Dispute Brewing Over Private Attorneys’ Fees in Tobacco Lawsuits

Even as states prepare to settle their massive lawsuits against the tobacco industry, some private lawyers involved in California’s litigation are headed for a fight over their fees.

San Diego attorney William Lerach, at the center of the dispute, is accusing Atty. Gen. Dan Lungren of trying to block him from getting fully compensated.

In 1992, Lerach’s law firm filed the first in the series of major lawsuits now pending against the tobacco industry. But the final settlement agreement is written in a way that guarantees no payment for his firm’s work in that case.

The omission, he said, means he may have to level a claim against the state to recover payment, rather than tap into a multibillion-dollar pot of money to be created by the tobacco industry to pay private lawyers who helped sue the industry.

“We’re going to get paid some day,” Lerach said in an interview. “We didn’t work for seven years for nothing. The question is, will we be paid by the tobacco companies, or are the people of the state of California going to have to pay us?”

Given the historic dimensions of the settlement, fees for Lerach’s firm could reach into the tens of millions. The tobacco industry promises to pay $206 billion to states over the next 25 years, including $25 billion for California. Lungren struck a side deal with California cities and counties to give them half the state’s share.

Lungren could not be reached for comment. But his aides scoffed at Lerach’s charges, saying the private lawyers will be adequately compensated.

“They want their cake and the ice cream and all the bananas, too,” said Special Assistant Atty. Gen. Sue Ellen Wooldridge, who helped negotiate the settlement on Lungren’s behalf.

Lungren has made no secret of his dislike of Lerach, one of the nation’s leading trial attorneys and a major campaign donor to Democrats, including Gov.-elect Gray Davis, who won a landslide victory against Lungren on Nov. 3.

Lungren went out of his way in a campaign debate with Davis to blast the lieutenant governor for his relationship with Lerach, who along with his law firm contributed more than $200,000 to Davis’ candidacy.

Also left out of the final settlement is attorney Mark Robinson for his work on a separate lawsuit he brought--one in which Davis was a plaintiff. Robinson, the incoming president of the Consumer Attorneys of California, also is a major Davis backer.

Trial lawyers were among Davis’ largest campaign donors, giving him more than $2 million. And they were major supporters of incoming state Atty. Gen. Bill Lockyer, who may have the task of defending the state if the fee dispute escalates.

Robinson, however, didn’t blame Lungren for the omission. He called the outgoing attorney general “an honorable man.”

“But somehow there has been a mistake made that needs to be corrected. We’ve been shut out,” Robinson said.

Under the settlement negotiated by attorneys representing various states and the tobacco industry, private lawyers who sued the tobacco industry on behalf of states and counties will get fees from a fund to be set aside by cigarette manufacturers.

The fund would total $500 million a year until all legal fees are paid.

The settlement lists several lawsuits brought by private attorneys, including some on behalf of cities and counties in California. Lerach and Robinson are likely to receive money for their work on those cases.

However, the document omits any mention of payment for earlier lawsuits filed by Lerach’s firm or Robinson’s firm against the tobacco industry. Lerach’s suit, filed on behalf of a San Diego teacher, was filed in May 1992--five years before Lungren brought the California action. Robinson filed his suit, on behalf of Davis and an Orange County cancer victim, in 1996.

The omission comes even though information developed by the private lawyers was damaging to the tobacco industry and was used by states in their suits against the industry, according to San Diego attorney Patrick Coughlin. Moreover, the national settlement probably will end those two private cases, lawyers involved said.

Coughlin, one of Lerach’s partners at the firm Milberg, Weiss, Bershad, Specthrie & Lerach, said he turned over to state lawyers 170 boxes of documents obtained during the course of litigation.

“I think it was the pressure point of our case that brought the settlement,” Coughlin said.

Lerach said private lawyers working on the case urged Lungren’s negotiators to ensure that the private lawyers be authorized as part of the deal to obtain fees from the tobacco industry-funded pot of money.

Lerach said private lawyers told Lungren’s negotiators: “ ‘If you don’t do that, you leave us no choice but to seek our fees from the state.’ They said, ‘No problem. We agree with you.’

“It’s a complete reversal,” Lerach said, calling the omission “one final gift to the cigarette companies.”

Lungren boasted several times that California was unique among the states that sued the industry in its decision not to hire outside lawyers. Instead, Lungren assigned a team of more than 50 deputy attorneys general and other staffers to handle California’s lawsuit.

At a news conference last week, Lungren noted that the $12.5-billion share of the payment that will be retained by the state will go into the state general fund, and not to outside attorneys.

Special Assistant Atty. Gen. Tracey Buck-Walsh, who along with Wooldridge negotiated California’s deal, insisted that she never promised to obtain fees on behalf of the attorneys who brought Lerach’s suit.

She said she specifically told Lerach: “You are not my lawyer. The state does not have outside counsel.”

Aides to Lungren point out that Milberg, Weiss, and Robinson’s firm will not go entirely without payment.

Lerach’s firm took on R.J. Reynolds in a separate 1991 lawsuit attacking the firm’s use of the Joe Camel cartoon character in its ad campaign, a campaign that had particular appeal to young people and teenagers.

The suit was responsible at least in part for R.J. Reynolds’ decision to discontinue the Joe Camel campaign. As part of the settlement, the company paid $10 million, most of which was used by counties for anti-tobacco advertising.

Milberg, Weiss has a fee application pending in the Joe Camel case. Lerach declined to say how much his firm was seeking but said the fee is not related to work on the 1992 case filed under California’s private attorney general statute.

That suit charged that the tobacco industry launched a massive four-decade conspiracy to hide the dangers of smoking in 1954--an allegation that became a central ingredient of the wave of suits filed by the states against the industry starting in 1994.

Also, Milberg, Weiss represented the city and county of San Francisco in its lawsuit against the tobacco industry. Robinson’s firm represents Los Angeles County. Both county cases are being settled as part of the national deal, and the firms will be paid for work on the local cases.

San Francisco Deputy City Atty. Marc Slavin doesn’t begrudge the private lawyers at Milberg, Weiss their pay. “They were vital not only to our case, but to the attorney general’s case,” he said. “Really, in California they laid the groundwork.”