Law Journal Extra!

States v. Big Tobacco

Tobacco Arbitration Panel Awards $8.2 Billion

Fee awards outstrip fees for attorneys in states that opted out of arbitration.

Law Journal Extra
December 11, 1998

By Melissa J. Kozlowski

  1. Dwarfing the $221 million fee attorneys in eight states who shunned arbitration will receive, attorneys in the Florida, Texas and Mississippi tobacco cases were awarded a $8.2 billion settlement today.

  2. In its first round of awards, the Tobacco Fee Arbitration Panel announced a 10 percent contingency fee award plus a "success" multiplier that took into account individual circumstances, according to the panel.

  3. "The panel recognizes that the fee awards being announced today are very substantial," said John Calhoun Wells, panel chairman, in a written statement. "However, notwithstanding all th e efforts by individuals who committed years of their lives to achieving progress on this issue, without these outside counsel, there would be no multi-billion dollar settlements for the states to reimburse tobacco-related health expenses and provide fund s for educational efforts to reduce youth smoking."

  4. The panel was organized to decide on fees for attorneys involved in the $206 billion settlement between tobacco companies and state attorneys general reached last month.

  5. Calling the awards "obscene," Brown & Williamson Tobacco Corp vowed to "vigorously assert" its position in the remaining state cases.

  6. A provision of the settlement in the Florida, Texas and Mississippi cases prevented the tobacco companies from appearing before the fee panel.

  7. Using the Mississippi case as an example, Brown & Williamson estimated that it would take 70,000 Mississippi households working an entire year to earn what the state's 29 lawyer legal team earned with this settlement.

  8. "We believe that such mind-boggling fee awards have a corrupting effect on the entire legal system," Brown & Williamson said.

  9. Florida's lawyers received an award of $3.4 billion, assuming a success multiplier of 2.6, given that state's $13.2 billion in recoveries.
  10. Attorneys for Texas received an award of $3.3 billion, assuming a success multiplier of 1.9, given that state's award of $16.4 billion.
  11. Mississippi's outside counsel received an award of $1.4 billion, assuming a success multiplier of 3.5, given that state's award of $4.1 billion.

  12. Each award will be paid by the tobacco companies over at least a 10-year period, beginning immediately. The total fees to be awarded by this panel are subject to an annual aggregate cap of $500 million, which could alter the time-frame for payment onc e the fees in other states are decided.

  13. Attorneys for Alaska, Arizona, Idaho, Montana, Nevada, Oregon and Washington opted out of the arbitration proceedings and reached a settlement yesterday.

  14. Charles B. Renfrew who was the tobacco interests' choice for the panel, condemned the fee decision in a written statement, shortly after fees were announced.

  15. "[T]here are limits, even in these cases, as to the amount the attorneys should be paid," Renfrew said. "Each of three state awards rendered by the majority is clearly excessive and to me incomprehensible."

  16. Renfrew criticized the exclusion of tobacco companies from supplying arguments against the fee applications; the failure of counsel in the three states to keep time records or estimate the time spent; and the limited time the panel had to review the c ases.

  17. In particular, Renfrew questioned the panel majority's decision to go above-and-beyond contracted contingency fees.

  18. Florida lawyers originally asked for 25 percent of their state settlement--and got 26 percent. Renfrew recommended a 7 percent or $801 million award.

  19. Texas had originally contracted for a 15 percent contingency fee. And while the state asked for 25 percent in oral arguments, they got 19 percent. Renfrew recommended 7 percent or a $1.1 billion.

  20. Mississippi counsel, who had no written contract with the state, got a 35 percent contingency fee.

  21. "While their risks were high, the percentage awarded here is vastly larger than they ever could have negotiated with the state in the first place," Refrew said of the Mississippi fee award. "I do not believe that a contingent fee of this amount could have been politically acceptable. He recommended a 10 percent or $1.2 billion award.

  22. Other panelists include:

    • Harry Huge, a Washington D.C. based attorney, selected by Florida
    • Texas Law School Dean W. Frank Newton, selected by Texas
    • Jack F. Dunbar, an Oxford, Mississippi-based attorney chosen by Mississippi


Tobacco Settlement

Related Sites

National Association of Attorneys General home page

See Also...

That $10 Billion Fee
Tobacco Arbitration Panel Goes to Work
Product Liability Law Practice Area

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