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Texas’ right to pick a forum for its litigation is the issue before a panel of the 5th U.S. Circuit Court of Appeals, which heard arguments on June 4 in a dispute between Texas Attorney General John Cornyn and the plaintiffs’ lawyers known as the Tobacco Five. Cornyn wants a state judge to decide if he has the right, under Rule 202 of the Texas Rules of Civil Procedure, to depose the five lawyers. He is collecting information to use in deciding whether to file a breach-of-fiduciary-duty suit against the private lawyers for allegedly mishandling the state’s tobacco litigation, which would put their fees at risk. At stake are $3.3 billion in attorneys’ fees the tobacco companies are paying the lawyers. But Michael Tigar, a former University of Texas School of Law professor representing the five plaintiffs’ lawyers, told the three-judge panel on June 4 that Texas gave up its 11th Amendment right to litigate tobacco-related matters in state court when it filed the suit against Big Tobacco in federal court. “Texas embraced the federal forum,” Tigar, of the Tigar Law Firm in Washington, D.C., said. Tigar represents John O’Quinn, Wayne Reaud, Walter Umphrey, John Eddie Williams and Harold Nix in the dispute with Cornyn, who has been investigating the tobacco lawyers since shortly after he took office in January 1999. Cornyn’s predecessor, Dan Morales, hired the plaintiffs’ lawyers to sue the tobacco companies for the state. But Texas Solicitor General Gregory Coleman, representing the state of Texas at the arguments, told the judges that the Rule 202 suit, which allows pre-suit discovery, should go back to state court. He says the 11th Amendment gives Texas the right to have a state judge decide the discovery issues under provisions of Rule 202, an obscure procedural rule that grants a court broad authority to investigate a potential suit or claim. Coleman disagrees with an August 2000 ruling by U.S. District Judge David Folsom of Texarkana denying the state’s request to remand the Rule 202 suit to state court. “There was absolutely no jurisdictional basis for removing it,” Coleman told Circuit Judges E. Grady Jolly, Will Garwood and Harold R. DeMoss during arguments in New Orleans. Cornyn filed the Rule 202 action in April 2000, seeking a court order to depose the tobacco lawyers. But they removed the suit to federal court, and in August, Folsom denied Cornyn’s motion to remand. Folsom, who has presided over all aspects of the tobacco litigation, found his court is the proper forum to address the alleged misconduct of the private counsel. In that ruling, Folsom said Texas waived its sovereign immunity by filing the tobacco litigation in federal court. Also, he found he can exercise jurisdiction over the state court proceeding under the All Writs Act, which a judge can use to prevent frustration of its orders. Cornyn wants the 5th Circuit to overturn Folsom’s order. ALL WRITS ACT APPLICABLE? Judge Jolly suggested the only way to resolve the appeal is to decide if the Rule 202 suit is tied to the underlying tobacco case. If it’s tied to the case, he said, that would make the 11th Amendment inapplicable. Jolly also said the court needs to decide if the All Writs Act is applicable. Coleman said the All Writs Act shouldn’t be used because no writ was issued. He also suggested that even if the state brings a breach-of-fiduciary-duty suit against the tobacco lawyers � and wins it � it wouldn’t put the tobacco settlement at risk because Folsom severed the fee issue from the underlying suit. He said nothing the state seeks in the discovery action would call into question any of Folsom’s orders in the underlying tobacco litigation, which was settled in January 1998 for $17.3 billion. It became final in June 1998. The tobacco lawyers signed a contingent-fee contract with the state entitling them to 15 percent of the state’s recovery, or roughly $2.3 billion. But in 1999 they renounced their rights in the contract, opting instead for a $3.3 billion fee awarded by an arbitration panel in December 1998. The possibility Cornyn would lodge a breach-of-fiduciary-duty suit against the tobacco lawyers is threatening in the wake of the Texas Supreme Court’s decision in 1999 upholding Arce v. Burrow, which calls for lawyers to forfeit some or all of their fees for a breach of fiduciary duty. Tigar told the judges there’s no way to separate fee issues from the underlying tobacco litigation. He said he’s not questioning the right of the state, or Folsom, to investigate the lawyers’ behavior, but asserts it’s a matter for Folsom to oversee. “If we did anything wrong that’s come to light … we have no question Judge Folsom can investigate until the end of time,” he said. Jolly asked Tigar whether the Rule 202 suit would undermine the federal proceedings. “It’s a frontal attack on that final judgment,” Tigar answered. But Coleman said Folsom’s order enjoining anyone from interfering with his judgment in the tobacco suit doesn’t specifically address a fee dispute. He said there are countless cases on record in Texas involving a federal court judgment and a subsequent legal malpractice suit filed in state court. “It doesn’t say if [there's] a malpractice action, you have to come back here [to Folsom's court],” Coleman noted.

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