Tobacco Wars’ Huge Legal Fees Ignite New Fight
A key architect of the legal war on Big Tobacco has gone to court against two of the country’s richest and best-known plaintiff lawyers, claiming they reneged on a pledge to cut him in on a fortune in legal fees.
Richard Daynard, a Massachusetts law professor and a driving force behind the tobacco litigation, filed his claim in federal court in Boston against attorneys Ronald Motley and Richard Scruggs, whose law firms are to receive as much as $3 billion in fees from settlements of state lawsuits against tobacco firms.
Daynard contends that Scruggs and Motley have refused to honor a handshake deal made in 1996 to pay him 5% of any fees they might collect for handling the anti-tobacco claims of state attorneys general.
Those lawsuits wound up being settled in 1997 and 1998 for $246 billion, to be paid to the states over 25 years. Cigarette makers also are on the hook for about $12 billion in legal fees to lawyers for the states, under the arbitration awards and fee agreements concluded so far.
Because the fee awards for some states still are being determined, the total owed the lawyers will rise.
The Scruggs and Motley firms--Scruggs, Millette, Bozeman & Dent of Pascagoula, Miss., and Ness, Motley, Loadholt, Richardson & Poole of South Carolina were key members of the legal teams of some 30 states and are expected to get about 25% of the fees, Scruggs said in an interview.
Scruggs and Motley made “a binding agreement” to cut him in on the fees but “want to keep it all,” Daynard said last week.
Scruggs said Daynard has “essentially created from whole cloth” his claim that there was an agreement. He said he and Motley owe Daynard nothing.
The dispute comes as business groups, such as the U.S. Chamber of Commerce, are denouncing the fees as an emblem of legal excess, in hopes of pushing Congress and the Bush administration to rein in consumer litigation.
Moreover, the stature of the adversaries and the amounts at stake make the case more than the routine nasty fee fight.
Motley, Scruggs and Daynard are central figures in the legal war over tobacco, the most complex and costly in the history of U.S. civil litigation. All three are featured prominently in recent books on the smoking wars. And Motley and Scruggs are portrayed by Hollywood actors in “The Insider,” the movie about tobacco whistle-blower Jeffrey Wigand and CBS’ “60 Minutes.”
Motley, 56, who made a fortune in asbestos litigation before turning to tobacco, is a renowned trial attorney and master of courtroom invective. The owner of a 156-foot yacht, he was featured this month on the cover of Forbes magazine in connection with the pursuit of his latest target, the lead paint industry.
Scruggs, 55, a University of Mississippi law school chum of Mississippi Atty. Gen. Mike Moore, was Moore’s top advisor and strategist in 1994 when he filed the first state lawsuit against the tobacco industry. Scruggs used his private jet to airlift to Congress thousands of pages of Brown & Williamson Tobacco Corp. documents that had been stolen by Merrell Williams, a former paralegal for a law firm representing the company.
He and Moore also barnstormed the country, persuading other attorneys general to sue the industry. Along the way, Scruggs and Motley picked up retainer agreements to represent most of the states.
Daynard, 57, is a law professor at Northeastern University in Boston and a longtime anti-smoking activist. In 1984, he co-founded the Tobacco Products Liability Project, a group dedicated to the idea that the best way to reduce the harm from smoking was to bury the industry in lawsuits, forcing it to reform its marketing practices and to raise cigarette prices, discouraging consumption.
Over the years, his group has served as a clearinghouse and cheerleader for lawyers suing the industry.
In his role as intellectual godfather of tobacco litigation, Daynard has been quoted in newsarticles hundreds of times--though always as a public health advocate, never as a private litigator.
In an interview last week, Daynard said that through his involvement in the tobacco case filed by Massachusetts, he was receiving fees in the six figures.
His lawsuit accuses Scruggs and Motley of breach of contract and deceptive business practices. He filed it in late December, but none of the parties spoke publicly about the case, and it apparently has gone unnoticed.
Daynard says lawyers from Ness Motley first sought his help in 1993 and that he brought them up to speed on the history and legal theories of tobacco litigation.
According to the suit, Daynard also provided entree to tobacco control experts and potential witnesses, shared extensive documentation on tobacco litigation and assisted in drafting and editing court papers.
After receiving “nominal compensation” for his services in 1994, Daynard said, he was told he would thereafter be a member of the legal team.
In 1996, as other states were joining Mississippi in the anti-tobacco battle, Daynard met with Scruggs to discuss their financial arrangement.
The discussion took place in August in Chicago, where some of the attorneys general and their lawyers had gathered for the Democratic National Convention.
According to the lawsuit, Scruggs stated that in return for his past and continuing assistance, Daynard would get 5% of any fees ultimately recovered by the Scruggs and Motley firms. “Daynard agreed to the 5% figure,” and he and Scruggs “shook hands on the agreement,” the complaint states.
It asserts that the next year, Daynard gave back about $15,000 of his university salary to assure his teaching obligations would be met when he served as co-counsel in the Mississippi case, which wound up being settled just before trial during the summer of 1997.
The suit contends that Scruggs and Motley have used as a pretext for not paying Daynard his refusal to support federal legislation, backed by most of the states, that would have given tobacco companies liability protections as part of a settlement proposal that ultimately died.
Indeed, Daynard became a vocal critic of the June 1997 proposal that would have traded $368 billion in industry payments for reduced exposure to future suits, including a ban on punitive damages.
Daynard attacked this feature of the deal, arguing that without the threat of punitive damages, there would be no way to deter future misconduct by the industry.
The proposed legal protections and other provisions required legislation, which Congress failed to pass. In November 1998, the states and tobacco companies finalized a narrower deal that did not need blessing by Congress.
In court papers and interviews, Scruggs and Motley said Daynard has exaggerated the importance of his help.
They said they never agreed to share fees. And they said that if Daynard had indeed been a member of their legal team, his attacks on a settlement proposal favored by their clients, the states, would have been a serious ethical lapse.
According to Scruggs, who has filed a motion to dismiss the case, Daynard is “a bit more mercenary than people think he is.”
“He’s greedy,” Motley said, adding that Daynard’s claim “that he had something monumental in the state lawsuits] is stupefying.”
“They really said that?” Daynard asked with a laugh when told of the remarks.
For “two guys who have each made a billion dollars on three or four years’ work to accuse me of being mercenary when I simply want them to honor their agreement . . . I’m speechless,” he said.
