Tobacco lawyers seek big payday
LANSING -- It's time to end the country lawyer jokes around Michigan courthouses.
Law firms from South Carolina and Mississippi hired in 1996 to help the Attorney General's Office in Michigan win its lawsuit against big tobacco companies are in line to get the largest legal fees in state history -- about $450 million.
An arbitration panel set up to determine fees in the case is expected to announce the award by the end of the month, said people familiar with the process.
The money will be paid to Ness, Motley, Loadholt, Richardson & Poole of South Carolina and Scruggs, Millette, Bozeman & Dent of Pascagoula, Miss., by the same tobacco companies that agreed to settle lawsuits filed by Michigan and dozens of other states over the alleged cost of smoking-related Medicaid expenses.
Michigan's share of the 1998 settlement is estimated at $8.5 billion over 25 years.
Although the attorney fees are not subtracted from the state's tobacco windfall, critics say the out-of-state lawyers played only a minor role in the lawsuit.
According to documents filed with the arbitration panel by the tobacco companies, the amount of time devoted to the Michigan case is "unlikely to exceed a couple thousand hours."
Michigan's lawsuit, the 13th state case filed, was not slated for trial when the settlement was reached, and neither pretrial discovery nor depositions were under way. At several hearings in Lansing, the state was represented by assistant attorneys general.
In a separate agreement, the tobacco companies paid $2.7 million for an estimated 10,000 hours of work by attorneys who work for the state.
That works out to about $270 an hour.
Documents filed by the tobacco companies with the arbitration panel suggest that the impact of lawyering on the Michigan case was negligible on the outcome.
"Michigan would have received exactly the same payments ...if it had never filed suit," the companies claimed.
The out-of-state lawyers, on the other hand, described the Michigan case as critical to the final outcome.
"Michigan was an early and major player in the well-conceived national strategy of achieving 'critical mass,' " they said in documents filed with the panel.
By comparison, Ohio and Illinois, which filed suits after Michigan but received larger settlements for Medicaid compensation, paid outside lawyers $265 million and $121 million, respectively.
Although they did not specify hours spent on the Michigan case -- the two law firms represented more than two dozen states in the tobacco litigation -- they claimed to have "devoted an incredible amount of time" to it.
The lawyers asked for even more -- between $500 million and $800 million -- citing the "unprecedented monetary and public health benefits" for Michigan. They compared their value to that of athletes and entertainers, such as Michael Jordan and Oprah Winfrey, who are paid millions for what are "arguably far less contributions to society."
The law firms' principals, Ronald Motley and Richard Scruggs, are credited as the major architects of the national lawsuit strategy that forced settlement by the tobacco companies. And their firms have reaped billions of dollars as a result. Scruggs is the brother-in-law of U.S. Senate Majority Leader Trent Lott, R-Mississippi.
After the arbitration panel awarded $8.1 billion in attorney fees for settlements in Florida, Texas and Mississippi, Motley said: "We brought a rogue industry to its knees begging for mercy with a tin cup in their hands."
Neither Motley nor Scruggs returned phone calls from the Free Press. Representatives of the arbitration panel declined comment.
A spokesman for Michigan Attorney General Jennifer Granholm said the state has no position on payment for the lawyers.
"There was no benefit or cost to the state to get involved," said Granholm's spokesman Chris DeWitt.
The fee agreement between Motley and Scruggs and former Attorney General Frank Kelley for assistance on the case specifically excluded them from seeking a percentage of the state's settlement. It called for "reasonable fees," based on a number of factors, including the expertise of the lawyers and the risk they undertook in assuming the case. That contract was nullified by a broader agreement included in the settlement of the states' lawsuits.
Robert Levy, a senior fellow at the libertarian Cato Institute think tank in Washington, D.C., said the process set up to determine legal fees maximizes the interests of the lawyers and the tobacco companies, and neutralizes the client states.
"No one cares what the fees are except the smokers who are going to pay for it. And they don't have any representation," Levy said.
"It's a scheme to screw the smokers and funnel the money to trial lawyers and the politicians they support."
The most active resistance to the fees has come from the U.S. Chamber of Commerce, which last week filed Freedom of Information Act requests for documents related to the lawsuits.
Jim Wootton, president of the chamber's Institute for Legal Reform, said the system was designed to avoid review by the client states or the courts and enrich lawyers "who are going to invest in more litigation."
"This just doesn't pass the smell test," Wootton said.