Illinois AG faces another lawsuit over use of outside lawyers

By Diana Novak Jones

Aug 20 (Reuters) - A pair of New Jersey energy companies facing enforcement actions brought by Illinois Attorney General Kwame Raoul are the latest to sue him over his office’s use of private law firms to pursue state business.

In a lawsuit filed Wednesday in federal court in Chicago, Residents Energy and its affiliate, IDT Energy, accused Raoul, a Democrat, of improperly using outside law firms, paid on contingency, to seek penalties against them for allegedly misleading consumers.

The companies said Raoul’s use of the lawyers violates their due process rights under the U.S. Constitution because it delegates state authority to private parties with a financial stake in the outcome. They also argue the Illinois Constitution requires officers of the state’s executive branch to be compensated with state salaries.

State attorneys general have long used outside counsel to help in litigation — perhaps most famously during the tobacco litigation of the 1990s — with the private firms often forgoing payment up front and instead receiving a portion of any judgment or settlement reached. The practice is controversial, as businesses facing the lawsuits say it replaces the neutral state government with a financially motivated prosecutor, but courts have generally upheld it against challenges.

The lawsuit seeks a declaration that the Illinois attorney general can’t rely on outside counsel in its actions against Residents and IDT, plus punitive damages.

Representatives for Raoul’s office declined to comment.

"When the State retains hired guns who get paid only if they force their targets to pay, it is motivated to pursue paydays rather than justice — and our justice system breaks down," said Jason Cyrulnik, a lawyer for Residents.

Attorneys from the outside firms involved did not respond to requests for comment.

In another lawsuit challenging Raoul's use of outside counsel brought in federal court in May, the attorney general asked the court to wait to address the question of whether the U.S. Constitution restricts an attorney general's use of outside counsel until after the 7th U.S. Circuit Court of Appeals rules in a similar case. For the claims brought under the Illinois Constitution, Raoul said the doctrine of sovereign immunity prevents a federal court from ordering him to follow the state constitution.

With the help of special assistant attorneys general from private law firms Edelson; Hughes Socol Piers Resnick & Dym; and Miner, Barnhill & Galland, Raoul’s office sued Residents Energy in September 2023, seeking to revoke the company’s license to operate in Illinois, restitution and penalties. The litigation is ongoing.

Separately, the office and its outside counsel sent a letter to IDT Energy in June, accusing the company of violating a 2019 consent decree and threatening to pursue enforcement action unless it halted all marketing activity, according to the lawsuit.

Raoul’s office has filed a number of lawsuits against energy companies that offer consumers an alternative to Illinois’ public utility, accusing them of conning customers into switching by lying about how their costs will compare.

Another company facing litigation from the attorney general’s office, Spark Energy, filed a similar lawsuit challenging the use of the same outside law firms in May.

Residents and Spark Energy have denied the allegations.

The case is Residents Energy v. Raoul, U.S. District Court for the Northern District of Illinois, No. 1:25-cv-09929.

For Residents and IDT: Bennett Lasko of Lasko Legal Services; and Jason Cyrulnik and Michael Pomerantz of Cyrulnik Fattaruso

For Raoul: Not yet available