New York Judge Cites Ethics Concern Over Tobacco Case Fees
A Manhattan judge has asked the New York attorney general's office and several law firms to justify $625 million in attorney fees awarded as part of New York's historic $25 billion settlement with the tobacco industry.
Citing unspecified ethical concerns, Supreme Court Justice Charles E. Ramos ordered state lawyers and attorneys from six firms that represented the state to explain why the fees should not be set aside.
One ground for vacating the fees, the judge said, could be that the arbitrators who awarded them may have "manifestly disregarded well established ethical and public policies."
Ramos suggested that the court had the power to not only ask a new panel of arbitrators to determine reasonable fees, but to vacate the entire $25 billion settlement, approved by another judge in 1998, if such action was warranted.
He also said the issue could be referred to the Departmental Committee on Discipline and require the outside firms to produce time sheets detailing their roles in the litigation.
Ramos asked the lawyers to appear in court on July 10. The judge's remarks appeared in an order to show cause signed Monday and obtained by the New York Law Journal Wednesday.
The judge issued the order sua sponte; neither the tobacco companies, the outside firms nor the attorney general's office have contested the fee awards.
"This office does not believe that there is any basis for overturning any aspect of that settlement," said Christine Pritchard, a spokeswoman for the New York attorney general's office. "Nevertheless, we will respond to Justice Ramos' order and will seek to respond to any concerns that he has."
Attorneys from the three New York firms who won a portion of the legal fees -- Schneider, Kleinick, Weitz, Damashek & Shoot; Sullivan Papain Block McGrath & Cannavo; and Thuillez, Ford, Gold & Johnson -- could not be reached for comment Wednesday.
Schneider Kleinick and Sullivan Papain were awarded $98.4 million each by a three-member panel of arbitrators in April 2001. Thuillez Ford won $84.3 million, while the remaining $343.8 million was to be split between three national firms: Ness, Motley, Loadhoalt, Richardson & Poole from Charleston, S.C.; The Scruggs Firm from Pascagoula, Miss.; and Hagens & Berman from Seattle.
Stephen Gillers, vice dean at New York University Law School and an expert on legal ethics, described Justice Ramos' order as "cryptic," but said it did not seem to imply any shady dealings.
"Nothing in here suggests fraud or other improper conduct," Gillers said. He said it seemed as if the judge was concerned that the fee award might be excessive.
Gillers said it was "an open question" whether the court had the power to order what it suggested, such as vacating the fee award. "That would be the first challenge the lawyers might raise," he said.
Ramos inherited the case from Justice Stephen G. Crane, who was elevated to the Appellate Division, 2nd Department. Crane had approved the tobacco settlement in 1998, and that ruling was affirmed twice by the 1st Department.
Ramos said he had considered "the comments of counsel with regard to the circumstances surrounding the award ... in light of ethical considerations." He said the hearing was necessary "in light of this Court's obligation to take appropriate action when in possession of facts suggesting unethical conduct."
Pritchard from the state attorney general's office described the tobacco settlement as the "the most important public health litigation settlement ever," and noted that it had been affirmed twice on appeal.
In 1998, the tobacco industry and 46 states agreed to a $208 billion settlement, of which New York will receive $25 billion over time. The $625 million in attorney fees were in addition to the $25 billion award.
New York's total award ranks in the top 10 among all states, but some lawyers, such as in Massachusetts, have received higher fees even though their states received less money overall.
The firms are expected to receive their fees over a period of 20 to 25 years.