Can a board member of an Arkansas regional airport authority earn a contingency fee from a windstorm subrogation lawsuit?

Plain-English summary

Delta Regional Airport suffered windstorm damage. Two insurance companies paid the Authority's losses. The insurers then hired a Philadelphia law firm to bring a subrogation action to recover what they had paid. The Philadelphia firm hired local Arkansas counsel to assist. That local attorney happened to also be a member of the Delta Regional Airport Authority Board. The local attorney's compensation was set as a percentage of recovery, contingent on whether the Philadelphia firm collected.

Representative Hollowell asked whether this fee arrangement violated Ark. Code Ann. § 14-362-107, which bars regional airport authority board members from receiving "compensation, whether in form of salary, per diem allowance, or otherwise, for or in connection with his services as a member."

Then-Attorney General Leslie Rutledge answered no, on the facts presented. The statute prohibits only compensation tied to board service. The contingency fee in the subrogation litigation was tied to legal work for outside insurance companies, not to anything the board member did for the Authority. The lawsuit sought to recover the insurers' losses, not the Authority's losses; the Authority had no authority over the insurers' decision to pay or sue. So the statutory prohibition did not reach the arrangement.

The opinion ended with a standard caveat: the AG cannot act as a factfinder, and additional facts could change the analysis. If, for example, the Authority's role in approving repair contracts or in coordinating with the insurers turned out to be deeper than the request described, the answer could shift.

Currency note

This opinion was issued in 2021. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What does § 14-362-107 actually prohibit?
The statute reads: "No member of the board of an authority shall receive any compensation, whether in form of salary, per diem allowance, or otherwise, for or in connection with his services as a member." Subsection (b) carves out "reimbursement by the authority for any necessary expenditures in connection with the performance of his general duties as a member." So directors get expenses, not pay, and only for board work.

Why doesn't subrogation work for the insurers count as connected to board service?
Because the Authority was not the plaintiff and had no role in the litigation. The insurers had already paid the Authority's claim. They were now in a separate posture as subrogees pursuing recovery from third parties, with no need for Authority approval or coordination. The board member's work assisting Philadelphia counsel had no nexus with the work he did as a director.

What if the Authority had been the plaintiff or had paid the local attorney directly?
The opinion did not analyze that scenario, but the answer would almost certainly flip. A contingency fee paid by the Authority itself, or paid for work directly aligned with Authority recovery, would carry compensation "for or in connection with" service as a board member. Section 14-362-107 would likely apply.

Could there still be ethical issues even without a statutory violation?
The opinion only addressed § 14-362-107. It did not analyze general fiduciary or conflict-of-interest issues, Arkansas Rules of Professional Conduct applicable to lawyers, or any specific airport-authority bylaws. A board member-attorney in this kind of arrangement would still want to vet the relationship under those frameworks.

What is the AG's "factfinder" caveat?
Citing Op. Att'y Gen. 2019-026, the AG noted that the opinion was based on the requestor's stated background. If additional facts emerge (the Authority shaped the litigation, approved settlement terms, or otherwise had a role), the conclusion could change.

Background and statutory framework

Ark. Code Ann. § 14-362-107 sits in the chapter governing regional airport authorities. It is part of a broader pattern in Arkansas public-body statutes that prohibits paid service on appointed boards while allowing reimbursement of out-of-pocket costs. The phrase "for or in connection with his services as a member" is a textual hook the AG used carefully: connection has to be real, not merely coincidental. A director who happens to be a lawyer doing unrelated legal work for unrelated clients does not fall within the prohibition just because both roles touch the same general industry.

The opinion's narrowness is structural. The AG treated § 14-362-107 as a targeted prohibition, not a broad conflict-of-interest provision. Other statutes (Arkansas's general government-ethics laws, the airport authority's own bylaws, professional-conduct rules) might still apply. The AG had been asked only about § 14-362-107.

Citations

Statutes:

• Ark. Code Ann. § 14-362-107 (1987)

Prior AG opinions:

• Op. Att'y Gen. 2019-026

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKANSAS
THE ATTORNEY GENERAL
LESLIE RUTLEDGE
Opinion No. 2020-046
January 29, 2021
The Honorable Steve Hollowell
State Representative
P.O. Box 1203
Forrest City, AR 72336-1203
Dear Representative Hollowell:
This is in response to your request for an opinion concerning Ark. Code Ann. § 14-362-107, which prohibits compensation in connection with service on the board of a regional airport authority. As background for your question, you report that the Delta Regional Airport suffered certain losses due to a powerful windstorm. You state that two insurance companies provided coverage and paid the losses, and that a Philadelphia law firm has been hired to institute subrogation litigation to recover the insurance companies' losses. You further state:

The Philadelphia law firm sought and retained local legal counsel, who is also a member of the DRAA [Delta Regional Airport Authority] Board. The Philadelphia law firm was hired on a contingency basis with the local attorney/board member to be compensated based upon the percentage that his work bears to the percentage recovered by the Philadelphia law firm. Further, if there is no recovery, none of the subrogation lawyers will receive anything.

Against this background information, you ask:
Does the [Delta Regional Airport Authority] Board member/local attorney's contingency fee agreement with the associating subrogation attorneys seeking payment for the insurance companies' losses (but not the [Board's]) offend Arkansas Code § 14-362-107, which prohibits compensation for service on the board of a regional airport?

RESPONSE
No. Based on the background you provided, the Board member's fee arrangement in connection with the subrogation litigation does not violate Ark. Code Ann. § 14-362-107. That provision provides that:
(a) No member of the board of an authority shall receive any compensation, whether in form of salary, per diem allowance, or otherwise, for or in connection with his services as a member.
(b) Each member shall, however, be entitled to reimbursement by the authority for any necessary expenditures in connection with the performance of his general duties as a member.

The statute only prohibits a member of the board from receiving compensation "for or in connection with his services as a [board] member." Based on the background information presented, it appears there is no connection between the subrogation litigation and the local attorney's service as a member of the Delta Regional Airport Authority Board. According to your correspondence, that litigation will be instituted for the purpose of recovering the insurance companies' losses and not any losses of the Board. Presumably, the Board has no authority or control over the insurance companies' decision to pay the claims or to initiate a subrogation action. In this light, and in my opinion, the Board member/local attorney's contingency fee agreement does not run afoul of section 14-362-107.

Of course, I cannot act as a factfinder in issuing opinions. If there are additional facts surrounding this situation of which I have not been made aware, corresponding modification of this opinion may be necessary.

Sincerely,
LESLIE RUTLEDGE
Attorney General