If the cigarette bill were truthfully labeled, it would be called “The National Tobacco Policy and Lawyer Enrichment Act.” It’s welfare for lawyers: a brazen model of social injustice. We assess poor and moderate-income people (smokers) to reward a few wealthy lawyers–many of them multimillionaires and some potential billionaires. We launder the process by having the tobacco companies collect the money (through higher prices) and “pay” the lawyers. Because tobacco companies are seen as more vile than trial lawyers, this makes the whole process seem respectable.
The sums are immense. In Florida, the attorneys hired by the state to sue the industry claim fees equal to 25 percent of the $11.3 billion settlement; that’s $2.8 billion over 25 years. In Texas, it’s 15 percent of a $15.3 billion settlement, or $2.3 billion over 25 years. In Minnesota, the fees seem more modest, $441 million or 7.2 percent of a $6.1 billion settlement. But because it is to be paid by 2000–and not over 25 years–the comparable value is higher.
The hourly rates strain belief. Lester Brickman of the Cardozo School of Law, an expert in fees, estimates that the Texas lawyers spent at most 25,000 hours on their case, which never went to trial. A $2.3 billion settlement values their time at $92,000 an hour.
Under the Senate tobacco bill, states would receive about $206 billion over 25 years to compensate for smoking’s alleged health costs. Lawyers’ fees on top of these payments would be set by arbitration if the lawyers and the states couldn’t agree. One way or another, Brickman, a witness for a challenge to the Texas fees, thinks that fees will average 15 percent of what states receive. This suggests fees of $31 billion.
Most of the money would go to a few lawyers. These men are mostly legal buccaneers, who relish the combat and covet huge fees.
But hold it, we’re not finished. Because the tobacco spoils would be spread among so few lawyers, other trial attorneys are outraged. They want their chance to sue. The Senate has removed any limit on new, individual or class action suits. Tobacco companies will have a hard time winning suits, predicts legal scholar Michael Horowitz of the Hudson Institute, because public opinion–so decisive in jury trials–has turned against them.
Lawyers’ contingency fees can run 30 percent to 40 percent of awards in typical damage cases. Assume that new tobacco awards total $7 billion annually; that’s $2.4 billion in fees (at a 35 percent average fee). As Horowitz says, only Congress can check this. One approach is to limit lawyers’ fees. An effort to do so in the Senate (to $250 an hour) failed. Brickman suggests $2,000 an hour–that’s roughly four times the highest reported rate the tobacco industry pays its lawyers. This is a pragmatic compromise: trial lawyers could get filthy rich; they could not become Bill Gates.
The better approach is to halt the serial lawsuits. It’s a massive shell game in which trial lawyers skim 30 percent to 40 percent of the take. Congress could end the suits with two steps.
First, curb the tobacco companies’ legal liability. Whatever the industry’s deceits, smoking’s hazards have long been public. Smokers knowingly assumed the risks. Congress could justifiably limit liability to smokers who started before 1966, when federal cigarette labeling began.
Second, recognize that the states’ suits aim to capture the federal cigarette tax. When Texas wins a “settlement,” the industry raises prices in all 50 states to pay. Congress ought to reclaim control of its tax by declaring that any state awards would be offset by dollar-for-dollar cuts in federal Medicaid payments (the health program allegedly affected). This would make the state suits–and their lawyers’ fees–pointless.
None of this would prevent Congress from enacting a tough anti-smoking policy. It could raise the cigarette tax as high as it wants. It could regulate tobacco. Preserving the “right” to sue won’t deter teen smoking. It merely sanctions a shakedown. The trial bar has hypnotized Congress and the president. This recalls a Kurt Vonnegut novel, in which a law professor (“Leech”) lectures his students.
” `In every big transaction,’ said Leech, `there is a magic moment, during which a man has surrendered a treasure, and during which the man who is due to receive it has not yet done so. An alert lawyer will make that moment his own. . . . If the man who is to receive the treasure is unused to wealth, . . . the lawyer can often take as much as half the bundle, and still receive the recipient’s blubbering thanks.’ “
No self-respecting political authority would enshrine this avarice as a principle of social policy. But the president and Congress are doing just that.
