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Lawyers Demand One-Quarter Of Florida's $11.3 Billion Deal

By John Schwartz
The Washington Post

When the state of Florida announced a $11.3 billion settlement with the tobacco industry in August, Gov. Lawton Chiles (D) said the state had "reached a victory of historic proportions." What might turn out to be equally historic, however, is the size of the fees being demanded by some of the attorneys who worked for the state - and the ugliness of the dispute over the money.

Some lawyers in the case are suing for immediate payment of what could turn out to be more than $200 million each - as much as $2.8 billion altogether - arguing that is what they are owed under the original 25 percent contingency fee deal they signed with the state.

"A deal's a deal," said Sheldon Schlessinger, one of the attorneys fighting the state.

But Florida officials negotiated a different deal with the industry. Under that agreement, the industry, not the state, would pay all legal fees and the amount would be determined by a panel of arbitrators.

Two weeks ago, a state judge in Palm Beach sided with the state. Ruling that the attorneys' demands were "unconscionable and clearly excessive," Circuit Judge Harold Jeffrey Cohen ordered the attorneys to arbitrate their fees. The dissidents have since sued to have the judge removed from the case.

The case is being closely watched. It's a nail-biting drama for those supporting a national tobacco policy based in part on the settlement proposal last June between the industry and the states and private attorneys suing it. The Florida squabble, and possible similar fights brewing in other states, represents an eruption of precisely the kind of monetary infighting proponents had hoped to avoid.

Among those most concerned are the attorneys general who negotiated the proposed national settlement with the industry. In a recent conference call, one state official joked about the irony of breakaway attorney Robert M. Montgomery Jr. driving to the West Palm Beach courthouse in his two-tone Rolls Royce "to complain that his fees are inadequate," according to sources familiar with the call.

Under the deal, the industry would pay an estimated $368 billion and make numerous public health concessions in return for protection from certain kinds of legal liability. The industry also would pay all legal fees and the amount would be determined by a national arbitration panel.

In his decision against the breakaway lawyers, Judge Cohen estimated the fees amounted to $7,716 an hour for each of the 12 private attorneys billing 24 hours a day for the 42 months that the case went on. "Perhaps tens of millions or hundreds of millions of dollars might be reasonable," Cohen wrote, "but 2.8 billion dollars simply shocks the conscience of the court."

A statement released by the tobacco companies said: "To the extent that a disagreement now exists between the plaintiffs' lawyers and their client, it is a matter for them to resolve. It is unfortunate that the sensible approach to the issue of lawyers' fees contained in the Florida settlement is now itself the subject of a lawsuit."

The Florida fight started the night before the settlement was announced, in attorney Montgomery's 21,000-square-foot oceanfront home. Dinner was served in the ballroom, and the lawyers for the state were assembled to meet with the governor. The attorneys expected a pep talk; instead the governor told them the case had been settled for more than $10 billion. "I was absolutely astounded," Montgomery said.

The industry had already quietly set aside $10 billion to cover legal bills for the state and private suits that would be settled by the deal, according to several attorneys attending the event. If Congress did not act by the fall of 1998, Florida's lawyers would go into a separate arbitration with any three mediators of the trial lawyers' choice. "Whatever they say the fee is, the tobacco industry has agreed to pay," Montgomery recalled Rice saying.

To Montgomery, the plan smelled of a payoff to support the national deal - and, perhaps, a way to later force the lawyers to accept less than their due. He told Rice he had fought the industry for more than two years and would not accept money from it. "I've never been a party to any fix and I ain't being a part of any fix now," he recalled saying.

Whatever one might think of the amount, the trial lawyers argue, the law enforcement officers of the state signed a contract.

"They have a point," acknowledged Peter Antonacci, Florida's deputy attorney general. "Most lawyers that you run this by say the same thing: Wait a minute, you're trying to welsh on your deal!' " When the amount of money at stake is brought up, however, "They say, Hmmm. That much?' " Antonacci said.