Tobacco lawsuits bring big payday Lawyers are awarded $8.2 billion in fees for services to states

Arbitrators set amount

December 12, 1998|By NEW YORK TIMES NEWS SERVICE Sun staff writer Scott Shane contributed to this article.

The lawyers who represented the first states to settle with the tobacco industry over health care costs were awarded $8.2 billion in fees yesterday, the richest legal payday in the nation's history.

The money, which will be divided among dozens of lawyers who represented the states -- Florida, Mississippi and Texas -- is the -- first to result from a series of tobacco cases that culminated last month in a $206 billion settlement between tobacco companies and 46 states and five U.S. territories.

That broader settlement, which did not include Florida, Mississippi and Texas, appears likely to produce billions more for plaintiffs' lawyers.

The three states settled their suits for a total of $34.4 billion to be paid by cigarette makers over 25 years. The legal fees awarded yesterday were determined by an arbitration panel set up under an agreement between tobacco producers and plaintiffs' lawyers. The panel also will be used to award legal fees from the larger settlement last month.

Peter G. Angelos, the Baltimore attorney and Orioles majority owner, stands to make half a billion or more for his handling of Maryland's tobacco lawsuit, which will pay the state more than ++ $4.2 billion over the next 25 years. His claim has not yet been presented for arbitration.

The attorneys' fees will be paid by cigarette makers. The payouts will not affect the amounts received by the states.

Cigarette makers are likely to pass on the fees, like the rest of the recent $206 billion settlement, to smokers.

In awarding $8.2 billion, the arbitration panel gave the lawyers credit for taking the risks of being first to test the legal strategy of suing the tobacco industry to recover Medicaid costs related to smoking. And it awarded far less than some of the lawyers had claimed; five trial lawyers hired by Texas, for example, wanted $25 billion for negotiating that state's $17.3 billion settlement.

Size provokes criticism

But the size of the awards -- those five Texas lawyers will get about $3.3 billion -- quickly provoked criticism from legal experts who said the huge recovery by the states did not justify traditional contingency-style rewards.

"Twenty-five percent of $1 million is one thing," said Geoffrey Hazard, a professor of law at the University of Pennsylvania who earlier opposed payment of large fees to the Texas lawyers. "Twenty percent of $1 billion is another thing."

In determining fees, the arbitrators started by awarding lawyers in the three states 10 percent of their state's settlement. Then the panel multiplied those figures 1.9 to 3.5 times depending on what it perceived to be the risks and work undertaken by the lawyers in each state.

Under those formulas, lawyers hired by Florida received about $3.4 billion for reaching a $13 billion settlement last year and lawyers for Mississippi got about $1.4 billion for forging a $4.1 billion settlement last year. The Mississippi lawyers got the highest percentage award, 33 percent, after the panel determined that they had taken the greatest risk by representing the first state to sue the tobacco industry in 1994.

In the tobacco litigation, state attorneys general hired lawyers to pursue their claims against tobacco producers under contingency-style contracts that gave the lawyers 10 percent to 25 percent of a state's recovery.

Angelos' contract

Angelos' 1996 contract -- by far the most favorable to the state of several law firms' bids -- called for him to receive 25 percent of the state's recovery, but the General Assembly cut that fee in half early this year.

In reaching the three state accords and the recent $206 billion settlement plan, the tobacco industry and plaintiffs' lawyers agreed to submit the lawyers' fee claims to arbitration for resolution. For each settlement, fees would be determined by a three-member panel, one member selected by the tobacco companies, one by the plaintiffs' lawyers and the third by common agreement.

When the settlement was announced last month, Angelos said he preferred to take his fee from the tobacco companies rather than from the state's settlement. But to be paid by the industry, he must submit his fee request to arbitration.

Angelos, who could not be reached for comment last night, said then he reserved the right to return to the state for more money if the arbitration amount was too low.

Cigarette makers had championed arbitration as an equitable way of resolving fees. But they quickly chafed last week when they reviewed fee requests from plaintiffs' lawyers, and the arbitrator they selected sharply dissented yesterday over the size of the awards.

In a statement, that arbitrator, Charles Renfrew, a former U.S. District Court judge, said that although he believed the results achieved by the lawyers were outstanding, the awards exceeded all reasonable limits and that some lawyers had not even kept time records.

"Each of the three state awards rendered by the majority is clearly excessive and to me incomprehensible," Renfrew wrote.

The neutral member, John Calhoun Wells, said in a telephone interview that the unhappiness of tobacco and plaintiffs' lawyers over the awards indicated that the arbitration process had worked.

Pub Date: 12/12/98

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