The Washington Post
December 02, 1997
A Fee Fight Worth $2.8 Billion; Lawyers Want 25% of Fla. Tobacco Settlement
By John Schwartz, Washington Post Staff Writer
- When the state of Florida announced an $ 11.3 billion settlement with
the tobacco industry in August, Gov. Lawton Chiles (D) said the state had
"reached a victory of historic proportions." What might turn out to be
equally historic, however, is the size of the fees being demanded by some
of the attorneys who worked for the state -- and the ugliness of the dispute
over the money.
- Some lawyers in the case are suing for immediate payment of what could
turn out to be more than $ 200 million each -- or as much as $ 2.8 billion
altogether -- arguing that is what they are owed under the original 25
percent contingency fee deal they signed with the state.
- "A deal's a deal," said Sheldon Schlessinger, one of the attorneys fighting
- But Florida officials negotiated a different deal with the industry.
Under that agreement, the industry, not the state, would pay all legal
fees and the amount would be determined by a panel of arbitrators.
- Two weeks ago, a state judge in Palm Beach sided with the state. Ruling
that the attorneys' demands were "unconscionable and clearly excessive,"
Circuit Judge Harold Jeffrey Cohen ordered the attorneys to arbitrate their
fees. The dissidents have since sued to have the judge removed from the
- The case is being closely watched, and not just in Florida. It's a nail-biting
drama for those supporting a national tobacco policy based in part on the
proposed settlement last June between the industry and the states and private
attorneys suing it. The Florida squabble, like possible similar fights
brewing in other states, represents an eruption of precisely the kind of
monetary infighting proponents had hoped to avoid.
- Among those most concerned are the attorneys general who negotiated
the proposed national settlement with the industry. In a recent conference
call, one state official joked about the irony of breakaway attorney Robert
M. Montgomery Jr. driving to the West Palm Beach courthouse in his two-tone
Rolls Royce "to complain that his fees are inadequate," according to sources
familiar with the call.
- It was gallows humor. No one knows better than those who ran the state
suits against the industry that a major brouhaha over lawyers' fees could
scuttle what remains of the carefully crafted agreement they reached with
the tobacco industry. Under the deal, the industry would pay an estimated
$ 368 billion and make numerous public health concessions in return for
protection from certain kinds of legal liability. The industry also would
pay all legal fees and the amount would be determined by a national arbitration
- The Florida fight misdirects the debate over tobacco policy, said Iowa
Attorney General Tom Miller, who calls the controversy "an enormous diversion
from . . . the public health goals."
- "It would provide the poster boy of the greedy plaintiffs' attorney
getting a windfall," said Columbia University law professor John C. Coffee
Jr., an expert on class-action fees. "That will be a natural target for
the Republicans, especially [House Speaker Newt] Gingrich [R-Ga.], who
has already thrown some barbs in the direction of the plaintiffs' attorneys."
- "If it simply makes trial lawyers richer, I would be inclined to oppose
it," Gingrich said when the settlement was first proposed. Republican lawmakers
have already introduced a bill that would limit outside lawyers' fees in
the tobacco litigation to $ 150 per hour.
- In his decision against the breakaway lawyers, Judge Cohen estimated
that the fees amounted to $ 7,716 an hour for each of the 12 private attorneys
billing 24 hours a day for the 42 months that the case went on. "Perhaps
tens of millions or hundreds of millions of dollars might be reasonable,"
Cohen wrote, "but 2.8 billion dollars simply shocks the conscience of the
- A statement released by the tobacco companies said: "To the extent that
a disagreement now exists between the plaintiffs' lawyers and their client,
it is a matter for them to resolve. It is unfortunate that the sensible
approach to the issue of lawyers' fees contained in the Florida settlement
is now itself the subject of a lawsuit."
- The Florida fight started the night before the settlement was announced,
in attorney Montgomery's 21,000-square-foot oceanfront home. Dinner was
served in the ballroom, and the lawyers for the state were assembled to
meet with the governor. The attorneys were expecting a pep talk; instead
the governor told them that the case had been settled for more than $ 10
billion. "I was absolutely astounded," Montgomery said.
- After addressing the group, Chiles said he would leave the room so that
the attorneys could discuss money matters. What happened next is in dispute.
Joe Rice, a lawyer with a South Carolina firm that represents many of the
states suing the industry, rose to speak. Montgomery recalls that Rice
started out by saying, "Now boys, let me tell you how it's gonna be," and
proceeded to lay out a plan by which the companies would submit to arbitration
of fees if a national settlement was reached. Attorney Robert G. Kerrigan
recalled that the explanation was strikingly blunt; Rice told them that
the arbitration panel "would shelter us from public disdain and hatred
and protect us from the Wall Street Journal," whose editorials have
crusaded against trial lawyers and their fees.
- Rice added that the industry had already quietly set aside $ 10 billion
to cover legal bills for settling all the state and private suits, according
to several attorneys attending the event. If Congress did not act by the
fall of 1998, Florida's lawyers would go into a separate arbitration with
any three mediators of the trial lawyers' choice. "Whatever they say the
fee is, the tobacco industry has agreed to pay," Montgomery recalled Rice
- To Montgomery, the plan smelled of a payoff to support the national
deal -- and, perhaps, a way to later force the lawyers to accept less than
their due. He told Rice that he had fought the industry for more than two
years and would not accept money from it. "I've never been a party to any
fix and I ain't being a part of any fix now," he recalled saying
- Rice said that while the words "10 billion dollars" might have come
into the conversation, he used the figure only as a hypothetical amount
that made the math easier.
- Whatever was said that night, it did not satisfy Montgomery, Kerrigan
and others. Whatever one might think of the amount, the trial lawyers argue,
the law enforcement officers of the state signed a contract.
- "They have a point," acknowledged Peter Antonacci, Florida's deputy
attorney general. "Most lawyers that you run this by say the same thing:
'Wait a . . . minute, you're trying to welsh on your deal!' " When the
amount of money at stake is brought up, however, "They say, 'Hmmm. That
much?' " Antonacci said. He noted that judges have great latitude to make
decisions to serve the public interest, and have long been able to declare void contracts that have
- Columbia University's Coffee said that courts rarely break contracts
unless "one side is shown to be commercially incompetent or hopelessly
naive, like the proverbial widows, orphans and drunken sailors." Even though
the payment demanded by the private attorneys "is off the charts," it still
might be valid because "the parties who negotiated this are parties who
have some bargaining power and wouldn't be considered naive or unsophisticated."
- Indiana Attorney General Jeffrey A. Modisett said that Florida shouldn't
be blamed for signing the contract it did, because at the time it was struck
the case seemed like the longest of long shots -- and many law firms wouldn't
- Iowa Attorney General Miller said he filed his state's lawsuit in 1996,
when the momentum was much greater. He negotiated a contract with his outside
lawyers that called for graduated fees if the state won, with 25 percent
of the first $ 100 million, 20 percent of the next and so on, with fee
arbitration in case of a settlement.
- Maryland Attorney General J. Joseph Curran Jr. has already discussed
the issue with Peter Angelos, the state's top outside attorney, said Carmen
Shepherd, Curran's deputy. She said the fees issue "is one that we can
resolve amicably." If not, she said, "we'll certainly do whatever it takes
and whatever we need to do to protect the state's interest."
- Richard Cerisi, the lead lawyer in Minnesota's case against the industry,
also signed a contingency fee deal with the state. But he said, "There
will be no fight over fees in Minnesota." Eric Johnson, a top aide to Minnesota
Attorney General Hubert H. Humphrey III, agreed: "I think in our case,
maybe we just have a better relationship with our counsel. Maybe they aren't
- Montgomery and Kerrigan bristle at accusations that they are motivated
by greed. They say that the case shows what's really going on in the fight
against the tobacco industry; they say the companies have bought peace.
"All of this is a purchase by tobacco of the loyalty of the lawyers who
had been fighting the bastards for 2 1/2 years," Kerrigan said.
- To Antonacci, however, greed is the only explanation that makes sense.
He suggested that the Florida lawyers are mainly jealous of attorneys such
as Richard Scruggs of Mississippi, who represent numerous states and stand
to profit immeasurably. "They all strut, they all have big egos," Antonacci
said. "The only way to distinguish them is the size of the pile of money."
This is a page in the section entitled Lawyers
Make Billions at Expense of Sick and Dying Smokers in the Web site
entitled Legal Reform Through Transforming the
Discipline of Law into a Science.