Dan Morales & Marc Murr
Have Some Explaining to Do

By John R. Butler, Jr.
Of all the suspicious dealings associated with the Texas tobacco lawsuit, perhaps none is so blatant as Houston attorney Marc Murr's claim for $260 million out of the Texas tobacco settlement. It is little wonder that Texas Attorney General John Cornyn has recently asked a federal judge to dismiss this claim. It should be dismissed.

Murr, a close friend and former associate of former Attorney General Dan Morales, claims he was an important part of the case. His good friend Dan Morales agrees. But almost no one else in the country agrees with that assessment.

Marc Murr's claim is based on a series of four "contracts" with the state -- all signed by Murr's friend Morales. The first such contract was signed in secret in October 1996. Murr and Morales later changed their contract three separate times in an ongoing manipulation to get Murr the maximum imaginable legal fee.

Morales first tried to give Murr 3 percent of any recovery by the state in its lawsuit against Big Tobacco. Since the tobacco companies had already tried to settle with the states ( including Texas ) for $150 billion, this contract would have given Murr a minimum of a $300 million legal fee. Then, they changed the contact from a 3 percent fee to a "reasonable" fee. Then, after Texas settled with Big Tobacco for more than $15 billion, they changed the contract again to an "arbitration" process. One decision-maker would be selected by Murr, one by Morales and one by the federal judge in the tobacco case. Finally, in September 1998, they secretly changed their "contract" yet again. This time, all three "arbitrators" would be chosen by Murr and Morales, and no one else would even know they were meeting. Incredible!

How did Murr and Morales try to justify this secret, handpicked panel? Murr and Morales told a federal judge that they were "unable, after substantial time and effort, to negotiate a mutually agreeable settlement of attorney's fees" for Murr.

But wait.

Then they told their "arbitrators" that they were in agreement, and that Murr should be paid 3 percent of the state's recovery, or $520 million. Has anyone cared to ask them why they told directly contradictory stories to two different parties? Or to put it bluntly, which statement was the truth, and which statement was the lie?

After hearing only from Murr and Morales, the panel chosen by Murr and Morales decided that Murr should be paid $260 million by the state. The contract that Morales gave his friend says that this decision would be "final and not appealable."

Perhaps most amazing and confounding though is that to this very day no one knows what Murr really did for the state. Murr says he worked as much as 2,000 hours on the case. But, as far as is publicly known, he has produced no time records, no expense records, not even a single page of notes. In fact, Murr apparently did not question any witness in a deposition. Murr apparently did not speak for the state at any hearing prior to the tobacco settlement. Murr and Morales say Murr "shunned the limelight" and preferred "working in the background." How convenient.

Even two highly respected legislators, Sen. Bill Ratliff, R-Mt. Pleasant, and Rep. Rob Junell, D-San Angelo, have directly contradicted Murr on one of his few specific claims--namely that Murr was not involved in settling the county-hospital district issue, as Murr has claimed.

Murr claims that he put himself at risk and therefore deserves much more than standard hourly rates. But when Morales hired Murr in October 1996, this was six months after the Texas tobacco lawsuit was filed and two months after Big Tobacco had offered to settle the claims of states, including Texas, for a whopping $150 billion. If the state had accepted Big Tobacco's offer, Texas' share would have been $10 billion, giving Murr at least $300 million. In short, the risk was virtually non-existent.

Murr says he spent 1,500 to 2,000 hours working on the tobacco case over a three-year period. Assume he's telling the truth. A fee of $260 million for 2,000 hours works out to at least $130,000 per hour.

The Texas Supreme Court has recently said that a fee should be tested "to prevent grossly excessive attorneys fee awards." To test a fee for reasonableness, the court said, you divide the fee by the hours worked to calculate the effective hourly rate. You compare the effective hourly rate against the normal noncontingent hourly rate. In that case, the court considered suspicious a fee of $9 million for 6,000 hours of work or $1,500 per hour.

After the state "arbitration" panel awarded Murr $260 million, Murr and Morales presented their $520 million fee request to the national "arbitration" panel. The tobacco companies had agreed not to oppose the fee demands by Texas' other five plaintiffs' lawyers, but for some unknown reason the tobacco companies did not agree to roll over for Murr. The national tobacco panel determined that Big Tobacco would pay Murr no more than $1 million. But thanks to Morales, Murr still has his "ruling" against his client, the state of Texas, for $260 million. Since the tobacco industry will only pay $1 million, Murr has indicated that he intends to collect the remaining $259 million out of the Texas tobacco settlement.

What should be done? First, Texans deserve to know the truth. Are Morales and Murr trying to defraud the state? Did Morales abuse his official position to benefit a friend? To benefit himself? The current attorney general and the Legislature need to investigate, just like the FBI. Then they need to take appropriate actions, including suing Murr, or Morales, or both, if warranted.

Second, Texans should not accept this manipulation of the legal process by an attorney and a former elected official. Murr's $260 million claim against the state should be challenged by Texas Attorney General John Cornyn and thrown out by the courts.

Third, the same scrutiny needs to be applied to the $3.3 billion in fees awarded to the other five plaintiffs' attorneys, the "Tobacco Five." Like Murr, these lawyers are seeking $130,000-plus per hour legal fees for a case that never went to trial. Like Murr, these attorneys never provided a shred of documentation of hours worked. And like Murr, these lawyers had Morales' help in making an enormous fee claim against their client, the state. But there is one big difference. The tobacco companies fought Murr, but they agreed to not even oppose the "Tobacco Five's" fee claims. Why would your opponent in a lawsuit agree to pay your lawyers an unlimited fee? Doesn't it make you wonder what the real deal between your opponent and "your" lawyer was?

And finally, no attorney general or any other government official should ever again be allowed to try to give millions or billions of taxpayer dollars, out of the government's recovery in a lawsuit, to a friend, in secret proceedings, with no oversight.

Editor's Note: Marc Murr withdrew his claim for $260 million in legal fees from the Texas tobacco case on May 6, one day after Attorney General John Cornyn accused him of trying to secure payment by fraud. U.S. District Judge David Folsom gave Murr 60 days to resubmit a fee request to a new arbitration panel.

Butler, a Houstonian, is president of Texans For Reasonable Legal Fees, a coalition of Citizens for a Sound Economy, the Texas Association of Business & Chambers of Commerce and Texans for Lawsuit Reform.

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