LAWYERS CASH IN ON TOBACCO CASES

WASHINGTON -- To hear many politicians tell it, the government's fight with
Big Tobacco is all about saving children from the evils of smoking. But
it's also about turning a few hundred lawyers into mega-millionaires.

Peter G. Angelos, the wealthy lawyer who owns baseball's Baltimore Orioles,
is on the verge of taking in up to $1 billion from suing the tobacco
industry for the state of Maryland.

Angelos is but the latest lawyer treading this golden path. Eleven law
firms are set to split $2.8 billion in fees from Florida's $11.3 billion
settlement with major U.S. cigarette companies. And a handful of Texas
lawyers won $2.3 billion from a similar $15.3 billion settlement, although
like Florida's, their fees are being challenged in court.

Across the country, 300 to 400 lawyers stand to collect more cash from Big
Tobacco settlement fees than the combined 1996 revenues of all 40,000
lawyers at the 100 biggest U.S. law firms, according to one authoritative
estimate before Congress.

Critics say every dollar that goes to lawyers is one less dollar for
tobacco-related health care costs. Trial lawyers insist they deserve the
money. Business executives -- and not just those from the tobacco industry
- -- denounce their fees as ``obscene.'' Increasingly, some Republicans sense
a potentially hot political issue ready to ignite.

``I can tell you, when the public finds out that billions and billions of
dollars will end up in the pockets of trial lawyers, they are going to go
nuts. They are going to be angry as hell,'' said Frank Luntz, a pollster
who advises Republican leaders in Congress on strategy.

A question of fairness

Luntz said discussions about America's justice system with 40-person focus
groups persuaded him the issue is volatile. ``It becomes an issue of
fairness, of justice.''

That's the way trial lawyers see the issue, too -- as a question of
fairness to them. They each were retained by state governments to sue Big
Tobacco for reimbursement of state Medicaid funds spent on tobacco-related
health expenses. The lawyers' terms were simple -they would be paid nothing
unless they won, but they would get a specific share of any winnings. In
each case those terms were guaranteed by contract.

Such contingency-fee contracts are standard procedure in risky class-action
lawsuits. Eight states -- Florida, Minnesota, South Carolina, New Jersey,
Maryland, Connecticut, Massachusetts and Utah -agreed to give the lawyers
representing them 25 percent of winnings. Other states set rates ranging
from 3 percent to 33 percent.

``The trial lawyers who took on the giant tobacco companies faced enormous
- -- perhaps even unprecedented -- risk, expense and complexity,'' Richard D.
Hailey, president of the Association of Trial Lawyers of America, said in
defending the arrangements before Congress. ``Indeed, no attorney general
in any state was either able to commit the staggering expense, or willing
to bear the substantial risks,'' without hiring outside lawyers on
contingency-fee terms, he said.

Florida's outside lawyers spent more than $10 million of their own money
pressing their case, according to Steven Yerrid, one of the attorneys.
Texas' lawyers spent about $60 million, the trial lawyers association said.

If they had failed, states would not have reimbursed them a dime. Instead,
however, they forced the tobacco firms into mammoth settlements and then
lined up to get their cuts.

Then on June 20, facing losses on many fronts, Big Tobacco cut an omnibus
deal with attorneys general from 40 states. In exchange for limiting their
liability to future lawsuits, the five big cigarette companies -- Philip
Morris, RJR Nabisco, Brown & Williamson, Lorillard and U.S. Tobacco --
agreed to pay $368.5 billion over 25 years to settle outstanding claims.

Feels left unresolved

The new deal muddled the question of lawyers' fees and left it unresolved.
Under its terms, fees for lawyers would be paid separately from the $368.5
billion sum; the tobacco companies asserted they could afford no more than
$500 million a year for this but did not commit to pay any specific amount.

Moreover, the June 20 deal recommended that state lawyer fees would be set
anew by a special arbitration panel. A pending Senate bill, which seeks to
extract more money from the tobacco companies, endorses the same
fee-setting procedure. Some trial lawyers involved were willing to go
along, others were not. The trial lawyers association opposes the
arbitration process, saying it would infringe upon their rights, and
insists that the courts already hold power to determine if lawyer fees are
fair and reasonable.

Several of the Florida law firms already are pressing the question in
court. They are suing their state government, seeking to enforce a contract
that promised them 25 percent of what turned out to be an $11.3 billion
settlement struck before the June 20 deal.

In Texas, Gov. George Bush, a potential Republican candidate for president,
has filed a lawsuit challenging the $2.3 billion in lawyer fees owed in his
state under a contract signed by his attorney general, a Democrat.

If all such state contingency-fee contracts are enforced by courts, the
lawyers would get $18.6 billion over 25 years, reckoned Lester Brickman, a
professor at Yeshiva University's Cardozo School of Law, in testimony
before the House Judiciary Committee. That's more than total 1996 revenues
at the top 100 U.S. law firms.

In addition, Brickman estimated, lawyers for individual tort settlements
would reap up to another $37 billion over 25 years. His calculations were
based on the $368.5 billion omnibus settlement terms; bigger payments from
tobacco companies -- such as the $516 billion demanded by the pending
Senate bill -- would generate even bigger lawyer fees, Brickman said.

Tilting to Democrats

The issue is striking political sparks, and it has partisan overtones, for
the trial lawyers are among the Democratic Party's most generous support
groups.

The political action committee for the trial lawyers' association tilts its
donations 10 to 1 in favor of Democrats. It gave the party's congressional
candidates $657,000 vs. $68,500 for Republicans in the current election
cycle, according to the latest data gathered by the Center for Responsive
Politics.

Both houses of Congress are expected to wrestle with this question over the
next several months, and when they do, the U.S. Chamber of Commerce will
lead influential business groups weighing in.

``No one contends the attorneys shouldn't be well-compensated. They should
get a nice fat fee,'' said Lawrence B. Kraus, president of the Chamber's
new Institute of Legal Reform, which seeks broad product-liability law
revisions. ``But small groups of attorneys raking in billions of dollars,
with the state as the body arranging it -- it is just plain obscene.''