$30,000 an Hour
Review and Outlook
Copyright 2000 Wall Street Journal
July 5, 2000
That's the amount that Baltimore trial lawyer Peter Angelos is demanding
from the state of Maryland for handling its lawsuit against Big Tobacco. He
says his firm put in 34,000 hours on a contingency fee contract and that he
deserves 25% of the state's $4.6 billion share of the national tobacco
settlement. He certainly wins the prize for low overhead. His billing
records show that nearly a quarter of the billable hours were performed by
neophyte lawyers supplied by a temp agency who worked for $12 an hour.
Mr. Angelos isn't blushing at the fact that he plans to earn 2,500 times
more than his hired help. "It's a clear-cut contingency fee contract," he
told the Baltimore Sun, which had to sue for release of the billing
records. "You can count the hours till you're blue in the face, and it
doesn't change that fact."
Perhaps it does. Bar rules of professional conduct in nearly all states
require that even contingency fees must be "reasonable." In Maryland's
case, the national tobacco settlement established that legal fees would be
paid by the industry after being set by an arbitration panel. Mr. Angelos
balked, saying he didn't think the panel would provide him a fair payment.
Attorney General J. Joseph Curran is suing him to block payment of the full
contingency fee. A trial is scheduled for next year.
The state will be compensated with $3.2 million for the 17,000 hours it
spent on the case. That's an average rate of $188 an hour for lawyers who
often worked side by side with Mr. Angelos's temp service lawyers, who were
often so inexperienced they had to be closely supervised by the Attorney
General's staff. "It's an outrage for taxpayers to hire Mr. Angelos at
$30,000 an hour, especially since he's a huge contributor to the state's
dominant Democratic Party," says Michael Hotra of the American Tort Reform
Association.
Other states have seen similar scandals. Then Texas Attorney General Dan
Morales, a Democrat, awarded contracts to prosecute his state's tobacco
suit to five firms, which in turn had donated more than one third of the
money that Texas Democrats raised in the 1998 election. That same year the
five firms won $3.3 billion in legal fees from the tobacco lawsuit. A
separate contract for $520 million in fees allegedly signed by Mr. Morales
with a lawyer from his old firm was found by the current Attorney General
to have been "procured by fraud" due to back-dating and phony
signatures.
The contingency fee jackpot has even affected "good government" states
such as Wisconsin. There the three firms representing the state in tobacco
litigation reduced their fee request to $75 million from $847 million under
pressure. When their billing records were finally forced open by a media
lawsuit, they showed that one firm charged an entire billable hour ($2,853)
to read a newspaper article and others billed lavish travel and
transportation expenses.
One reason the trial lawyers have been so brazen in many states is their
fear that the good times may end with the election of a President who isn't
a co-dependent Democrat and a more tort-reform-minded Congress. Legislation
is being proposed to extend to large tort settlements the "excess benefit"
tax provisions that require pension, foundation and charitable executives
to refund clearly unreasonable compensation. "Lawyers share with those
executives a fiduciary duty to their clients and a requirement that
compensation be reasonable," says Michael Horowitz of the Hudson
Institute.
Maybe the Angelos case would be mitigated some if he could point to some
social benefit from his take. But Mr. Angelos was just in the news for
grandiosely announcing that his Baltimore Orioles would never hire
defecting Cuban baseball players. This from the owner of one of the highest
payrolls in baseball for a team that's in the dumpster. That alone should
have the state's citizens up in arms over billing them $30,000 an hour.
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