$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.