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August 1, 2003

N.Y. Appellate Court Disses and Dismisses Judge Ramos’ Try to Trim Tobacco Fees

Filed under: pre-06-2006 — David Giacalone @ 2:33 am

For over a year, Judge Charles E. Ramos had sought to review the $625 million in fees awarded to six law firms that had represented the State in a tobacco lawsuit, which netted a $25 billion settlement for New York.   His campaign ended yesterday (July 31, 2003), as Ramos was overwhelmingly defeated before the 1st Department Appellate Division Court.  In an article for the New York Law Journal, captioned N.Y. Panel Rejects Review Of Tobacco Fee Award  (posted on, Aug. 1. 2003), reporter Daniel Wise aptly sums up Ramos’ drastic defeat:

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 . . . (emphases added)

Wise further explained the Court reasoning:

“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.” . (emphases added)

In addition, Wise writes that Justice Richard T. Andrias, who wrote the Court’s opinion, “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.

In sum, Ramos had no authority to review the “reasonableness” of the fees (in effect, reversing the appellate court’s review), or to appoint independent counsel, and he misunderstood the relatively modest percentage size of the fee awards.  The $13,000 per hour figure was simply not excessive, as the percentage rate applied to the damages award was not excessive.

We posted on this matter on May 30, 2003, asking whether a fee is ever too large. Apparently, an effective rate of $13,000 per hour isn’t, when it’s the result of a calculus that seems reasonable. Getting 2%, instead of the 4% allowed in the retainer agreement, is acceptable, despite the size of the multiplicand or the resulting hourly rate. Ramos’ appointed independent counsel said he would be seeking review at the Court of Appeals, despite great uncertainty over how or if he’ll be paid.

This result is disappointing, but the case contains a lot of special factors that are unlikely to arise frequently in the arena of highstakes contingency fees.  We can, therefore, still hope that other judges will take a hard look at large fee awards and perhaps help craft a principle that can reign in contingency fee awards that amount to many many thousands of dollars per hour and  — because of the enormous total —  cannot be justified by the risk taken by the lawyers.

Supplement: The Albany (NY) Times Union covered the story this morning, and has a number of interesting quotes and observations. (Court cuts short scrutiny of fees in tobacco suit Albany — Justice sought recalculation of $625M paid to lawyers hired by state, by Andrew Tilghman, Aug. !, 2003)

Here are excerpts from the article (emphases added):

The move reverses the judge’s order that the fees be recalculated and some of the fees paid by the tobacco companies be taken from the lawyers and given to New York state.

State Attorney General Elliot Spitzer had fought the judge’s effort, arguing that it would threaten the entire $25 billion Master Settlement Agreement, or MSA, reached in 1998 between New York and the tobacco industry, one that the state has depended on to help balance the budget. “We did not want the judge’s well-intentioned actions to jeopardize the MSA in any way,” Darren Dopp, a spokesman for Spitzer’s office, said on Thursday after the ruling.

But other observers said Ramos had no intention of altering the master agreement and that the entire case, along with the appellate court’s decision, illustrates the power of big money in the legal system.

“I wouldn’t categorize it as a surprise because you expect the court to follow the money,” said Cardozo School of Law professor Lester Brickman, who teaches the country’s only seminar on the ethics of legal fees.

Brickman said he was disappointed that nobody on the four-judge panel dissented. “I might have hoped that one of the four judges might have expressed some concern about the total lack of application of the ethical rules to these absolutely gargantuan and unearned fees,” he said.

P.S.  Last night and late this morning, I searched the New York Times web site to see if this important newspaper covered this important case.  Once again, I got no search results, as happened back in June.  I just don’t understand.

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