The Washington Post
December 02, 1997

Pg. A1

A Fee Fight Worth $2.8 Billion; Lawyers Want 25% of Fla. Tobacco Settlement
By John Schwartz, Washington Post Staff Writer

  1. 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.

  2. 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.

  3. "A deal's a deal," said Sheldon Schlessinger, one of the attorneys fighting the state.

  4. 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.

  5. 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 case.

  6. 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.

  7. 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.

  8. 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 panel.

  9. 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."

  10. "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."

  11. "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.

  12. 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 court."

  13. 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."

  14. 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.

  15. 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.

  16. 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 saying.

  17. 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

  18. 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.

  19. 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.

  20. "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 excessive fees.

  21. 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."

  22. 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 touch it.

  23. 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.

  24. 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."

  25. 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 as greedy."

  26. 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.

  27. 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.