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• $1.3 Billion Tobacco Attorney Fee Overturned 

A nearly $1.3 billion attorney fee award -- the largest issued out of the 1998 nationwide settlement of state litigation against the tobacco industry -- was overturned Wednesday by Manhattan Supreme Court Justice Nicholas Figueroa.

Figueroa set aside a 2-1 arbitration decision awarding about $1.3 billion to the lawyers who handled a private attorney general's action in California. In his ruling, Figueroa found the arbitrators had exceeded the scope of their authority in compensating the 56-firm consortium for work it performed nationwide, instead of restricting its award to work "in connection with" the California litigation. . .

David N. Ellenhorn of New York-based Solomon, Zauderer, Ellenhorn, Frischer & Sharp, who represented the law firm consortium, said Figueroa's ruling in Brown & Williamson v. Chesley, 117050/01, will be appealed. Ellenhorn said the consortium, known as the Castano group, which brought claims on behalf of California, had played an "integral" part in producing that state's $25 billion share of the national settlement.

Without the work the group did in bringing a national class action and private attorney general actions in 25 states, Ellenhorn said, there would not have been a national settlement, or one in California, of such a large dimension. . .

Jeffrey E. Stone of McDermott, Will & Emery's Chicago office, who brought the challenge to the fee award on behalf of the tobacco industry, sharply disputed that description of the Castano group's contribution. The attorney general's office in California pursued its own separate action with its own staff, financed by a special $14 million appropriation to fund an in-house tobacco litigation unit, he said. . .

The dispute over the fees in the underlying California case, Ellis v. R.J. Reynolds Tobacco Co., came before Justice Figueroa because the fee arbitration was held in New York City for five days in the winter of 2001. . .

In overturning the award to the Castano group, Justice Figueroa looked to a restriction on the fees that could be awarded to lawyers involved in the tobacco litigation that was common to all the arbitrations. Under the 1998 master settlement, compensation for legal work was restricted to work performed "in connection with" the state litigation a firm had been retained to handle. The agreement specifically excludes the payment of "any Fee Award in connection with any litigation" other than the lawsuit a firm had been hired to litigate.

The "plain meaning" of that limitation, Figueroa wrote, was "ignored by the arbitrators' adjudication of an unsubmitted issue: respondents' nationwide compensation."

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