file and a solicitation shall disclose that

1a contingent fee basis is the method of compensation for the
2procurement.

3(c)  Prohibition.--

4(1)  The Commonwealth shall not enter into a contingency
5fee contract that provides for a legal entity to receive an
6aggregate contingency fee, exclusive of reasonable costs and
7expenses, in excess of $50,000,000.

8(2)  Except as provided for in paragraph (4), the
9Commonwealth shall not enter into a contingency fee contract
10that provides for a legal entity to receive an aggregate
11contingency fee, exclusive of reasonable costs and expenses,
12in excess of any of the following:

13(i) twenty-five percent of any recovery up to
14$10,000,000; plus

15(ii) twenty percent of any portion of such recovery
16between $10,000,000 and $15,000,000; plus

17(iii) fifteen percent of any portion of such
18recovery between $15,000,000 and $20,000,000; plus

19(iv)  ten percent of any portion of such recovery
20between $20,000,000 and $25,000,000; plus

21(v)  five percent of any portion of such recovery
22exceeding $25,000,000.

23(3)  A contingency fee shall not be based on a penalty or
24civil fine awarded or an amount attributable to a penalty or
25civil fine.

26(4)  The Commonwealth shall not enter a contingency fee
27contract covering a securities class action that provides for
28a legal entity to receive an aggregate contingency fee,
29exclusive of reasonable costs and expenses, in excess of 20%
30of a portion of the recovery if any of the following:

1(i)  The Commonwealth is appointed as lead plaintiff
2pursuant to section 21D(a)(3)(B)(i) of the Securities Act
3of 1933 (48 Stat. 74, 15 U.S.C. § 78u-4(a)(3)(B)(i)) or
4section 27 of the Securities Exchange Act of 1934 (48
5Stat. 881, 15 U.S.C. § 78aa).

6(ii)  The Commonwealth is a class representative.

7(5)  This subsection shall apply only to the
8Commonwealth's share of any judgment, settlement amount or
9common fund and shall not apply to the amount of attorney
10fees that may be awarded to a legal entity for representing
11other members of a class certified pursuant to the Rules of
12Civil Procedure or state class action procedures.

13(d)  Applicability.--This section shall not apply to
14contingency fee contracts where the gross amount of the award or
15settlement is less than $100,000.

16(e)  Control.--

17(1)  A contingency fee contract for legal services
18entered into shall include all of the following provisions:

19(i)  A Commonwealth attorney shall retain control
20over the course and conduct of the case.

21(ii)  A Commonwealth attorney shall retain veto power
22over a decision made by outside counsel.

23(iii)  A Commonwealth attorney shall attend all
24settlement conferences.

25(iv)  Decisions regarding settlement of the case
26shall be reserved exclusively to the discretion of a
27Commonwealth attorney and the Commonwealth.

28(v)  A Commonwealth attorney shall be subject to the
29Rules of Professional Conduct.

30(2)  The head of the purchasing agency shall develop a
 

1standard addendum to the contingency fee contract that shall 
2be used in all cases, which shall include all of the 
3following:

4(i)  A detailed description of the expectations for
5both the contracted legal entity and the Commonwealth.

6(ii)  The provisions listed in paragraph (1).

7(f)  Oversight.--

8(1)  A copy of an executed contingency fee contract for
9legal services and the head of the purchasing agency's
10written determination under subsection (b) to enter into the
11contract shall be posted on the purchasing agency's website
12for public inspection no less than five business days after
13the date the contract is executed and shall remain posted on
14the website for the duration of the contract, including an
15extension or amendment to the contract.

16(2)  The cost of a contingency fee shall be posted on the
17purchasing agency's website no less than 15 days after the
18payment of the contingency fee and shall remain posted on the
19website for no less than 365 days.

20(3)  A contingency fee contract for legal services 
21executed under this section shall be in writing and posted in
22accordance with Chapter 17 of the act of February 14, 2008
23(P.L.6, No.3), known as the Right-to-Know Law.

24(4)  A legal entity under contract to provide legal 
25services on a contingency fee basis shall, from the inception 
26of the contract until no less than four years after the 
27contract expires or is terminated, maintain detailed current 
28records, including documentation of all expenses, 
29disbursements, charges, credits, underlying receipts and 
30invoices and other financial transactions concerning the
 

1legal services. The legal entity shall make all the records 
2available to the head of the purchasing agency, where they 
3will be available for inspection and copying upon request in 
4accordance with the Right-to-Know Law. The Commonwealth may 
5take reasonable steps to protect the evidentiary privileges 
6of the Commonwealth when producing the records under the 
7Right-to-Know Law. The legal entity shall maintain detailed 
8contemporaneous time records for the legal services in 
9increments of no greater than one-tenth of an hour and shall 
10promptly provide the records upon request to the head of the 
11purchasing agency.

12(5)  By February 1 of each year, the head of the
13purchasing agency shall submit a report to the President of
14the Senate and the Speaker of the House of Representatives
15describing the use of contingency fee contracts with legal 
16entities in the preceding calendar year. The Commonwealth may 
17take reasonable steps to protect the evidentiary privileges 
18of the Commonwealth when producing the report. The report 
19shall include, but not be limited to, the following:

20(i)  The contingency fee contracts entered into 
21during the year and all previously executed contingency 
22fee contracts that remain current and for each contract 
23describe all of the following:

24(A)  The name of the legal entity with whom the
25purchasing agency has contracted, including the name
26of the attorney representing the Commonwealth.

27(B)  The nature and status of the legal matter.

28(C)  The name of the parties to the legal matter.

29(D)  The amount of the recovery.

30(E)  The amount of the contingency fee paid.

1(ii) The copies of written determinations made under
2subsection (b).

3(g)  Definitions.--As used in this section, the following
4words and phrases shall have the meanings given to them in this
5subsection unless the context clearly indicates otherwise:

6"Commonwealth attorney."  An attorney at law employed by the
7purchasing agency who is eligible to participate in the
8retirement system established under 71 Pa.C.S. Pt. XXV (relating
9to retirement for State employees and officers).

10"Legal entity."  A private attorney at law, law firm,
11partnership, association or professional corporation.

12"Securities class action"  An action brought as a class
13action that includes a claim for a violation of the Securities
14Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.) or the
15Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 78a
16et seq.).

17§ <-544. Legal services contracts.

18(a) General rule.--A purchasing agency shall determine the
19payment method to be used pursuant to a legal services contract
20entered into under section 515 (relating to sole source
21procurement) or 518 (relating to competitive selection
22procedures for certain services).

23(b) Contract.--The method of compensation determined under
24subsection (a) shall be part of the contract for legal services.

25(c)  Determination.--The following factors shall be
26considered by the purchasing agency when selecting a contractor
27for legal services:

28(1)  Whether outside counsel:

29(i) Possesses the requisite skills, expertise and
30staff to handle the nature, scope and complexity of the

1matter.

2(ii) Intends to engage other counsel or firms to
3assist in the matter, and the manner in which these
4counsel or firms will be compensated.

5(iii) Is in compliance with all applicable Federal
6and State laws.

7(2)  The estimated costs and expenses to be incurred to
8fulfill the legal services contract.

9(3)  Any other factors deemed necessary by the purchasing
10agency.

11(d)  Conduct.--Commonwealth attorneys shall be subject to the
12Rules of Professional Conduct established by the Pennsylvania
13Supreme Court under section 10(c) of Article V of the
14Constitution of Pennsylvania.

15(e)  Posting.--A contract under this section shall comply
16with Chapter 17 of the act of February 14, 2008 (P.L.6, No.3), 
17known as the Right-to-Know Law, subject to all applicable 
18privileges or exceptions.

19(f) Contingent fees.--The following shall apply:

20(1) In order to enter into a legal services contract
21paid on a contingent fee basis, the purchasing agency shall
22make a written determination that payment on a contingent fee
23basis is all of the following:

24(i) Feasible and efficient.

25(ii) In the best interest of the Commonwealth.

26(2) Contingent fee contracts under this subsection shall
27comply with all of the following:

28(i)  Compensation shall not exceed 25% of an award or
29settlement in favor of the Commonwealth.

30(ii) The following provisions shall be included in

1the contract:

2(A)  Commonwealth attorneys designated by the
3head of the purchasing agency shall retain final
4authority over the course and conduct of the legal
5action, including authority to:

6(I)  Review and approve all court filings,
7including briefs, pleadings, motions and other
8materials.

9(II)  Veto any decision of outside counsel.

10(III)  Retain the ability to have direct
11contact with any party to the action.

12(IV)  Participate in any conference call,
13hearing, trial or Commonwealth settlement.

14(B)  The Commonwealth shall maintain the
15exclusive authority to accept a settlement.

16(C)  A detailed description of the expectations
17for both the contractor and the Commonwealth.

18(iii)  A contingent fee shall not be based on a
19penalty or civil fine awarded or an amount attributable
20to a penalty or civil fine.

21(iv)  A contractor that provides legal services
22pursuant to a contingent fee agreement shall maintain
23detailed current records and documentation of all
24expenses, charges, credits, receipts and other financial
25records relating to the legal services provided for no
26less than four years from the execution of the contract.

27(3) By February 1 of each year, the head of the
28purchasing agency shall submit a report to the President pro
29tempore, Majority Leader and Minority Leader of the Senate,
30and the Speaker, Majority Leader and Minority Leader of the

1House of Representatives relating to the use of contingency
2fee contracts under this section in the preceding calendar
3year. Subject to all applicable privileges, the report shall
4include all of the following information:

5(i) All current contingent fee contracts or
6contracts that expired in the calendar year, with
7description of all of the following:

8(A)  The name of the outside counsel and the name
9of the attorney representing the Commonwealth.

10(B)  The nature and status of the matter.

11(C)  The name of the parties to the matter.

12(D)  The amount of any recovery by the
13Commonwealth.

14(E)  The amount of any contingent fee paid at the
15conclusion of the litigation.

16(ii)  The written determinations made under paragraph
17(1).

18(4)  This subsection shall not apply to contracts where
19the gross amount of the award or settlement is less than
20$100,000.

21(5) The report shall not include matters that are
22related to an ongoing investigation.

23(g) Applicability.--This section shall not apply to legal
24services contracts entered into by the Public School Employees'
25Retirement System or the State Employees' Retirement System.

26(h) Definitions.--As used in this section, the following
27words and phrases shall have the meanings given to them in this
28subsection unless the context clearly indicates otherwise:

29"Commonwealth attorney." An attorney at law employed by the
30purchasing agency who is eligible to participate in the

1retirement system under 71 Pa.C.S. Pt. XXV (relating to
2retirement for State employees and officers).

3"Outside counsel." A private attorney at law, law firm,
4partnership, association or professional corporation.

5Section 2.  This act shall take effect in 60 days.