Angelos seeks fee `insurance'

With millions at stake in tobacco suit, lawyer flirts with arbitration

October 15, 1999|By Scott Shane | Scott Shane,SUN STAFF

Orioles' owner Peter G. Angelos writes some hefty paychecks to his ballplayers. But his own payday for handling Maryland's tobacco lawsuit might make those millions look like pocket change.

All he wants, Angelos says, is a reasonable fee. But as the squabble over fees for tobacco lawyers has shown, in state after state, one lawyer's reasonable is another's outrageous.

If the Baltimore attorney insists on enforcing his contract for 25 percent of Maryland's tobacco settlement -- which some legal experts say he has a right to do -- his firm could collect $1.1 billion.

FOR THE RECORD - A photograph caption in yesterday's editions of The Sun incorrectly stated that Baltimore attorney Peter G. Angelos could collect $1.1 million in fees for handling Maryland's tobacco lawsuit. As the accompanying article stated, the correct figure is $1.1 billion. The Sun regrets the errors.

That comes to $22,000 an hour for each of the 50,000 hours the firm estimates its attorneys worked on the case. The money would come from the state's settlement.

If Angelos agreed to submit his fee to arbitration, his firm probably would get a lot less -- perhaps as little as $100 million, based on the experience of other states.

That's still $2,000 an hour, not too shabby by anybody's standards. And the fee would be paid by the tobacco industry rather than by the state.

Angelos is fending off a lawsuit filed by a New Jersey lawyer who consulted on the case and claims he was underpaid. Now Angelos says he is negotiating with Attorney General J. Joseph Curran Jr. over whether he'll try to collect his fee from the $4.4 billion Maryland is to receive over 25 years or risk going to arbitration.

When the settlement was announced in November, Angelos strongly suggested that he would take the arbitration route, saying, "Our goal is to make sure the tobacco industry pays our fee."

Curran commended him for that public-spirited stance and didn't remark on the caveat Angelos added at the time: "We don't relinquish any rights under our contract."

Today, that little caveat has ballooned into a legal and political wrangle that has stirred up legislators and could end up in court.

In an interview last week, Angelos would not reveal his position.

"When you have a contract approved by the [state] Board of Public Works to perform certain services, and you perform those services, you expect the contract to be honored," he said.

But in the next breath he added, "I've always been prepared to reduce that 25 percent to an amount that we and the state feel is reasonable."

Though he would not say so explicitly, it appears that Angelos is asking for an insurance policy, an agreement that the state would raise any award arbitrators made to a "reasonable" level.

What's reasonable? That's the billion-dollar question.

"I haven't seen anything like these fees in terms of size," said Daniel J. Capra, a law professor at Fordham University in New York. "But then there's never been litigation the size of the tobacco lawsuits."

Calculating hourly rates is irrelevant, he says, because the lawyers took a chance on losing and getting nothing at all. They gambled their own money -- Angelos says his firm has spent $10 million on out-of-pocket expenses -- and won, Capra said.

"If you ask a venture capitalist what do they make an hour, they'll say, `On some deals I make $1 million an hour. And on some deals I make nothing,' " Capra said.

Of Angelos' stance, he said, "It seems to me he's doing more than he has to do. He would be perfectly within his rights to stand on his contract and ask for 25 percent."

Lester Brickman, a professor at the Benjamin N. Cardozo law school at Yeshiva University in New York, strongly disagreed.

Brickman said he helped draft a Senate bill that would have limited tobacco legal fees at the equivalent of $4,000 an hour, which he said might be justified by risk and effort in some cases.

But he said some of the lawyers sharing the $3.3 billion in legal fees awarded in Texas received $200,000 an hour for the time they actually worked.

"If the term `excessive fee' has any meaning, then most of the fees paid in the tobacco cases are excessive," Brickman said.

Brickman expressed skepticism about the Angelos firm's estimate of 50,000 attorney-hours, which he described as resembling "ice cream containing a lot of air."

By May 1996, when Maryland filed suit, Brickman said, "it was clear there would be a payoff" because damning tobacco industry documents were out and settlement rumors were circulating.

"The risk Angelos undertook was minimal," he said.

What's more, Brickman said, Angelos has a "fiduciary duty" to place his client's financial interest before his own by accepting arbitration. By suggesting that he'll go to arbitration -- but then possibly return to the state for more money -- Angelos "is trying to have it both ways," Brickman said.

If legal experts differ so sharply over the appropriate legal fees, it might not be surprising that the arbitrators' fee awards in six other states have varied enormously, from $90 million for Hawaii's lawyers to $3.4 billion awarded to Florida's lawyers.

Some of the variation is explained by population, which determined the states' shares of the settlement. But risk and effort have also been a factor.

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