Judge Rejects Lawyers’ Fees in Tobacco Suit as Excessive

In a stinging decision, a Florida state court judge on Wednesday rejected the claims of a group of plaintiff’s lawyers that the attorneys who wrested an $11.3-billion settlement from the tobacco industry for the state were entitled to $2.8 billion in legal fees.

The decision is the first ruling on a fee dispute arising out of tobacco litigation. It could have a significant impact beyond Florida because the question of how much money plaintiff’s attorneys will garner clearly will be an issue as Congress considers a sweeping resolution of such litigation next year.

The fee dispute in Florida, which erupted in late August immediately after the state reached its huge settlement with the tobacco industry, has proved embarrassing to Florida officials and to the plaintiffs’ bar. And the dispute has held up Florida’s ability to start utilizing the first $750 million of the settlement, $200 million of which was earmarked to be used to discourage children from smoking.

The order issued by West Palm Beach Circuit Court Judge Harold J. Cohen annulled liens placed on the money, and Florida Atty. Gen. Robert A. Butterworth said the state could get access to the funds. However, West Palm Beach, Fla., lawyer Robert Montgomery has asked that Judge Cohen’s order be stayed pending appeal.

Cohen’s decision said the dispute was “unique in the annals of legal history.” The judge concluded that a $2.8-billion award to 11 law firms was “without a reasonable doubt excessive,” even though the lawyers had a contract with the state that provided they would get 25% of any recovery.

Florida sued the nation’s cigarette companies in 1995 seeking to recover funds that the state expended treating sick smokers, as well as punitive damages. At the time, the industry had never lost a court case, but over the next two years its legal position grew increasingly perilous, leading to a $368.5-billion national settlement reached in June.

Two months later, with the national settlement’s fate in doubt, the cigarette companies settled the Florida case on the eve of trial because it feared that damaging revelations would harm the prospects of the national settlement being enacted into law by Congress.

The Florida settlement provided that the 11 law firms representing the state would immediately be paid $12 million by the industry to compensate them for out-of-pocket expenditures and that their fees would be determined later by a panel of three arbitrators.

But half the trial team balked and filed liens against the settlement funds. The state retorted that the arbitration procedure was valid, setting in motion a separate case that led to Wednesday’s ruling.

Cohen acknowledged in his decision that the lawyers representing the state “did an extraordinary and magnificent job. . . . Counsels are undoubtedly entitled to handsome fees. . . . [They] may very well be entitled to and receive tens of millions or even hundreds of millions of dollars. . . . However, $2.8 billion simply cannot be reasonable under any scenario argued by private counsel.”

Cohen calculated that if all the lawyers had worked 24 hours a day on the case since Florida enacted a special anti-tobacco law in July 1994, they would be receiving $7,716 an hour each for their work.

“The court recognizes the sanctity of contracts and that the private attorneys representing [Florida] in this case are businessmen as well as lawyers,” Cohen wrote. “However, in addition to being businessmen, the lawyers are also professionals who are officers of the court and, by accepting the title of attorney in this state, submit themselves to the Rules of Professional Responsibility. . . . The ‘dream team’ of private attorneys representing [Florida] in this case are not members of a professional sports franchise, but are officers of the court and the people’s advocate in this case.”

Butterworth called Cohen’s decision “very wise.” But Montgomery said he and four other lawyers would appeal and expect a reversal. He said he is personally out of pocket $530,000 in expenses and would not accept money from the tobacco companies.

“My contract is with the state,” he said.