Contingent-fee contracts for environmental-enforcement actions, which Texas counties are filing against alleged polluters, face challenges at the Texas Legislature and in courthouses.

So far, neither route has made law that would prevent local governments from hiring outside counsel under a contingent-fee contract to file civil suits under the Texas Water Code.

A proposed bill, H.B. 3119, would prohibit local governments from entering into a contingent-fee contract for legal services for a civil lawsuit filed under Texas Water Code Chapter 7, Subchapter H.

A related bill, H.B. 3117, also sponsored by Rep. Cindy Burkett, R-Dallas area, would give the Texas Office of the Attorney General authority to "settle in full" civil claims brought by a local government under that law without consent or approval of the local government "for an amount that is consistent with the policies of the state." Burkett did not return a call seeking comment.

Both bills are pending in the House Environmental Regulation Committee following a hearing on April 16. They are unlikely to pass in the waning days of the 83rd Legislative Session, says Mark Vickery, a lobbyist for the Texas Association of Manufacturers, who testified in favor of both bills at the April 16 hearing.

He says his client supports the bills in an effort to "bring consistency to the enforcement process."

Specifically, he says, Texas counties filing civil enforcement suits are seeking monetary penalties only, while the state’s aim is to get companies to participate in environmental cleanup.

Nelson Roach, a partner in Nix, Patterson & Roach in Daingerfield who testified against the bills on behalf of the Texas Trial Lawyers Association, says local governments may not be able to afford to file environmental suits under the Texas Water Code without hiring contingent-fee lawyers.

"Our argument is government is best which is closest to the people," Roach says.

Robert Soard, the first assistant Harris County attorney, also testified at the hearing. He says Harris County opposes the bills, because they would "take away the power of local government to decide who can represent them in environmental lawsuits."

Harris County has hired outside counsel on a contingency for three currently pending Texas Water Code suits, Soard says.

Court Challenges

In one of them, Harris County, Texas, et al. v. International Paper Co., et al.,which was filed in 2011, the defendants — in addition to denying the allegations — are challenging the contingent-fee contract in an interlocutory appeal.

In that suit, International Paper Co. has asked the 1st Court of Appeals to hold that Harris County cannot prosecute the litigation with outside counsel hired with a contingent-fee contract. Among several grounds, International Paper argues that the contingent-fee contract is unconstitutional and violates its due-process rights.

In the same appeal, defendants Waste Management Inc., Waste Management of Texas Inc. and McGinnes Industrial Management Corp. filed briefs last fall asking the 1st Court to reverse an order from 295th District Judge Caroline Baker, in which Baker denied a temporary injunction that would have prevented Harris County from proceeding with private contingency-fee counsel.

That interlocutory appeal is pending. Oral arguments were in November 2012.

Rock Owens, an assistant Harris County Attorney who is lead attorney in the suit, says that the litigation is moving forward in the meantime. He says that Baker signed an order on May 15, 2012, that authorized the Harris County Attorney to file the suit under the Texas Water Code, but she found the portion of the resolution relating to the hiring of outside counsel Connelly Baker Wotring of Houston did not meet requirements of the code. In that same order, however, Baker authorized the county to proceed with the suit.

Owens says the county subsequently got approval for the contingent-fee engagement from the Texas Comptroller’s Office and revised its contract with Connelly Baker. Debra Baker, a partner in Connelly Baker in Houston who is working on the litigation, refers questions to Soard.

Owens says the county attorney’s office occasionally hires contingent-fee lawyers for big litigation.

"When we know we are going up against a well-heeled defendant with lots of money and we can expect a very swift resistance, rather than . . . add to our stable of environmental trial lawyers a whole bunch of people, it’s a better use of our time to go outside," Owens says.

S. Shawn Stephens, a partner in Baker & Hostetler in Houston who represents International Paper in the 1st Court appeal, did not return a telephone message seeking comment. Glenn Ballard Jr., a partner in Bracewell & Giuliani in Houston who represents Waste Management, declines comment.

McGinnis’ attorney, Thomas Hutcheson, a shareholder in Winstead in Houston, said he would have shareholder Albert Axe of Austin call back, but he did not.