Illinois Attorney General Kwame Raoul
CHICAGO - Companies that say they offer consumers choice on their electric bills have accused Illinois Attorney General Kwame Raoul of unconstitutionally teaming up with Chicago-based plaintiffs' law firms in a bid to use the power of the state to extract big settlements from the companies, generating big fees for the lawyers and millions of dollars to help Raoul finance his office's politically-driven court actions opposing policies and goals of the administration of President Donald Trump.
On Aug. 20, so-called alternative retail energy suppliers Residents Energy LLC and IDT Energy Inc. filed suit in Chicago federal court against the Illinois Attorney General's office and Raoul in his official capacity as the state's top legal officer.
The lawsuit accuses Raoul of violating the rights to due process afforded to Residents, IDT and other alternative retail energy suppliers (ARES) under both the U.S. Constitution's 14th Amendment and the Illinois state constitution.
Specifically, the lawsuit asserts Raoul violated those constitutional protections by deputizing three plaintiffs' law firms, who normally specialize in class actions and other similar lawsuits, to take point on legal actions against Residents, IDT and other ARES.
Those actions have accused the companies of allegedly violating Illinois state law by allegedly misleading Illinois residents into signing onto electric rate payment plans through the ARES companies, rather than electrical utilities, like ComEd or Ameren. In those actions, Raoul's office has asserted nearly all customers who sign on with the ARES plans end up paying more than they would have if they had stayed with their electrical utility provider, even though the state asserts the ARES allegedly tell customers they will save money or benefit from locking in their electrical rates over the life of the contract.
Law firms named in the new action against Raoul's office include Miner Barnhill & Galland P.C.; Hughes Socol Piers Resnick & Dym; and Edelson P.C., all of Chicago.
According to agreements presented in court, the firms have agreed to work as so-called "special assistant attorneys general" on a contingency basis, meaning they will be paid only from any settlements or judgments they may extract from the companies targeted under the actions, brought through Raoul's office.
The lawsuit claims those law firms are motivated primarily to use the courts and the constitutional enforcement powers granted to the Attorney General's office to extract and maximize their fees, rather than acting as at least nominally neutral agents of the state tasked by the people of Illinois with enforcing the law.
"... Attorney General Raoul has unleashed these three private firms on a contingency-fee-incentivized quest to investigate and prosecute an entire industry, with the goal of profiting from enormous fines extracted through threats of revoking the licenses that the ARES depend on to do business," IDT and Residents said in their complaint.
The three law firms "have repeatedly cloaked themselves with the power of the state, demanding rights no private litigant ever could, all while enforcing penal statutes for private profit," the companies said.
The lawsuit comes nearly two years after Raoul's office sued Residents and IDT in Cook County Circuit Court, accusing the companies of alleged deceptive marketing practices and consumer fraud.
Those lawsuits come as part of a frontal assault launched by Raoul's office against the ARES industry operating in Illinois, in general. Those state actions begun in recent years have generated settlements worth at least tens of millions of dollars from ARES companies and their third-party marketing vendors, with other actions still pending.
IDT and Residents have contested the actions in court, saying they and other ARES offer consumers’ choices and rate stability and predictability. They say they have complied with all laws. They said “the vast majority” of the alleged deceptive marketing claims leveled by the state “involve alleged acts or omissions by individual third-party marketing contractors, who purportedly said something they should not have, or failed to say something they should have, when soliciting a sale.”
In those actions, however, the Attorney General's office has not prosecuted the cases directly. Instead, they have hired the Miner Barnhill, Hughes Socol and Edelson firms to do the work, in exchange for a cut of any settlements or judgments the ARES or other targeted companies may pay.
According to the contingency agreement presented in court, the firms could be in line for as much as 25% of any fines or other sums paid by the companies sued by the state, with the remainder going to the state.
The state, however, could maximize its take by also allowing the plaintiffs' firms to petition the court for an award of attorney fees, which would reduce the amount those firms would receive from the fines or other penalties paid by the companies, according to the agreement.
In recent years, state attorneys general in Illinois and elsewhere have increasingly turned to hiring such plaintiffs' firms, who specialize in class action and complex litigation, to sue companies under state law.
The use of such "special assistant attorneys general" have generated big results, leading to hundreds of millions or even billions of dollars in money generated for states.
However, the use of such plaintiffs' lawyers have also generated controversy, as businesses have cried foul over the constitutionally questionable actions.
In the new lawsuit, the companies assert Raoul's office has violated their constitutional rights by allowing the profit-driven law firms to use the power of the state to demand big payments from the companies.
They companies further asserted the three law firms are also allegedly using the information they receive from the companies, under the banner of the state, to try to launch similar actions in partnership with other attorneys general in other states against the same companies.
The law firms, they said, "are wielding state enforcement power to initiate and coordinate penal actions across jurisdictions - actions by which the (Special Assistant Attorneys General) themselves stand to profit financially, if they can cajole other state attorneys general into pursuing copycat prosecutions in other jurisdictions."
In the lawsuit, the companies accused Raoul of also seeking to use the enforcement actions and his office's partnerships with the plaintiffs' firms to generate big money for his office. The companies noted Raoul has boasted in recent news articles that at least 30% of his office's revenue comes from settlements and judgments stemming from such lawsuits.
The companies further noted that Raoul, a Democrat, has publicly stated that his office's financial resources have been further strained in recent months by Raoul's politically-driven legal actions opposing policies, executive orders and other initiatives from the Trump administration.
"These admissions reinforce that the Attorney General has an institutional and political interest in maximizing enforcement revenue - a profit motive that aligns with and exacerbates the bias created by his illegal contingency-fee arrangement with the deputized private-law-firm (Special Assistant Attorneys General)," the companies said in their lawsuit.
Neither Raoul nor the private law firms identified in the new lawsuit have yet responded to the claims in court.
IDT and Residents are represented in the action by attorneys Bennett W. Lasko, of Lasko Legal Services, of Chicago; and Jason Cyrulnik and Michael M. Pomerantz, of Cyrulnik Fattaruso, of New York.
