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Three Maine Law Firms Paid $10M for Tobacco Litigation
By Earl Brechlin
Part 1 of 2
(click
here for part two)
ELLSWORTH—Three Maine law firms, retained by the state as outside
counsel to sue tobacco companies, were paid $10 million for their
role in securing more than $1.5 billion from the tobacco industry.
In June 1997,
Andrew Ketterer, then Maine’s attorney general, signed a contract
with James T. Kilbreth of Verrill and Dana in Portland; George Z.
Singal of Gross, Minsky, Mogul and Singal of Bangor; Terrance D.
Garmey of Smith, Elliott, Smith and Garmey of Portland; and Peter
J. DeTroy III of Norman, Hanson and DeTroy of Portland. The firms
were to serve as special attorneys “for the purpose of seeking
recovery and relief from third parties for damages arising from
the sale and/or distribution of cigarettes.”
Singal, now a
U.S. District Court judge, dropped out soon after and the case was
carried forward by the remaining three firms.
Under terms of
the original contract with the state, the outside attorneys were
to be paid on a sliding scale, depending on when the case was
settled. If no monetary recovery was secured by the lawyers, they
would not be paid unless state officials terminated the
appointment. In that event, the Maine attorney general would have
been directed to seek payment for the lawyers from the
legislature.
The contract
spelled out a specific payment schedule linked to the amount of
time the case continued. If a settlement was reached within six
months on a nationwide or multistate basis, or if the case was
settled by an act of Congress, the state would have been required
to pay expenses and reimburse the law firms at the rate of $150
per hour for partners and $120 per hour for associates. The total
amount was capped at no more than 13 percent of any recovery for
the state.
If the case
continued from six months to a year beyond the contract date, the
firms would have been paid expenses and the same hourly rate as
well as 5 percent of any recovery.
After a year,
the contract allowed for the attorneys to collect 13 percent of
the total recovery plus 50 percent of any incentive payments made
to the state for collection of money that might be owed to the
federal government.
In a May 1999
letter to then Speaker of the Maine House Steven Rowe, Attorney
General Ketterer said the contingency fee arrangement was “the
second most frugal arrangement of all the states” that sought the
services of outside counsel. Under that formula, the special
attorneys would have been eligible for $196 million based on the
initial recovery alone.
State
officials at the time estimated the costs at approximately
$250,000.
The agreement
also required the special attorneys to submit monthly statements
to the Maine attorney general detailing their work on the tobacco
case.
In July, a
formal Freedom of Information (FOI) request for those statements
was filed with the AG’s office. Despite repeated telephone calls,
and a resending of the original FOI request last month, no
documents have been produced.
According to
Deputy Attorney General Paul Stern, his department has been unable
to locate any statements. “I believe they existed at one time but
we can’t put our hands on them,” Stern said on Nov. 5.
A Master
Settlement Agreement (MSA) was completed between the tobacco
companies and 46 states and five U.S.
territories in November 1998. Under that agreement, the states and
territories share a $206 billion award. (Four other states settled
an earlier suit against the tobacco companies for $40 billion.)
The settlement
agreement established an initial pool of $8.6 billion, outside the
amount to be paid to the states, to cover outside attorney fees.
That $8.6 billion pool was to come directly from tobacco
manufacturers.
A special
panel was set up by the National Association of Attorneys General
to draft a fair disbursement strategy. The three Maine special
attorneys began negotiations with the association’s Strategic
Contribution Fund Allocation Committee under the MSA’s liquidated
fee arrangement. They also began initial arbitration proceedings
in the event the liquidated fee talks broke down.
In December
1999, Kilbreth wrote to Ketterer advising that the outside
attorneys had reached an agreement on fees and would file the
necessary paperwork to release Maine from any claims they might
make. There is no mention of an amount in those documents.
According to
National Association of Attorneys General officials, there is no
master list of fees paid from the contribution fund. Although
documents obtained under Maine’s Freedom of Access Law indicate AG
Ketterer reviewed the final fee agreement, officials presently in
the attorney general’s office said they apparently did not keep
any copies or, if they did, could not locate them.
A spokesman
for cigarette maker R.J Reynolds, however, confirmed that the
Maine attorneys received a total of $10 million.
Reached by
phone, DeTroy said, “the figure’s right. But I’m not going to
comment on how it breaks out.” Garmey did not respond to requests
for comment. Kilbreth, who also represented New Hampshire
as an outside attorney, declined to comment.
Attorney
George Schelling, acting as a spokesman for Gross, Minsky in
Bangor, said his firm did not share in the $10 million, which is
to be paid over four years.
Compared to
similar-sized states and the progress of the case, the fees
awarded to Maine special attorneys are average. Officials note
that outside attorneys in Vermont, which received $805 million in
the MSA, settled for $10 million, and attorneys in Washington
State, who had already spent 10 weeks trying their case in court,
ended up getting $93 million.
Mississippi
attorney Richard Scruggs, who helped design the initial lawsuits
and who served as national lead special counsel for 16 other
states, collected a reported $1.2 billion for his firm’s efforts.
Negotiations
to settle some of the outside fee demands continue. A total in
excess of $11 billion has been paid to date.
Next week:
More and more tobacco-settlement money drifts into Maine’s General
Fund. |
