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83 A.B.A. J. 74 (1997)
Contingency Fees - Should Plaintiffs Lawyers in the Tobacco Settlement Receive Billions of Dollars

handle is hein.journals/abaj83 and id is 989 raw text is: - AT ISSUE Contingency Fees Should plaintiffs lawyers in the tobacco settlement receive billions of dollars? As the dust settles after the epic negotiations that led to a $368.5 billion settlement in states' lawsuits against the tobacco industry, the question of attorney fees remains to be sorted out, Most of the contingency fees agreed to range from 10 percent to 25 percent, with many at 25 percent. The settlement, which creates a partnership between the states and the tobacco companies, includes an initial payment to the states of $7 billion and subsequent payments of more than $175 billion over a 25-year period with a substantial portion to be rebated to the federal government. If the contingency fee agreements-many of which apply to the gross recovery-are enforced, they will likely yield attorney fees in excess of $30 billion over the first 25 years, apart from enormous fees separately generated by 17 class actions and individual representations. Is this fair? Charles Silver, a University of Texas law professor who has written widely on attorney fee litigation, says this is fair and to deny it smacks of hypocrisy. It was the contingent fee bar that made the settlement possible, Silver says, and the states should pay the going rate. For Lester Brickman, a Benjamin N. Cardozo School of Law professor with extensive publications on contingency fees, however, a host of reasons lead to the conclusion that the agreements should not, and will not, stand. Yes: The attorneys who took the risks deserve compensation Bill Gates holds 23.5 percent of Micro- soft's common stock; company insiders own 38.6 percent. If, overnight, the stock rose by $368.5 billion, Gates' share would be $86.6 billion; insiders as a group would reap $142.2 billion. Other shareholders wouldn't complain about the insiders' cut. They would be too busy celebrating their own $226.3 billion payday. The Wall Street Journal would cite Mi- crosoft's prosperity as evidence that compen- sation arrangements that benefit managers are good for outside investors, too. Journal editors would never think to suggest that Congress trim the insiders' share. Govern- ment rewrite a bargain that increased a company's value by $368.5 billion? Absurd! But when lawyers helped the states re- cover $368.5 billion-found money for tax- payers-the possibility of lawyers earning billions in fees set off alarms. Newt Gingrich announced that his job was to keep down legal fees. The Wall Street Journal encour- aged him to intervene. The paper didn't note that the fees are within the 15 percent to 25 percent range Congress mandated in the False Claims Act for people who help re- cover federal funds. Instead, it published an inane op-ed piece encouraging Congress to limit fees to 0.01 percent. The attorneys general couldn't have brought the tobacco industry to its knees on their own. They didn't have the political muscle to convince their states to risk scarce tax dollars on lengthy, easy-to-lose suits. They needed help-and found it in the contingent fee bar. The attorneys general negotiated terms favorable to themselves and the states. Private lawyers agreed to gamble tens of millions and an indefinite amount of time on an incredible long shot. If the suits failed, and it seemed likely that they would, the lawyers would lose millions. The attorneys general would appear to have fought the good fight while preserving states' resources. If the states won, the attorneys general would be heroes; again the states would pay nothing. The federal government pays legal fees that states reasonably incur in recover- ing Medicaid funds. The settlement sweet- ens the deal by requiring Big Tobacco to pay fees on top of the $368.5 billion, so even the federal government has no complaint. Aha! you say. States' money wasn't on the line, so the attorneys general had no in- centive to minimize legal fees. Think again. Lawyers have never been more despised. The attorneys general can't afford to be known for making lawyers rich. They had strong incentives to bargain for good terms, the same incentives that now are causing them to pressure lawyers to accept lower fees. If entrepreneurial lawyering were properly respect- ed, the settlement would be seen as the ultimate vindi- cation of the contingent fee, which rewards agents who take risks and generate good results quickly. Private at- torneys did a spectacular job for the states. They should be fully compensated. Taxpayers could learn about incentives from cor- porate America, which makes widespread use of result- based compensation. If Gingrich's salary were inverse- ly related to the size of the federal budget, we might see some serious deficit cutting. 74 ABA JOURNAL / SEPTEMBER 1997 ARAI/PETER 5ILVA

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