THE NEW BILLIONAIRES
Top officers of Trial Lawyers, Inc. haul in sky-high fees for little work.
Once upon a time, the average person blanched at lawyer fees that reached upward of $500 an hour at many of the best firms. But those high hourly fees are chump change compared with what Trial Lawyers, Inc. is raking in these days. From tobacco settlements to asbes-to class action suits, the industry now boasts fees that can range as high as an astounding $30,000 an hour, turning some members of Trial Lawyers, Inc. into overnight billionaires and providing the capital to bankroll new lawsuit ventures in new markets.
The Tobacco Settlements
Regardless of one’s view about the merits of the suits, the mega-fees from the 1998 tobacco settlement were nothing but egregious. Some 300 lawyers from 86 firms will pocket as much as $30 billion over the next 25 years even though, for many of them, the suits posed minimal risk and demanded little effort. That staggering sum comes right out of taxpayers’ pockets—enough money to hire 750,000 teachers. When it comes to big corporations ripping off the public, no one holds a candle to Trial Lawyers, Inc.
More than $8 billion will go to a handful of firms that pioneered the first tobacco lawsuits in Mississippi, Florida, and Texas.27 The Florida teams will take home $3.4 billion, or $233 million per lawyer. That’s $7,716 an hour—assuming they each worked 24 hours a day, seven days a week for three and a half years.
The branch of Trial Lawyers, Inc. hired by the state of Illinois to handle the tobacco settlement took no depositions and never submitted a reckoning of their hours, but pocketed $121 million—and complained it should have gotten $400 million. Ohio and Michigan also signed on late in the game—af-ter the heavy lifting had already been done—but their lawsuit industry sections still got $265 million and $450 million, respectively.
Trial lawyers are now hauling in fees that can range as high as an astounding $30,000 an hour, turning some plaintiffs’ attorneys into overnight billionaires.
The Michigan award alone amounted to $22,500 an hour for the Pascagoula, Mississippi, firm of Richard “Dickie” Scruggs and for Ness Motley, the Charleston, South Carolina, firm that was headed by prominent trial attorney Ron Motley. Motley, in many ways the “founder” of Trial Lawyers, Inc., helped get the asbestos litigation industry rolling in the 70s. Motley has now moved on to other prey, including lead-paint manufacturers, from whom he hopes to extract more huge sums, along with contingency fees for Trial Lawyers, Inc.
The Scruggs firm will collect $1.4 billion in the tobacco settlement. Scruggs, who might be called the president of the tobacco branch of the lawsuit industry, is now gunning for HMOs.
A TEXAS-SIZE FRAUD
In July, former Texas attorney general Dan Morales pled guilty to two of 12 counts for which he had been indicted in connection with the Texas suits he filed against the tobacco industry. Morales was ac-cused of trying to funnel hundreds of millions of dollars from the Texas tobacco settlement to a friend and converting campaign contribu-tions to personal use. Morales’s case demonstrates the grave danger when government officials sub-contract out the state’s judicial authority to private litigators in Trial Lawyers, Inc.
Baltimore trial lawyer Peter Angelos, who along with Motley and Fred Baron was an asbestos-suit pioneer, claimed a disputed $1.1 billion in tobacco fees, or one quarter of Maryland’s entire award. Angelos is now suing cell-phone makers (so far unsuccessfully) in addition to passing his time as owner of the Baltimore Orioles.
While Trial Lawyers, Inc. makes a fortune from its suits—Scruggs and other top officers are known to fly around in their private jets—its customers are often left with crumbs. For example, in one Florida class action, lawyers for flight attendants suing the airlines for health problems resulting from secondhand smoke pocketed $49 million of the $349 million settlement. The flight attendants who brought the suit got nothing unless they filed individual suits and demonstrated that secondhand smoke actually made them sick.
Class members in a lawsuit against Toshiba for defective laptop computers did little better, collecting between $100 and $443 in cash and coupons. The take for Trial Lawyers, Inc.: $148 million.
For the lawsuit industry as a whole, less than half of all dollars actually go to plaintiffs, and less than a quarter of all dollars actually go to compensate plaintiffs’ economic damages. As the above examples indicate, in mass tort and class action claims, plaintiffs’ awards are typically di-vided among so many individuals that the only people who meaningfully profit are the plaintiffs’ lawyers themselves. And in capturing 19% of a $200 billion pie, Trial Lawyers, Inc. does handsomely indeed.
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25. See Editorial, $30,000 an Hour, WALL ST. J., July 5, 2000, at A22 (reporting Baltimore attorney Peter Angelos’s attempt to obtain 25% of Maryland’s $4.6 billion tobacco settlement for 34,000 hours of legal work); Symposium, Excessive Legal Fees: Protecting Unsophisticated Consumers, Class Action Mem-bers, and Taxpayers, No. 3 MANHATTAN INST. CONF. SERIES 65 (Manhattan Inst. Center for Legal Pol’y) [hereinafter “Excessive Legal Fees”], available at http://www.manhattan-institute.org/html/mics3a.htm.
26. See Robert A. Levy, The Great Tobacco Robbery: Lawyers Grab Billions, Mar. 6, 1999 (citing Robert A. Levy, The Great Tobacco Robbery, LEGAL TIMES, Feb. 1, 1999, at 27), http://www.cato.org/dailys/03-06-99.html.
27. See id.
28. See id.
29. See id.
30. See Walter Olson, Puff, the Magic Settlement, REASONONLINE, Jan. 2000, http://reason.com/0001/co.wo.reasonable.shtml (citing observations by tobacco fee arbitration panel).
31. See Susan Beck, Trophy Fees, AM. LAW., Dec. 2, 2002, available at http://www.nylawyer.com/news/02/12/120202i.html.
33. See Stuart Taylor Jr., Perverting the Legal System: The Lead-Paint Rip-Off, NAT’L L.J., Feb. 19, 2003, available at ATLANTIC ONLINE, http://www.theatlantic.com/politics/nj/taylor2003-02-19.htm.
34. See And the Winners Are…, N.Y. LAW., Dec. 2, 2002, available at http://www.nylawyer.com/news/02/12/120202j.html.
35. See CBS Evening News: HMOs Face Racketeering Lawsuits (CBS television broadcast, July 1, 2002), available at http://www.cbsnews.com/stories/2002/07/01/eveningnews/main513904.shtml.
36. See $30,000 an Hour, supra note 25.
37. See Steven Malloy, Cell Phone Suit Gets Bad Reception, FOX NEWS, Oct. 4, 2002, available at http://www.foxnews.com/story/0,2933,64790,00.html.
38. See 60 Minutes II: The HMO War (CBS Television broadcast, Mar. 13, 2000), available at http://www.cbsnews.com/stories/2000/02/29/60II/main166310.shtml.
39. Cf. Florida Appeals Court Affirms Settlement of Broin Class Action, Vol. 14, No. 9, ANDREWS TOBACCO INDUSTRY LITIG. REP. 7 (Apr. 9, 1999), at 17; Broin v. Philip Morris Cos., 641 So. 2d 888 (Fla. Dist. Ct. App. 1994), rev. denied, 654 So. 2d 919 (Fla. 1995).
40. See Andy Pasztor and Peter Landers, Toshiba to Pay $2B Settlement on Lap-tops, WALL ST. J. ONLINE, Oct. 31, 1999, available at http://zdnet.com.com/2100-11-516294.html; Press Release, Toshiba Reaches Settlement of U.S. Law-suit Regarding Floppy Disk Controllers in Notebook PCs (Oct. 29, 1999).
41. See TILLINGHAST-TOWERS PERRIN REPORT (2003), supra note 1, at 17, 19.
42. See Pete Slover, Morales’ Plea May Help Friend’s Fraud Case, Attorney Says, DALLAS MORNING NEWS, July 19, 2003, available at http://www.dallasnews.com/sharedcontent/dallas/tsw/stories/071903dntexmorales.55d96.html.
43. See John Moritz, Dan Morales Indicted in Tobacco Case, STAR-TELEGRAM, Mar. 6, 2003, available at http://www.dfw.com/mld/dfw/news/state/5333435.htm; see also Associated Press, Former Attorney General Dan Morales Indicted on Fraud Charges, AP WIRES, Mar. 7, 2003.
44. See generally WALTER K. OLSON, THE RULE OF LAWYERS 30-45 (2003).