Covington’s $125M Fee for 3M Case ‘A Little Steep’: Lawmaker

Covington & Burling LLP came under fire March 5 for a $125 million fee it received to represent the state of Minnesota in its $5 billion environmental lawsuit against 3M Co., which settled Feb. 20 for $850 million.

At a March 5 Minnesota House Ways and Means Committee hearing, state Rep. Sarah Anderson (R) questioned the Big Law firm’s contingency arrangement with the state, reached in 2010.

“I’m just curious as to why we are paying a law firm $125 million for seven years of work,” she said. Referring to her own math, she said the sum works out to about $48,000 per day. “That seems a little steep.” She also said all the legal fees are being shipped outside the state because Covington doesn’t have an office in Minnesota.

Jim Knoblach (R), Minnesota Ways and Means Committee chairman, said additional legislation may be needed to ensure the money could be received and spent appropriately.

The underlying case stems from a lawsuit in 2010, when Minnesota sued 3M, alleging it acted with deliberate disregard by dumping perfluorinated chemicals at four Minnesota sites beginning in the 1950s, largely in unlined pits and trenches, contaminating groundwater.

The complaint alleged the company knew about the risks the chemicals posed but concealed those risks from government regulators for decades. The March 5 hearing was called to review the settlement deal, particularly its impact on the state’s finances.

$10 Million in Costs Cited

Lawyer and state Rep. Debra Hilstrom (D), who said she has followed the case for years, told the hearing the litigation involved more than 27 million pages of documents, more than 200 witness depositions, more than 100 judicial hearings and conferences, and about $10 million in environmental tests, fees, and associated costs.

The agreement the state put in place with Covington was a contingency contract, and such deals can result in legal teams reaping up to 40 percent of any eventual settlement, Ben Wogsland, a spokesman for state Attorney General Lori Swanson (D), told Big Law Business. Covington’s fee was about 14 percent of the total settlement amount.

A Dec. 22, 2010, agreement between Minnesota and Covington said the state was not liable to pay Covington compensation other than amounts recovered from 3M. If the final recovery turned out to be less than sufficient to fully reimburse Covington for its costs and expenses, Minnesota would not be responsible to make the law firm whole, the agreement said. The Minnesota Attorney General’s office didn’t provide Big Law Business with a breakdown of the billable hour fees of Covington lawyers working on the case, which was included in the retainer agreement

“Covington has represented the State of Minnesota in environmental matters for more than 20 years, including the NRD [3M] litigation that was recently resolved. Our work on the NRD case involved a contingency fee arrangement, the attendant risk that we might receive no fee whatsoever, and dedicated efforts by our team in hard-fought, complex litigation lasting over seven years,” a Covington spokesman told Big Law Business in an email.

Anderson also questioned why the state didn’t rely on state Attorney General Lori Swanson (D) and her office to litigate the case.

Wogsland said Covington is “a long-time counsel to the state on environmental matters and has represented Minnesota on environmental matters for over 20 years.” Minnesota state agencies also likely didn’t have the wherewithal to litigate the case, he said. “To litigate this case you needed the best experts in the world, from geologists to chemists to engineers, and this firm [Covington] put up that money to pay for all of that,” he said.

To contact the reporter on this story: Stephen Joyce in Chicago at sjoyce@bloomberglaw.com

To contact the editor responsible for this story: Casey Sullivan at cSullivan@bloomberglaw.com