A recent ruling by the Texas Supreme Court has made the claims by five lawyers in the Texas tobacco case even more tenuous.
On July 1, the Supreme Court reaffirmed the long recognized rule that a person who renders a service to another may be denied compensation if he breaches the trust inherent in that relationship. The court was addressing the case of Burrow v. Arce, where 49 workers sued the attorneys who represented them in a personal injury lawsuit against a chemical company. The facts were strikingly similar to the issues pending in the tobacco case, putting Attorney General John Cornyn on even firmer ground to launch an investigation of the actions of the trial lawyers.
The question is whether the five private attorneys who settled the states suit against the tobacco industry in January, 1998 breached their fiduciary duty to the taxpayers of Texas in order to cut a lucrative deal for themselves.
Who were the attorneys representing, themselves or the taxpayers of the state? If the answer is the former, the attorneys violated their fiduciary duty and are not entitled to the compensation they have demanded. If the attorneys acted properly, why are they attempting to stop General Cornyn from investigating their deal?
The Texas Association of Business and Chambers of Commerce, which represents 140,000 businesses and employers statewide, applauds General Cornyns handling of the case. We stand firmly behind him. He has asked the tough questions and he has stood his ground.
Federal prosecutors are reportedly looking into other aspects of the tobacco settlement. We urge General Cornyn to additionally investigate whether the attorneys breached their fiduciary duty and, if so, determine if some of the remuneration they are seeking should be forfeited to the state.
At the very least, the attorneys should be required to stand by their commitment to not look to the states coffers for their compensation. Twenty months ago, shock waves reverberated throughout the state when taxpayers learned that the private lawyers, representing the state, were demanding $2.3 billion in fees. This, despite the fact the case was settled without ever going to trial.
Taxpayers were assured that the compensation would come from the defendants and not the state. Taxpayers would not be liable for a single dime, we were told. The five attorneys made that commitment over and over again, but they have since changed their tune and are reneging on their word.
In August, the attorneys stood in a federal courtroom in Texarkana and tried to cut a deal with General Cornyn. The attorneys said they would not hold the state responsible for their fees if General Cornyn agreed to drop his proposed investigation into possible fiduciary breaches. The threat were even more distasteful, coming on the heels of a $3.3 billion arbitration ruling. The $3.3 billion fee award was $1 billion more than the already outrageous 15 percent contingency fee they had demanded.
General Cornyn was right to reject their deal. Cornyns next step should be to vigorously investigate the actions of the attorneys.
The five attorneys cannot be allowed to continue holding up the citizens of this state. Texans deserve to know the whole story of the tobacco pact and the Texas Supreme Court has made that task a little easier.
Hammond is president of the Texas Association of Business & Chambers of Commerce.