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 hen
Congress was debating a comprehensive, lawsuit-settling tobacco
bill in 1998, Republicans proposed an
amendment
to cap the anti-tobacco lawyers' fees at $2,000 an hour. Washington
Post columnist Richard Cohen wrote a tough piece on how the
Republicans had abandoned their usual principles—hostility to price
controls and belief in the free market and the sanctity of contracts—in
order to stick it to the lawyers. If Cohen wants to revisit this
topic, he now has an even better example of apparent hypocrisy:
President Bush is proposing a 200 percent tax on most of
those fees.
But Cohen was wrong and Bush is right. The first thing to understand
when thinking about the tobacco lawyers' fees is that they are not
analogous to market prices. They're more like ransom payments. Lawsuits
are not free-market exchanges. The license to practice law is a
deputized governmental power. That's why the law of every state
mandates that any retainer agreement that lists a fee follows it
up with the phrase "unless it violates fiduciary standards by being
excessive."
It is reasonable for lawyers to demand high fees when they take
risks. But it is not reasonable to pay them $200,000 an hour. Especially
when, as in Maryland and Florida, the risks were eliminated by state
legislatures that, acting at the lawyers' behest, passed laws to
nullify the tobacco companies' legal defenses. Or when the fees
were for copycat suits that were clearly going to win.
The anti-tobacco lawyers were well aware that their fees raised
ethical concerns. So they sought rather brazenly to prevent any
ethical scrutiny of their fee arrangements. They wanted to set up
arbitration panels on their fees with the
| “If
Bush really presses for this policy, he has a very good
chance of prevailing.” |
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defendants
— even though the tobacco companies had no particular interest
in how much of the money they were paying out was going to the lawyers
and how much to the state governments. The lawyers' clients, in
other words, were to have no say in the matter.
But as Michael Horowitz pointed out in the latest Weekly Standard,
an obscure line in Bush's budget proposal may upset the lawyers'
plans. The line appears on page 80: "The budget also assumes additional
public health resources for the states from the President's proposal
to extend fiduciary responsibilities to the representatives of States
in tobacco lawsuits." What this means is that Bush is prepared to
apply to the lawyers the same rule that applies to pension-fund
trustees and foundation executives: If their fees are so high as
to violate fiduciary duties, they have to either give back the excess
or pay $2 in tax for every excess dollar they get.
Mitch Daniels, head of Bush's budget office, pushed for this provision.
It is quite clever, because it sets up a fight in which Democrats
will have to choose between giving the lawyers the money and giving
the money to the sick ex-smokers for whom they have claimed to labor.
If Bush really presses for this policy, he has a very good chance
of prevailing. And the poor anti-tobacco lawyers will have to settle
for $3,000 an hour.
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