Tobacco Wars' Huge Legal Fees Ignite New Fight
Litigation: Longtime anti-smoking activist is suing two
top lawyers for the states, saying they reneged on a deal to pay him a share.

May 20, 2001

                                           By MYRON LEVIN, Times Staff Writer

                                                A key architect of the legal war on Big Tobacco has gone to
                                           court against two of the country's richest and best-known plaintiff
                                           lawyers, claiming they reneged on a pledge to cut him in on a
                                           fortune in legal fees.
                                                Richard Daynard, a Massachusetts law professor and a driving
                                           force behind the tobacco litigation, filed his claim in federal court
                                           in Boston against attorneys Ronald Motley and Richard Scruggs,
                                           whose law firms are to receive as much as $3 billion in fees from
                                           settlements of state lawsuits against tobacco firms.
                                                Daynard contends that Scruggs and Motley have refused to
                                           honor a handshake deal made in 1996 to pay him 5% of any fees
                                           they might collect for handling the anti-tobacco claims of state
                                           attorneys general.
                                                Those lawsuits wound up being settled in 1997 and 1998 for
                                           $246 billion, to be paid to the states over 25 years. Cigarette
                                           makers also are on the hook for about $12 billion in legal fees to
                                           lawyers for the states, under the arbitration awards and fee
                                           agreements concluded so far.
                                                Because the fee awards for some states still are being
                                           determined, the total owed the lawyers will rise.
                                                The Scruggs and Motley firms--Scruggs, Millette, Bozeman &
                                           Dent of Pascagoula, Miss., and Ness, Motley, Loadholt,
                                           Richardson & Poole of South Carolina were key members of the
                                           legal teams of some 30 states and are expected to get about 25%
                                           of the fees, Scruggs said in an interview.
                                                Scruggs and Motley made "a binding agreement" to cut him in
                                           on the fees but "want to keep it all," Daynard said last week.
                                                Scruggs said Daynard has "essentially created from whole
                                           cloth" his claim that there was an agreement. He said he and
                                           Motley owe Daynard nothing.
                                                The dispute comes as business groups, such as the U.S.
                                           Chamber of Commerce, are denouncing the fees as an emblem of
                                           legal excess, in hopes of pushing Congress and the Bush
                                           administration to rein in consumer litigation.
                                                Moreover, the stature of the adversaries and the amounts at
                                           stake make the case more than the routine nasty fee fight.
                                                Motley, Scruggs and Daynard are central figures in the legal
                                           war over tobacco, the most complex and costly in the history of
                                           U.S. civil litigation. All three are featured prominently in recent
                                           books on the smoking wars. And Motley and Scruggs are
                                           portrayed by Hollywood actors in "The Insider," the movie about
                                           tobacco whistle-blower Jeffrey Wigand and CBS' "60 Minutes."
                                                Motley, 56, who made a fortune in asbestos litigation before
                                           turning to tobacco, is a renowned trial attorney and master of
                                           courtroom invective. The owner of a 156-foot yacht, he was
                                           featured this month on the cover of Forbes magazine in
                                           connection with the pursuit of his latest target, the lead paint
                                                Scruggs, 55, a University of Mississippi law school chum of
                                           Mississippi Atty. Gen. Mike Moore, was Moore's top advisor
                                           and strategist in 1994 when he filed the first state lawsuit against
                                           the tobacco industry. Scruggs used his private jet to airlift to
                                           Congress thousands of pages of Brown & Williamson Tobacco
                                           Corp. documents that had been stolen by Merrell Williams, a
                                           former paralegal for a law firm representing the company.
                                                He and Moore also barnstormed the country, persuading other
                                           attorneys general to sue the industry. Along the way, Scruggs and
                                           Motley picked up retainer agreements to represent most of the
                                                Daynard, 57, is a law professor at Northeastern University in
                                           Boston and a longtime anti-smoking activist. In 1984, he
                                           co-founded the Tobacco Products Liability Project, a group
                                           dedicated to the idea that the best way to reduce the harm from
                                           smoking was to bury the industry in lawsuits, forcing it to reform
                                           its marketing practices and to raise cigarette prices, discouraging
                                                Over the years, his group has served as a clearinghouse and
                                           cheerleader for lawyers suing the industry.
                                                In his role as intellectual godfather of tobacco litigation,
                                           Daynard has been quoted in newsarticles hundreds of
                                           times--though always as a public health advocate, never as a
                                           private litigator.
                                                In an interview last week, Daynard said that through his
                                           involvement in the tobacco case filed by Massachusetts, he was
                                           receiving fees in the six figures.
                                                His lawsuit accuses Scruggs and Motley of breach of contract
                                           and deceptive business practices. He filed it in late December, but
                                           none of the parties spoke publicly about the case, and it
                                           apparently has gone unnoticed.
                                                Daynard says lawyers from Ness Motley first sought his help
                                           in 1993 and that he brought them up to speed on the history and
                                           legal theories of tobacco litigation.
                                                According to the suit, Daynard also provided entree to
                                           tobacco control experts and potential witnesses, shared extensive
                                           documentation on tobacco litigation and assisted in drafting and
                                           editing court papers.
                                                After receiving "nominal compensation" for his services in
                                           1994, Daynard said, he was told he would thereafter be a
                                           member of the legal team.
                                                In 1996, as other states were joining Mississippi in the
                                           anti-tobacco battle, Daynard met with Scruggs to discuss their
                                           financial arrangement.
                                                The discussion took place in August in Chicago, where some
                                           of the attorneys general and their lawyers had gathered for the
                                           Democratic National Convention.
                                                According to the lawsuit, Scruggs stated that in return for his
                                           past and continuing assistance, Daynard would get 5% of any fees
                                           ultimately recovered by the Scruggs and Motley firms. "Daynard
                                           agreed to the 5% figure," and he and Scruggs "shook hands on
                                           the agreement," the complaint states.
                                                It asserts that the next year, Daynard gave back about
                                           $15,000 of his university salary to assure his teaching obligations
                                           would be met when he served as co-counsel in the Mississippi
                                           case, which wound up being settled just before trial during the
                                           summer of 1997.
                                                The suit contends that Scruggs and Motley have used as a
                                           pretext for not paying Daynard his refusal to support federal
                                           legislation, backed by most of the states, that would have given
                                           tobacco companies liability protections as part of a settlement
                                           proposal that ultimately died.
                                                Indeed, Daynard became a vocal critic of the June 1997
                                           proposal that would have traded $368 billion in industry payments
                                           for reduced exposure to future suits, including a ban on punitive
                                                Daynard attacked this feature of the deal, arguing that without
                                           the threat of punitive damages, there would be no way to deter
                                           future misconduct by the industry.
                                                The proposed legal protections and other provisions required
                                           legislation, which Congress failed to pass. In November 1998, the
                                           states and tobacco companies finalized a narrower deal that did
                                           not need blessing by Congress.
                                                In court papers and interviews, Scruggs and Motley said
                                           Daynard has exaggerated the importance of his help.
                                                They said they never agreed to share fees. And they said that if
                                           Daynard had indeed been a member of their legal team, his
                                           attacks on a settlement proposal favored by their clients, the
                                           states, would have been a serious ethical lapse.
                                                According to Scruggs, who has filed a motion to dismiss the
                                           case, Daynard is "a bit more mercenary than people think he is."
                                                "He's greedy," Motley said, adding that Daynard's claim "that
                                           he had something monumental in the state lawsuits] is stupefying."
                                                "They really said that?" Daynard asked with a laugh when told
                                           of the remarks.
                                                For "two guys who have each made a billion dollars on three
                                           or four years' work to accuse me of being mercenary when I
                                           simply want them to honor their agreement . . . I'm speechless," he