Angelos, state spar over tobacco payday

Talks intensify, as attorney eyes share of $4.4 billion

October 09, 1999|By Scott Shane | Scott Shane,SUN STAFF

With hundreds of millions of dollars at stake, Baltimore attorney Peter G. Angelos is in intensive negotiations with the Maryland attorney general's office over his firm's fee for handling the state's tobacco lawsuit.

The talks between Angelos and Attorney General J. Joseph Curran Jr. could determine whether part of the state's $4.4 billion tobacco settlement will go to Angelos and his law firm rather than to such public purposes as cancer research, anti-smoking campaigns and education. Because the state could receive its first, $55 million payment from the tobacco deal as early as next month, the matter has become urgent, said Deputy Attorney General Carmen M. Shepard.

"The negotiations have intensified," Shepard said last night, adding that lawyers from the two sides met yesterday without reaching an agreement.

At issue is whether Angelos will seek his fee from the tobacco industry under an arbitration procedure or try to enforce his contract with the state to receive as much as 25 percent of the state's award.

Angelos, the pugnacious millionaire who as Orioles' majority owner fired his manager and general manager this week, said last night he hopes to collect his fee from the tobacco industry and leave the state's tobacco money untouched. As part of last year's settlement, the tobacco industry agreed to pay legal fees awarded by a three-member arbitration panel, with one member chosen by the lawyer seeking the fee, one by the tobacco industry and one by both parties.

But after watching lawyers for six other states receive fees from the panel, Angelos said he fears that the tobacco industry will seek to cut his firm's fee to the bone. While fees awarded so far have ranged from $90 million in Hawaii to $3.4 billion in Florida, most of the awards have amounted to far less than 25 percent of each state's settlement.

"I believe the the tobacco industry will raise heaven and earth to see that our fee is as minimal as possible," Angelos said. "We hate to go to them, hat in hand, and ask them to pay us for suing them."

Because of the anticipated fee battle with the industry, Angelos has postponed filing a fee application with the arbitration panel.

Though he would not say so directly, Angelos evidently seeks a guarantee from the state that it would offer him additional money if arbitrators award what he considers an inadequate fee.

"It seems almost like a chess game," Senate President Thomas V. Mike Miller said of Angelos' discussions with the state.

Miller and House Speaker Casper R. Taylor Jr. said they would like to see Angelos seek his fee from the tobacco industry. But they left the possibility that the state might add to what the arbitration panel offers him.

`A duty to mitigate'

"What he doesn't recover from the companies, he could return and seek an additional amount from the state," said Miller, a Prince George's County Democrat.

"It would seem that he would have a duty to mitigate the state's liabilities by first seeking recourse from the tobacco companies, who in the eyes of most people are the root cause of the problem."

Taylor agreed that Angelos' first target should be the cigarette manufacturers. "If he thinks he can get it out of the tobacco companies, fine," said the Cumberland Democrat. "But if he can't, then I'm still expecting him to cut [his fee] in half."

Under its 1996 contract with the state, the Angelos firm was to receive 25 percent of any money collected by the state, plus reimbursement for expenses. But last year, as odds of a settlement grew, the General Assembly passed legislation cutting the fee in half, to 12.5 percent.

That would still amount to an estimated $600 million over the next 25 years.

While saying he does not necessarily expect to receive the full 25 percent, Angelos says the legislators' reduction is a "nullity" because they had no right to alter a contract signed in good faith.

Political battles

The tobacco litigation has shattered all previous records for legal fees and touched off huge political battles in several states. Some politicians and tobacco executives have attacked the scale of the fees -- sometimes amounting to thousands of dollars for an hour of work -- as unconscionable.

When the Hawaii attorneys got their $90 million, the Brown & Williamson Tobacco Corp. issued a statement asserting that the lawyers had done little work and noting that "the average Honolulu worker would have to work more than 6,000 years to earn such pay."

Sun staff writer Thomas W. Waldron contributed to this article.

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