HUGE FEES FOR ANTI-TOBACCO LAWYERS

Cigarette Firms Call Record $8 Billion Award 'Outrageous'

An arbitration panel yesterday ordered tobacco companies to pay more than
$8 billion in fees to lawyers who had sued cigarette makers in three
states, including $3.4 billion -- the largest fee in U.S. history -- to 11
firms that represented Florida.

The award for each state suit dwarfs any granted before, even in huge class
action cases. But panel chairman John Calhoun Wells, a former top federal
mediator, defended the fees as "fair" and "reasonable" based on the
multibillion-dollar settlements they produced.

The tobacco industry, along with legal experts who have challenged large
fees in other cases, called the fees "outrageous." Former federal judge
Charles Renfrew, a panel member chosen by the industry, issued a strong
dissent, calling the sums "clearly excessive and . . . incomprehensible."

The panel awarded nearly $3.3 billion to six firms handling the Texas case,
and more than $1.4 billion to 13 firms handling the Mississippi case. Some
of the lawyers, such as Richard Scruggs, of Pascagoula, Miss., the
architect of the first state lawsuit filed against the industry, played a
role in many of the cases and will reap fees from several states.

Scruggs, as well as several lawyers in Texas and Florida, could not be
reached for comment.

But other attorneys slated to receive the money defended the fees. "Private
attorneys bore the entire risk of the lawsuits -- risks that were personal,
professional and financial," said a statement issued by Ness, Motley,
Loadholt, Richardson & Poole, of Charleston, S.C.

But legal experts, and even other trial lawyers who have sued the industry
were flabbergasted by the size of the fees. Alan Morrison, of the Public
Citizen Litigation Group, which has challenged legal fees, criticized the
secrecy of the arbitration, which was conducted behind closed doors in New
York and Washington since October. "None of us knows what the basis for
these fees are," Morrison said.

Washington trial lawyer John Coale, who also has sued the industry, said
while all the lawyers "did a great job . . . these figures are beyond human
comprehension and the work does not justify them."

The fees stem from novel lawsuits first filed against the industry in 1994
by several state attorneys general to recover the costs of treating sick
smokers. Many of the attorneys general hired law firms to handle the
complex and unprecedented cases.

The avalanche of suits forced the industry to negotiate with its foes for
the first time. The suits also spurred failed Senate legislation that would
have placed a huge tax on cigarettes and given the federal government broad
authority over tobacco.

While Congress pondered antismoking measures, the industry negotiated
settlements with three states -- Mississippi, Florida and Texas -- and the
fees are based on those cases. In the settlements, the industry agreed to
pay Mississippi about $4 billion; Florida, more than $13 billion, and
Texas, about $17 billion over 25 years. The fees will be paid by the
industry over and above those amounts in installments over at least 10, but
possibly as long as 25, years. The first payment is due this month.

Still to come are fees for lawyers representing another three dozen states
that are part of a multistate settlement reached last month in which the
industry will pay $206 billion over 25 years. Those fees will also be
determined by an arbitration panel.

Wells, formerly the federal government's top labor-management negotiator,
issued a statement saying the fees reflect "a 10 percent contingency fee
for each state," plus a "success multiplier," which took into account
various state-specific factors, including the risk the attorneys took, the
results, the time required and the novelty of the issues.

"We could have tried to dodge the bullet and shelter ourselves from
controversy," Wells said in an interview. "But . . . we tried to do our job
. . . to make an individual judgment of what was full, fair and reasonable."

In his dissent, Renfrew agreed that the state settlements "were truly
incredible." Still, he wrote, "there are limits . . . to the amount the
attorneys should be paid." In Mississippi, for instance, the $1.4 billion
fee represents 35 percent of the state's recovery, a fee which would not
have been "politically acceptable," Renfrew wrote.

The arbitration panel members were chosen equally by the trial lawyers and
the four tobacco companies that will make the payments: Philip Morris Cos.,
R.J. Reynolds Tobacco Co., Lorillard Inc. and Brown & Williamson Tobacco
Corp. While the panel's awards are considered final under the state
settlements, an industry source yesterday left room for challenging the
decision.

Staff researcher Ben White contributed to this report.

(c) Copyright 1998 The Washington Post Company

Checked-by: Pat Dolan