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U.S. Chamber of Commerce pushing look into attorneys

Tobacco wars far from over

Tobacco suit attorneys in Mississippi and numerous other states may have won decisive battles in recent years, but the war is clearly not over.

The U.S. Chamber of Commerce, one of the more powerful lobbying groups in Washington, and the chamber’s Institute for Legal Reform have fired the latest salvo by attempting to have Congress rescind these lawyers’ fees and stem further such suits against big business.

The chamber and its Institute for Legal Reform have filed 21 Freedom of Information Act (FOIA) requests in 21 states, including Mississippi, for all documents and contracts pertaining to both the hiring of outside counsel in tobacco litigation and to the size of the attorneys’ fees. The group is also calling for a congressional investigation into what the chamber calls excessive legal fees.

“We’ve watched in amazement as outrageous tobacco settlement fees in state after state were awarded to plaintiffs’ attorneys — often to the same attorneys,” said Thomas Donohue, chamber president and CEO. “The $11 billion in fees to the plaintiffs’ attorneys represent more than the economies of some small countries.”

Donohue said the chamber’s Institute for Legal Reform will examine the criteria and retention practices used by the 21 target states to hire outside counsel, and to determine whether the lawyers acted in a responsible and ethical manner on behalf of their clients, the states.

“We think, from a preliminary evaluation of the public records in the area, that a small number of lawyers worked together to try to monopolize the market for representing states in the lawsuits against tobacco,” said Jim Wootton, president of the Institute for Legal Reform. “We further think that they designed the settlement agreement so their fees would avoid the normal scrutiny of the government. That’s pretty clear on the face of it. The question is whether or not they did anything that was either illegal or unethical in the process.”

The U.S. Chamber is the world’s largest business federation, representing more than three million businesses and organizations.

“If we allow these trial lawyers to collect this massive windfall, the damage to our economy could be incalculable,” Donohue said. “They have made no secret of the fact that those billions of dollars are earmarked for new causes of action, with numerous businesses and industries on their ‘hit’ list. The threat is real and no industry is immune.”

Wootton noted that several lawyers involved in the tobacco trials have already filed suits against agricultural industries, environmental industries and HMOs.

“They are making good on their threat to use this money to sue other industries,” Wootton said.

He also said that an as-yet-unnamed congressional committee chairman will soon hold hearings on the issue of the tobacco suit attorney’s fees. Meanwhile, Wootton says the chamber will file suit against any states that do not respond fully to their FOIA requests.

Furthermore, the chamber claims that some of the tobacco suit attorneys are waiving their future settlements for cash-in-hand through bond deals with investment bankers. Wootton says litigation bonds from these types of “securitization” deals may be open to challenge from investors if the legal fees are successfully challenged.

“So far, the state bar associations have ignored their own rules against lawyers charging excessive fees, but it is a bad bet to assume that Congress, the courts or the new administration will all give tobacco suit lawyers a free pass,” said Wootton.

Richard Bennett, president of the Mississippi Bar Association, said he doesn’t know what Wootton is talking about when making such allegations.

“Under the Rules of Professional Conduct in Mississippi, Rule 1.5 basically states that a lawyer’s fee shall be reasonable,” Bennett explained. “There are numerous factors to be considered in determining a reasonable fee, but the bottom line is that fees are left largely to the sound discretion of the court, and if a party feels aggrieved, the party can always appeal. There is a check and balance there within the framework of our judicial appellate process.”

Pascagoula attorney Richard Scruggs, who served as national counsel for 41 states involved in tobacco lawsuits, believes the U.S. Chamber — a traditional adversary of the American Trial Lawyers Association — is using the issue as a scare tactic to raise money.

“They are in business just like anybody else, and this is a good way to raise funds: bash lawyers, scare industry and make them cough up money. It isn’t a serious effort to do anything fundamental about the civil justice system,” said Scruggs.

Scruggs does believe the chamber will be successful in getting Congress’ ear, but doesn’t believe it will amount to anything.

“There is no legislation pending here, this is just a bone that some of the more conservative Republicans are throwing to the chamber,” Scruggs said. “Besides, the fees the chamber is attacking, none of the clients are complaining about! The fees were paid by the tobacco industry and didn’t come out of the states’ awards. Also, these fees were determined by an arbitration panel, a fair process agreed to by all parties involved. The chamber doesn’t have a prayer.”

Scruggs also denied the chamber’s allegations that some attorneys monopolized the market for representing states.

“There is no evidence to back it up,” he said. “If there was a small group of lawyers that represented a large number of states, it is because we were asked to for the expertise and for the coordination from one state to the other.”

What impact will the chamber’s efforts likely have on business and on the legal community?

Philip McIntosh, a Mississippi College professor of law, believes their efforts will fall victim to politics, with the chamber making some headway in the Republican-controlled House of Representatives, but running into a roadblock in the Senate because of Democratic leadership.

His bigger concern, however, is the issue of the role of the federal government in this battle.

“We’ve gotten to the point where everyone who has a cause wants Congress to solve it on the national level,” McIntosh said. “That creates problems. If Congress gets involved, they could end up legislating on a national basis things that have traditionally been local issues. It’s interesting to see how that dynamic is going to work and whether or not the philosophy of federalism is going to prevail over the perceived economic consequences.”

McIntosh cautions that business, especially smaller businesses, could pay a hefty price if they have to give up local control.

“Once you open the door toward national legislation, and everybody starts playing the game on a national basis, the players might not end up liking the results,” he continued. “Legislation is not necessarily permanent, and if control of Congress shifts, it could cause problems for the other side. It creates a dangerous precedent in that area and I’m not sure these parties have considered what the long-term possibilities might be.”

Ultimately, McIntosh thinks there will continue to be similar legislative pushes on a national level, particularly with a Republican administration that is perceived to be more pro-business than the previous Democratic one.

Contact MBJ contributing writer Mara Hartmann at mbj@msbusiness.com or (601) 364-1018.

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