Two Little Rock lawyers say an appeal before the Arkansas Supreme Court could affect much more than their $18.16 million in attorneys’ fees.
Attorney Joe Denton of Denton & Zachary said he fears that if the state Supreme Court tosses the attorneys’ fee award, it will deter Arkansans from filing lawsuits challenging the illegal use of taxpayer money by any governmental entity because they won’t be able to afford to hire attorneys.
In 2018, Denton and his law partner, Justin Zachary, agreed to take a contingency fee in exchange for representing a group of Arkansans challenging the use of sale tax funds authorized by Amendment 91 to the Arkansas Constitution for the Interstate 30 and Interstate 630 projects in Pulaski County.
When an attorney takes a case on contingency, there’s no guarantee of payment. But if the case results in a settlement or a judgment, the attorney receives a percentage of the amount, typically between a third and 40%. With a traditional hourly fee payment plan, however, attorneys are paid regardless of the outcome of the case.
“So there’s an increased risk for any attorney or law firm who engages in contingency fee work, because not only do you have to fund the case with your own funds, but you have to delay your own payment,” Denton said. “And there’s a risk that you may never get paid at all.”
In 2019, Pulaski County Circuit Court Judge Chip Welch ruled against the taxpayers, but they appealed and won at the state Supreme Court. As a result of the illegal exaction lawsuit, Welch ruled that $121 million used from the fund on the two road projects from the sales tax fund had to be reimbursed.
Welch also ruled in June 2021 that Denton and Zachary were entitled to a 15% contingency fee of the reimbursed amount.
The state of Arkansas and the Arkansas Department of Transportation appealed the ruling for attorneys’ fees, saying in their briefs that the fee should be thrown out or slashed. Both sides argued in their briefs that sovereign immunity barred the award of attorneys’ fees and costs entirely. “Winning an illegal exaction lawsuit should not be the equivalent of winning the lottery for the taxpayers’ lawyers,” the Department of Transportation said in its filing. “But that is exactly what the Fees Order is.”
The Denton & Zachary law firm has until Tuesday to file its brief.
Under the Arkansas Constitution, any Arkansan can challenge the illegal use of taxpayer funds by any governmental entity, said Denton, who, like Zachary, graduated from the University of Arkansas at Little Rock Bowen School of Law.
“So if the state’s position that they are immune from having to pay attorneys’ fees in these instances is upheld by the Supreme Court, then it creates a financial barrier to the citizens of Arkansas being able to exercise this right,” Denton said. “So only the very affluent would be able to come in and challenge whether or not any governmental entity’s use of a particular taxpayer fund is authorized by law.”
The sales tax that was paid into the Amendment 91 account for use by the Department of Transportation has no legislative oversight, Denton said.
“An illegal exaction cause of action is the only way to police these particular funds,” Denton said. “Without the ability to collect attorneys’ fees, if you prevail on the illegal exaction lawsuit, there is no meaningful way to check the government’s use of these funds.”
At the state Supreme Court, the state of Arkansas is represented by the Arkansas attorney general’s office. The Department of Transportation is represented by Kevin Crass and Kathy McCarroll of Friday Eldredge & Clark of Little Rock. Both sides declined to comment.
