Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The New York Appellate Division, 1st Department, on Thursday shut down Justice Charles E. Ramos’ sua sponte inquiry into a $625 million fee award to the six firms that represented New York state in a lawsuit against the tobacco industry that netted a $25 billion settlement. Though finding “laudable” Ramos’ concern that the fee award might be “excessive,” Justice Richard T. Andrias found him wrong, and in instances dead wrong, on every legal conclusion he had to reach in order to proceed with his inquiry. Even Ramos’ concern over the amount of the fees was based on a factual “misapprehension” and was reached by reviewing the fee award out of context, Andrias wrote for a unanimous panel in State of New York v. Philip Morris, 1360N. Andrias further suggested that Ramos had done the six firms an injustice by “hauling” them into court without any legal authority. The panel also reversed Ramos’ order appointing an independent counsel to defend his ruling on the appeal, leaving in doubt how the two appointed lawyers, Jack S. Hoffinger and Harvey Fishbein, would be compensated for their work. Hoffinger, who argued the appeal, said he would ask the New York Court of Appeals to review the case. The question of his own compensation, Hoffinger said, is “on the back burner.” But, he added, he would take whatever steps are “ethically required” under the order of appointment. One question that lingered with the reversal of the appointment order was whether the two lawyers would have any legal authority to pursue a leave application to the Court of Appeals. Ramos, who was assigned to the tobacco case after Justice Stephen G. Crane was appointed to the Appellate Division, 2nd Department, in March 2001, first signaled to the parties that he wanted to examine the propriety of the fee award in early March 2002. Crane had signed off on the $25 billion settlement three years earlier in December 1998. New York’s case, like that of 45 other states, had been resolved as part of a nationwide settlement between the tobacco industry and a coalition of states and local governments. Nationwide, the settlement required the tobacco industry to pay $208 billion to compensate 46 states and six territories for the costs of treating their own employees and Medicaid recipients for smoking-related ailments. The settlement had to be separately approved by courts in each state, like New York, where litigation was pending. The agreement also required the industry to undertake a number of public health initiatives, which in New York state alone are projected to save 90,000 lives. The nationwide settlement also set up a mechanism under which lawyers who had been retained by individual states could take their fee claims to arbitration when they could not come to an agreement with the industry on their fees. The six New York firms had sought between $1.25 billion and $1.75 billion for their work, but after a three-day hearing in December 2000, an arbitration panel awarded the firms $625 million. The fee award amounted to 2.5 percent of $25 billion slated to be paid to the state over the first 25 years of the settlement. Three New York state-based firms received a total of $281.1 million, with Schneider, Kleinick, Weitz & Damashek, and Sullivan Papain Block McGrath & Cannavo, both with offices in Manhattan, receiving $98.4 million each. The third New York firm, Albany-based Thuillez, Ford, Gold & Johnson, was awarded $84.3 million. The three national firms that were part of the New York team were awarded a total of $343.8 million. They were Ness, Motley, Loadhoalt, Richardson & Poole of Charleston, S.C.; the Scruggs Firm in Pascagoula, Miss.; and Hagens & Berman, a Seattle firm. Although the $625 million fee award was among the largest granted by the arbitration panel, on a percentage basis it was among the lowest. LACK OF CONTEXT In undertaking a review of the New York award on his own initiative, Ramos had focused on the large dollar amount without properly placing it in context, Andrias suggested. The award amounted to “approximately 2 percent” of New York’s recovery, he noted, while the firm’s retainer agreement with the state would have allowed for fees of 4 percent on any recovery pursuant to a settlement agreement. Andrias also faulted Ramos for laboring under the “misapprehension” that a reduction in legal fees could increase the state’s recovery. The nationwide settlement explicitly provided that “attorneys’ fees were to be separate and apart form the payments that tobacco companies would be making to the states,” Andrias wrote. Andrias, however, aimed some of his sharpest remarks at Ramos’ conclusion that he had the power to review the fee award based on two theories: because the case had been certified as a class action, and he had “inherent authority” to supervise attorneys appearing before him. Both the tobacco industry and the New York attorney general’s office, as well as the six retained firms, had opposed Ramos’ assertion of jurisdiction to review the fee award, both in Supreme Court and on appeal to the Appellate Division. Confronted with no party before him asserting that the review was proper, Ramos appointed the two independent counsel in January. To start with, Andrias pointed out, Ramos had no proceeding before him at the time he started his inquiry in March 2002, approximately three years after Crane had approved the settlement. By the terms of the settlement, Ramos’ jurisdiction was limited to implementing and enforcing the accord, Andrias wrote. Because Crane’s approval of the settlement had been affirmed by the 1st Department, Andrias noted that Ramos lacked the power “to, in effect, reverse this Court.” Andrias also called Ramos’ claim of inherent authority “internally inconsistent.” While denying that he was reviewing the award as excessive, Justice Ramos had claimed authority to review it for “reasonableness,” Andrias wrote. However, Andrias concluded, there would be “no need” to examine an award for “reasonableness” unless the court viewed it as “excessive.” Andrias also criticized Ramos for “foisting” independent counsel upon the class members, which consisted of the 57 counties and New York City. He described the class members as “sophisticated” litigants who have made it clear that they do not want independent counsel to represent their interests. Columbia Law School professor Samuel Issacharoff represented the three national firms retained by New York state in the tobacco litigation. Brian J. Shoot represented his own firm, Sullivan Papain Block McGrath & Cannavo. Steven L. Levitt, who has his own firm, represented Schneider Kleinick and Thuillez Ford. The state was represented by Assistant Solicitor General Sachin S. Pandya, and the tobacco industry by Derek J. Meyer of McDermott, Will & Emery. Hoffinger is a partner in Hoffinger, Stern & Ross, and Fishbein a partner at Gould Fishbein Reimer & Gottfried.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.