Attorney H. Neal Conolly quit the firm of Thuillez, Ford, Gold & Conolly shortly before it won the right to be part of the team of law firms representing the state of New York in the tobacco litigation. He argues, though, that having been involved in a “work in progress” he’s entitled to a share of the $84.3 million in fees payable to his former partners. “Six firms, including the politically connected Thuillez partnership, received a total of $625 million in fees for their role in negotiating the tobacco settlement. Thuillez Ford has had close ties to the Pataki administration and the administration of then New York Attorney General Dennis C. Vacco.” The fees work out to about $13,000 an hour. (John Caher, “Attorney’s Bid for Share of $84.3 Million Fee Moves Forward”, New York Law Journal, Jan. 12). More on N.Y. tobacco fees: see, among other posts, May 11-13, 2001, Jul. 30-31, 2002, and Aug. 10, 2003.
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Attorney General Christine Gregoire of Washington, a leading figure in brokering the 1998 tobacco settlement that ensured cartel-based profits for big tobacco companies and gigantic fees for the lawyers who sued them, is now in a close race for governor of the state. Very helpfully, she’s getting political contributions (via the Democratic Governors Association) from plaintiff’s-side lawyers such as Richard Scruggs, Joseph Rice and Steve Berman who were made exceedingly rich by the settlement, and who’ve given more than $1 million to the DGA in the space of a month. And another grateful contributor to the DGA is the lawyer who represented … Philip Morris. Isn’t it great when people can get along? (Ralph Thomas and Andrew Garber, “Out-of-state donors feed Gregoire fund”, Seattle Times, Oct. 28). For more, see Oct. 11, 2004, and Jul. 17 and Sept. 13-14, 2000.
Plaintiffs defending the insane $10.1 billion class action judgment (Feb. 8; Mar. 24, 2003) have retained as co-counsel a law firm associated with a Republican Illinois Supreme Court justice in an effort to have him disqualified from the case. (Paul Hampel, St. Louis Post-Dispatch, “Smaller court may hear tobacco case in Madison County”, Oct. 3; Ameet Sachdev, “Philip Morris seeks removal of law firm”, Chicago Tribune, Sep. 1 (no longer online)). The Edwardsville Intelligencer (in a strange story whose math seems to be wrong in other particulars) reports that Madison County has received a $1.7 million windfall in interest from Philip Morris from the bond (Apr. 4, 2003) it posted to appeal that judgment. (Steve Horrell, “County is cashing in”, Oct. 8).
The Seattle Times has a retrospective look back at the comprehensive tobacco settlement (Feb. 28 and links therein) negotiated in large part by Washington state Attorney General Christine Gregoire, and notes the irony that it forced the state to ally itself with Philip Morris to protest the amount of the bond (see also Apr. 30, 2003). (Andrew Garber, “Tobacco settlement Gregoire negotiated not popular with all”, Oct. 4). But the bad news for Altria shareholders, states hoping to continue receiving tobacco funds, and the ability of Americans to conduct business is that plaintiffs continue to pile on with similarly meritless class action lawsuits, waiting to find the combination of judges who dislike tobacco companies enough to expand class action law rather than rule in their favor. Plaintiffs’ lawyers will bring dozens of these lawsuits, and need win only one multi-billion dollar judgment to become the new owners of the enterprise. The Massachusetts Supreme Court recently signed off on a class action against Philip Morris, and lower courts in Missouri and Ohio have followed suit. (AP, Sep. 17; Theo Emery, AP, Aug. 16).
Four more entries from our correspondence stack on our letters page. Topics include: why autopsies don’t figure more prominently in malpractice cases, whether the legal climate deserves all the blame for the shrinkage in Philadelphia obstetrics, what happens when you tell your homeowners’ insurance company that you run a controversial website, and another lawsuit challenging the 1998 tobacco settlement.
“The question before the jurors was not whether legal fees amounting to $7,700 an hour were ‘unreasonable.’ It was whether the lawyer-plaintiffs should get $1.3 billion more.” Detailed account of tobacco-fee buccaneering and the resulting courtroom antics (complete with “trained-seal” expert witnesses) in one state. When contemplating the tobacco crusade, the chief of litigation at Brown Rudnick said, “I had dollar signs in my eyes, even back at that early stage. And I know that they were large dollar signs.” (Alex Beam, The Atlantic, Jun.). For our coverage of Massachusetts tobacco fees, see Nov. 4 and links from there.
Profoundly depressing: “A Manhattan appeals court [last week] reinstated a $1.3 billion fee award for attorneys who helped to settle tobacco litigation in California, saying the arbitrators who awarded the fee did not exceed their authority and should not have been second-guessed by a state judge.” A year and a half ago Manhattan judge Nicholas Figueroa (Sept. 27-29, 2002) struck down as “irrational” the $1.25 billion fee award to the so-called Castano Group of lawyers, who had filed many different legal actions including one under a California private attorney general statute. As we commented at the time, the lawyers in question “didn’t actually represent California — the state’s own lawyers did that — and were in fact rivals, rather than allies, of the Scruggs-Moore team of lawyers who did manage to pull off the settlement. The Castano lawyers, however, repositioned themselves as somehow a catalyst for the national settlement and thus entitled to fees”. With an appellate panel’s quashing last August of Judge Charles Ramos’s inquiry into tobacco fees (see Aug. 10), the tobacconeers have now compiled a well-nigh perfect record of rolling over judicial opposition, with the notable exception of the Freedom Holdings v. Spitzer case in the Second Circuit (see Jan. 12). (Tom Perrotta, “$1.3 Billion Fee Upheld in California Tobacco Case”, New York Law Journal, May 19).
In March Moody’s lowered its rating of New York City’s tobacco settlement bonds (which securitize the future flow of booty to the city from the great 1998 robbery) in light of the Second Circuit’s highly significant decision in Freedom Holdings v. Spitzer (see Jan. 12) exposing the settlement to antitrust challenge (Reuters/Forbes, Mar. 23). The Second Circuit itself denied a petition for rehearing (opinion Mar. 25 in PDF format). The General Accounting Office published a report confirming that states are spending most of the proceeds on their general budgets rather than on anything related to the weed or its effects (March report in PDF format, via the University of Tennessee’s AgPolicy.org page on tobacco litigation, which has a number of useful resources), which in turn touched off a number of caustic commentaries (”States Spend Mega-Billion Tobacco Settlement On Budget Shortfalls”, Competitive Enterprise Institute, Mar. 23; Christine Hall, “States Spend Tobacco Settlement on Budget Shortfalls”, Heartland Institute, May 1; see Nancy Zuckerbrod, “States rely on tobacco settlement to fix budgets”, AP/Louisville Courier-Journal, Mar. 23). Also check out the debate between CEI’s Sam Kazman and ever-blustering Connecticut Attorney General Richard Blumenthal on CNNfN (Mar. 18). Vice Squad (Mar. 27) has further updates on the efforts of state governments to curtail small and independent cigarette producers by way of protecting the anticompetitive arrangements established in the 1998 settlement (see Feb. 28). And the Clinton-initiated federal racketeering lawsuit against the tobacco industry, the continued prosecution of which must surely count as among the low points of the Bush Administration’s domestic record, is apparently headed toward trial in September or thereabouts (”Federal suit against tobacco moves toward trial”, AP/Helena Independent Record, Mar. 22).
People may have laughed 16 months ago when obese teenagers unsuccessfully sued McDonald’s, saying its food made them fat. But a well-honed army of familiar lawyers who waged war against the tobacco companies for decades and won megamillion-dollar settlements is preparing a new wave of food fights, and no one is laughing.
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“I think it’s a mistake, and I’ve told clients this, to underestimate the creativity and the imagination and very frankly the aggressiveness of the plaintiffs’ bar,” said Joseph McMenamin, a defense lawyer and doctor in Richmond, Va. “They have a hell of a track record, frankly. They kept slogging away on tobacco and eventually they prevailed, and the sums of money companies had to pay exceed the gross national product of some third-world countries.”
(Kate Zernike, New York Times, Apr. 9) (via Bainbridge).
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As we noted Jan. 13 and Jan. 23, the structure of the great 1998 tobacco robbery puts state governments under financial pressure to restrict or suppress the activities of maverick cigarette makers that do not participate in the settlement fund. Vice Squad, which has been following this issue, has recent posts detailing how this is happening in Pennsylvania, West Virginia, Florida (Feb. 23) and Pennsylvania again (Feb. 26)(Florida is one of four states with their own settlements with the tobacco majors paralleling the 46-state main settlement).
Who’s serving as muscle to enforce a cartel that costs American consumers billions of dollars a year? Why, the National Association of Attorneys General, that’s who. As reported in our Jan. 13 item, the Big Four tobacco companies are starting to lose significant market share to small, regional and foreign cigarette companies that either do not contribute to the MSA (multistate settlement agreement) or do not contribute as much as the majors proportionally. Now AP confirms that NAAG sees this as a big problem and is urging states to pass laws closing the supposed “loophole” (which loophole appears to consist simply of the smaller companies’ not having to pay for past sins absent any showing that they’ve committed such sins). AP also obtained a confidential September memo from NAAG that’s a bit of a smoking gun, we’d say, as far as illuminating the true motives behind the plan. The memo “warned states to expect a $2.5 billion decrease in settlement payments due April 15, down from a projected $9.3 billion. It says about $600 million of that decrease, or 25 percent, is the result ‘not of a decline in smoking but rather of NPM (nonparticipating manufacturer) sales displacing sales by Participating Manufacturers.’ ‘NPM sales confer no benefits on the States,’ reads the memo…. ‘All States have an interest in reducing NPM sales in every State.’” (”Small cigarette makers cut into Big Tobacco’s markets, states’ pockets”, AP/Raleigh News & Observer, Jan. 16). (via Vice Squad).
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More trouble (besides the trouble described yesterday) for states financially dependent on the spoils of the great 1998 tobacco robbery: the market share of companies that signed the agreement is eroding at a surprisingly rapid clip, despite the passage of harsh state laws aimed at protecting the loot by discouraging the rise of new, small or foreign cigarette companies. “In four years, the market share of the small cigarette companies has multiplied more than tenfold, from 0.5 percent of cigarettes sold in the United States in 1998 to 6.5 percent in 2002, according to the National Association of Attorneys General. The group said the numbers for 2003 will be more startling.” (”Small Cigarette Companies Whittle Away At Big Tobacco’s Sales”, AP/WRAL, Jan. 5) (via Vice Squad)(& see Jan. 23)
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We’ve been saying it for years (here and here, for instance), and now we can cite authority from one of the nation’s most distinguished jurists, Judge Ralph Winter of the Second Circuit: the 1998 tobacco settlement was skillfully designed to create the sort of cartel among cigarette manufacturers that would have gotten tobacco executives packed off to jail had not state attorneys general been on hand to bestow their blessing. In a case called Freedom Holdings, Inc. v. Spitzer (yes, the New York AG, a vocal defender of the 1998 travesty, continues to be on the wrong side), a three-judge panel headed by Winter reinstated a lawsuit by a cigarette importer challenging the deal’s anticompetitive provisions.
A reader asks, in the wake of our discussion of Dr. Dean’s 1988 letter, whether other candidates have spoken out on tort reform.
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“Dan Morales, the former attorney general jailed for scheming to steal millions of dollars from Texas’ tobacco settlement, says sealed court documents could show wrongdoing on the part of private lawyers who represented the state.” (see Nov. 2 and links from there). Morales said a year ago that he believed the Big Five tobacco lawyers he hired may have breached their loyalty to the state in the course of taking home $3.3 billion in fees, and now says documents sealed as part of his criminal case would show such misconduct if made public. The documents were sealed by U.S. District Judge Sam Sparks at the request of attorney Mike Tigar, representing the Five. “Also Friday, Marc Murr, a former Houston lawyer charged as a co-defendant to Morales, was sentenced to six months in federal prison. In October, Murr pleaded guilty to mail fraud.” (Janet Elliott, “Morales urges probe of tobacco attorneys”, Houston Chronicle, Dec. 20).
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Law firms Brown Rudnick Berlack & Israels and Lieff, Cabraser, Heimann & Bernstein now say they’ll sue the state of Massachusetts for the whole $2 billion they say they’re entitled to — a 25 percent contingency share of the state’s $8 billion tobacco-settlement booty — rather than accept the measly $775 million they’ve been awarded in arbitration. The Associated Press says the firms “risk becoming poster children for attorney greed at a time when the profession is already under attack for high damage awards. ‘This lawsuit is about greed and it’s about selfishness. They should be ashamed of themselves,’ said former Maine Attorney General James Tierney, who worked with attorneys general from around the country to help negotiate the $246 billion master settlement.” (”Law firms go to court to make Massachusetts pay full tobacco legal fee”, AP/San Francisco Chronicle, Nov. 3; Steve Bailey, “Pigs at the trough”, Boston Globe, Oct. 10) For earlier coverage of the Massachusetts fees, see May 19; Jan. 2-3, 2002; Aug. 13-14, 2001; Dec. 22, 1999. (& see Dec. 17)
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“Former Texas Attorney General Dan Morales was sentenced Friday to four years in prison for filing a false income tax return and mail fraud in a case stemming from the state’s $17 billion tobacco settlement.” Although Morales had entered a guilty plea as part of a plea agreement, “he insisted most of the accusations about public misdeeds were untrue.” (AP/Tyler Morning Telegraph , Oct. 31; Janet Elliott, “Morales ordered to prison”, Houston Chronicle, Nov. 1). Background: Oct. 2, Jul. 17, Jun. 26 and links from there.
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It’s been a great couple of weeks for impunity for the devisers and beneficiaries of the gigantic 1998 tobacco heist. On July 31 a New York appellate panel unanimously slapped down Judge Charles Ramos’s attempt to launch an inquiry under his own authority into the ethical status of the $625 million in fees awarded to lawyers representing the Empire State in the litigation. The panel found that Judge Ramos lacked authority to pursue such review in the absence of controversy between the parties to the litigation and said he had mistaken a variety of points of law along the way. The politically well-connected recipients of that $625 million bonanza had good reason to heave a sigh of relief, since it seems practically no one in the state other than Judge Ramos is curious as to what they did to become entitled to the money (Daniel Wise, “N.Y. Panel Rejects Review Of Tobacco Fee Award”, New York Law Journal, Aug. 1)(see Jul. 30-31, 2002 and links from there). Meanwhile, “[o]nce again, the 3rd U.S. Circuit Court of Appeals has rejected an antitrust challenge to the $200 billion settlement between the top four tobacco companies and 46 states, finding that while the mega-deal did result in stifled competition, the state officials who agreed to it are immune from suit.” Previously, a suit by cigarette wholesalers had been dismissed on the ground of antitrust law’s Noerr-Pennington doctrine, which immunizes anticompetitive conduct related to lobbying and government action itself; the newly dismissed suit was filed on behalf of consumers (Shannon P. Duffy, “Smokers’ Antitrust Challenge Rejected”, The Legal Intelligencer, Jul. 31).
“A Mississippi Supreme Court justice and a wealthy attorney who helped land the state millions in tobacco settlement money were among five people indicted Friday on federal fraud and bribery charges. Biloxi attorney Paul Minor is accused of funneling hundreds of thousands of dollars to Justice Oliver Diaz Jr., Diaz’ former wife, Jennifer, and to two lower court judges. In return, Minor allegedly received favorable treatment for Minor and his clients in cases involving multimillion dollar judgments.” The 16-count indictment also names former Harrison County Judges Wes Teel and John Whitfield. Prominent in the state’s tobacco litigation, Minor is the son of a well known Magnolia State political columnist, Bill Minor. (Jack Elliott Jr., “Justice, Attorney Charged in Mississippi”, AP/Sarasota Herald Tribune, Jul. 25; Jerry Mitchell, “Justice, 4 others indicted”, Jackson Clarion Ledger, Jul. 26; Jerry Mitchell, “Charges may alter opinions of Miss. judiciary”, Jackson Clarion Ledger, Jul. 27; Jack Elliott Jr., “Indictment of justice and lawyer come amid debate between Mississippi business, trial lawyers”, AP/New Orleans Times Picayune, Jul. 27). More: Beth Musgrave, “‘Go see Paul Minor’”, Biloxi Sun Herald, May 18. For our earlier coverage, see: Oct. 9-10 and Oct. 11-13, 2002; May 7 and Jul. 24, 2003.
