Sun-Sentinel: Tobacco Attorneys land $3.4 Billion

Copyright 1998 Sun-Sentinel Company
Sun-Sentinel (Fort Lauderdale, FL)
December 12, 1998, Saturday,
Broward Metro EDITION
SECTION: LOCAL,
Pg. 1A
LENGTH: 1323 words

TOBACCO SUIT ATTORNEYS LAND $ 3.4 BILLION IN FEES
BYLINE: SCOTT GOLD; Staff Writer

Mediators awarded a staggering $ 3.4 billion paycheck on Friday to the attorneys who led Florida's legal assault on cigarette companies, ending a bitter financial dispute that tarnished last summer's landmark Tobacco settlement.
Attorneys involved in the case say it is the largest award for legal fees in history.
A panel of mediators in Washington voted 2-1 to award $ 8 billion in fees to attorneys who drove lawsuits against tobacco in Florida, Texas and Mississippi. Florida attorneys will receive $ 3.4 billion, Texas attorneys will receive $ 3.3 billion and Mississippi attorneys will receive $ 1.45 billion.
The money will come directly from tobacco companies, paid in addition to individual settlements with states, including the $ 13 billion deal reached in Florida in August 1997. The payments will be capped nationally at $ 500 million a year, and it could take the tobacco industry a quarter-century to pay up.
Nine Florida attorneys, including Fort Lauderdale's Sheldon J. Schlesinger and West Palm Beach's Bob Montgomery, will split 54 percent of Florida's money, a combined $ 1.9 billion. Two out-of-state law firms that have coordinated much of the country's tobacco wars _ one in South Carolina and one in Mississippi _ will get the rest.
''I have felt all along that when we had an opportunity to put what we accomplished in front of a group of neutral people that we would be treated fairly,'' said Joe Rice, an attorney with the South Carolina firm. ''That's what happened today. Nobody ever imagined that we could accomplish what we did. We did a hell of a good job.''
The state's settlement with the tobacco companies was actually negotiated independently of the attorneys pursuing the lawsuit. But the attorneys have maintained _ and the state has not disputed _ that their efforts gave the state negotiators powerful leverage.
The settlement agreement was an enormous victory for the state, but its terms directly contradicted the payment arrangement Florida had with the private attorneys. The original contract called for the attorneys to get 25 percent of any money the state won; the settlement called for an arbitration panel to hand down ''reasonable fees.''
When several of the attorneys tried to hold the state to its original contract, the ''Dream Team'' of attorneys split.
Frustrated by the dispute, the attorneys finally agreed to the arbitration process by November. The panel deliberated for weeks before effectively granting the attorneys the amount of money the original contract called for _ a 25 percent fee.
The panel determined the figure through a formula: A 10 percent contingency fee topped by a ''success'' multiplier that factored in time, labor and risk. Still, former federal judge Charles B. Renfrew, whom the tobacco industry appointed to the mediation panel, voted against the legal fees.
''By any standard, the work of the attorneys was phenomenal, and they richly deserved to be compensated for their efforts,'' he said. ''However, there are limits. In my opinion the fee awards rendered here were more than fair.''
But John Calhoun Wells, the chairman of the arbitration panel, referred to it merely as ''full, fair and reasonable.'' And the attorneys downplayed the number of zeroes that will suddenly appear on their paychecks.
''I had a nice shack in Palm Beach before this happened,'' said Montgomery, who lives in an oceanfront mansion and drives a Rolls-Royce, after stepping off the golf course on Friday. ''It's not going to change my lifestyle at all.''
By any measure _ even by only-in-America standards _ it is a big award. It's the amount of money raised annually by the United Way nationwide. It's the annual budget of the Florida Department of Children & Families. It's the net worth of Ted Turner.
''Nobody has taken in this much loot since Hannibal sacked Rome,'' said Bill Herrle, Florida director of the National Federation of Independent Businesses.
They didn't resort to riding elephants through the Alps, but the road to Friday's payday was a tortuous one.
In 1994, Florida filed a lawsuit against the tobacco industry to recover tax dollars spent treating the poor for illnesses, such as emphysema, that are linked to smoking. At the time, the industry was considered invincible, and the state did not feel it had the manpower or the expertise to pull it off.
Some of the brightest legal minds in the South gathered in a Fort Lauderdale law office to discuss the suit.
They had captured millions of dollars for workers scarred by asbestos, had brought down polluters in Jacksonville, had beaten the makers of the Dalkon Shield. But if they agreed to take the case, they knew they would have to put their lucrative careers on hold for as long as three years. They would have to pay millions in expenses themselves. If they lost, they would get nothing.
Several of the lawyers, in a play on the Latin phrase ''pro bono'' _ which means providing free legal assistance _ called the tobacco case ''pro stupido.'' They turned it down. Nine Florida firms agreed to take the case.
''It was a herculean job, '' Montgomery said.
When the state reached its settlement last summer, three of the lead attorneys, Montgomery Schlesinger and Robert Kerrigan of Pensacola filed liens against the payout. A judge called the attorneys' drive for 25 percent ''unconscionable.''
State officials held hearings to investigate the murky origins of the lawsuit, and found that the original contract was a mistake, and that the state should have collected bids for legal assistance.
In November, the Florida Supreme Court ruled that in order to collect the money they said they were owed, the attorneys would have to sue the state. Any payment awarded by a jury would still have to be appropriated by the Legislature, the court said. At that point, the last of the Dream Team agreed to arbitration.
As the debate ended on Friday, a new one began.
Herrle said the award ''sends shivers down the spine of small businesses across Florida,'' and will encourage attorneys to pursue other vulnerable industries, just as they pursued asbestos makers before targeting tobacco.
''Sadly, we're concerned that they will use these funds to paint a target on business in our state and set out to destroy free enterprise, one industry at a time,'' he said.
The award likely will fuel a push this spring by Republican Gov.-elect Jeb Bush and the Florida Legislature to overhaul the civil justice system, limiting product liability cases.
The tobacco lawyers discarded those concerns, and said the industry has been uniquely ill-behaved by burying its knowledge about the hazards of smoking.
Tobacco companies would not comment on Friday.
''I don't go around salivating, trying to figure out who I can sue next,'' said Kerrigan, one of the tobacco lawyers. ''Tobacco owed an apology to the people.''
And the contingency fee, they said, has historically been the poor person's key to the courthouse. When attorneys agree to take risks and pay the immense cost of lawsuits themselves, it is the only mechanism that puts the disenfranchised on equal footing with the country's most powerful companies.
''They ought to spend a day in my shoes and see the tragedies that I see,'' Montgomery said. ''That's corporate America saying that, because we keep them honest.''
In fact, one of the reasons Florida's attorneys received a larger share of the pot than Texas' and Mississippi's was that the state was on the forefront of the nation's tobacco wars. It uncovered thousands of once-secret industry documents, for example, that were used in other states' tobacco lawsuits.
''We carried the ball,'' said W.C. Gentry, a Jacksonville attorney and a member of the state's legal team who was directly involved in the arbitration panel's negotiations. ''We were given additional weight because of that.''
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