Angelos seeks fee 'insurance'; With millions at stake in tobacco suit, lawyer flirts with arbitration

THE BALTIMORE SUN

Orioles' owner Peter G. Angelos writes some hefty paychecks to his ballplayers. But his own payday for handling Maryland's tobacco lawsuit might make those millions look like pocket change.

All he wants, Angelos says, is a reasonable fee. But as the squabble over fees for tobacco lawyers has shown, in state after state, one lawyer's reasonable is another's outrageous.

If the Baltimore attorney insists on enforcing his contract for 25 percent of Maryland's tobacco settlement -- which some legal experts say he has a right to do -- his firm could collect $1.1 billion.

That comes to $22,000 an hour for each of the 50,000 hours the firm estimates its attorneys worked on the case. The money would come from the state's settlement.

If Angelos agreed to submit his fee to arbitration, his firm probably would get a lot less -- perhaps as little as $100 million, based on the experience of other states.

That's still $2,000 an hour, not too shabby by anybody's standards. And the fee would be paid by the tobacco industry rather than by the state.

Angelos is fending off a lawsuit filed by a New Jersey lawyer who consulted on the case and claims he was underpaid. Now Angelos says he is negotiating with Attorney General J. Joseph Curran Jr. over whether he'll try to collect his fee from the $4.4 billion Maryland is to receive over 25 years or risk going to arbitration.

When the settlement was announced in November, Angelos strongly suggested that he would take the arbitration route, saying, "Our goal is to make sure the tobacco industry pays our fee."

Curran commended him for that public-spirited stance and didn't remark on the caveat Angelos added at the time: "We don't relinquish any rights under our contract."

Today, that little caveat has ballooned into a legal and political wrangle that has stirred up legislators and could end up in court.

In an interview last week, Angelos would not reveal his position.

"When you have a contract approved by the [state] Board of Public Works to perform certain services, and you perform those services, you expect the contract to be honored," he said.

But in the next breath he added, "I've always been prepared to reduce that 25 percent to an amount that we and the state feel is reasonable."

Though he would not say so explicitly, it appears that Angelos is asking for an insurance policy, an agreement that the state would raise any award arbitrators made to a "reasonable" level.

What's reasonable? That's the billion-dollar question.

"I haven't seen anything like these fees in terms of size," said Daniel J. Capra, a law professor at Fordham University in New York. "But then there's never been litigation the size of the tobacco lawsuits."

Calculating hourly rates is irrelevant, he says, because the lawyers took a chance on losing and getting nothing at all. They gambled their own money -- Angelos says his firm has spent $10 million on out-of-pocket expenses -- and won, Capra said.

"If you ask a venture capitalist what do they make an hour, they'll say, 'On some deals I make $1 million an hour. And on some deals I make nothing,' " Capra said.

Of Angelos' stance, he said, "It seems to me he's doing more than he has to do. He would be perfectly within his rights to stand on his contract and ask for 25 percent."

Lester Brickman, a professor at the Benjamin N. Cardozo law school at Yeshiva University in New York, strongly disagreed.

Brickman said he helped draft a Senate bill that would have limited tobacco legal fees at the equivalent of $4,000 an hour, which he said might be justified by risk and effort in some cases.

But he said some of the lawyers sharing the $3.3 billion in legal fees awarded in Texas received $200,000 an hour for the time they actually worked.

"If the term 'excessive fee' has any meaning, then most of the fees paid in the tobacco cases are excessive," Brickman said.

Brickman expressed skepticism about the Angelos firm's estimate of 50,000 attorney-hours, which he described as resembling "ice cream containing a lot of air."

By May 1996, when Maryland filed suit, Brickman said, "it was clear there would be a payoff" because damning tobacco industry documents were out and settlement rumors were circulating.

"The risk Angelos undertook was minimal," he said.

What's more, Brickman said, Angelos has a "fiduciary duty" to place his client's financial interest before his own by accepting arbitration. By suggesting that he'll go to arbitration -- but then possibly return to the state for more money -- Angelos "is trying to have it both ways," Brickman said.

If legal experts differ so sharply over the appropriate legal fees, it might not be surprising that the arbitrators' fee awards in six other states have varied enormously, from $90 million for Hawaii's lawyers to $3.4 billion awarded to Florida's lawyers.

Some of the variation is explained by population, which determined the states' shares of the settlement. But risk and effort have also been a factor.

The lawyers representing Mississippi, which pioneered the national legal strategy and filed the first state lawsuit in 1994, received $1.43 billion, 35 percent of that relatively small state's award.

In Illinois, where the arbitration panel concluded that the lawyers did almost no work, they were awarded $121 million, 1.3 percent of Illinois' settlement.

Under most circumstances, $121 million would seem decent pay for what the arbitrators described as "very little actual litigation." But to contingency-fee lawyers who focus on percentages, it was a chilling result that might have encouraged Angelos to seek an insurance plan from Curran before heading into arbitration.

The fee for Angelos, a generous donor to Democrats, has become a partisan issue in Annapolis.

Senate President Thomas V. Mike Miller and House Speaker Casper R. Taylor Jr., both Democrats, have expressed a willingness to guarantee Angelos that the state would supplement whatever the arbitrators offered to make sure he got the equivalent of 12.5 percent of the state's award, or about $550 million.

That figure reflects General Assembly action last year -- which Angelos says was legally invalid -- that cut Angelos' 25 percent fee in half.

Some Republicans aren't so sure. At a meeting Tuesday night of key lawmakers considering next year's state budget, Sen. Robert R. Neall said he had strong concerns about Angelos' fee.

The Anne Arundel County Republican said the fee matter could become "pretty ugly" because Angelos might be able to block the state from spending the settlement money due to arrive next month. He said a taxpayer might sue to overturn any fee paid to Angelos out of state money and that a judge could reject the fee as unreasonable.

The full $4.4 billion "was intended for the state," Neall said. "The attorney general got us into this, and we have to find a way out."

Sun staff writer Thomas W. Waldron contributed to this article.

Pub Date: 10/15/99

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