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S.J.R. 102 Enrolled

                 

RESOLUTION APPROVING TOBACCO

                 
LAWSUIT SETTLEMENT

                 
2001 FIRST SPECIAL SESSION

                 
STATE OF UTAH

                 
Sponsor: David H. Steele

                  A joint resolution of the Legislature approving the settlement agreement between the state
                  of Utah and the law firms of Bendinger, Crockett, Peterson and Casey and Ness, Motley,
                  Loadholt, Richardson and Poole. This joint resolution has an immediate effective date.
                  Be it resolved by the Legislature of the state of Utah:
                      WHEREAS, on or about October 22, 1996, the Utah Attorney General's Office entered into
                  a contingent fee agreement on behalf of the state of Utah with the outside law firms of Bendinger,
                  Crockett, Peterson and Casey (of Salt Lake City, Utah) and Ness, Motley, Loadholt, Richardson
                  and Poole (of Charleston, South Carolina), wherein, among other things, the state agreed to pay
                  to the law firms 25% of the amounts, if any, received by the state from the tobacco companies in
                  the state's tobacco reimbursement litigation;
                      WHEREAS, the state's tobacco reimbursement litigation (in the United States District Court
                  for the District of Utah) was settled in 1998, through the signing by the state of Utah and other
                  participating states of a Master Settlement Agreement with the tobacco companies;
                      WHEREAS, the Master Settlement Agreement provides, among other things, that the
                  tobacco companies will pay settlement sums to the state over a period of approximately 25-30
                  years. The Utah Attorney General's Office has estimated that such payments could total as much
                  as $1 billion and that sums paid to the state thus far approximate $64 million;
                      WHEREAS, at the insistence of the attorneys general of the participating states, the Master
                  Settlement Agreement included a process for payment of attorneys' fees by the tobacco companies
                  separate from and in addition to the settlement payments due the states under the Master Settlement
                  Agreement. Pursuant to that process, the law firms entered into a February 4, 1999 Utah Fee
                  Payment Agreement with the tobacco companies. The Utah Fee Payment Agreement provides that
                  the tobacco companies would offer a single lump-sum cash payment for attorneys' fees. If the law
                  firms were not satisfied with that offer, the law firms and the tobacco companies would arbitrate


                  the amount of the attorneys' fees to be paid by the tobacco companies. The law firms party to the
                  contingent fee agreement with the state of Utah rejected the cash offer and pursued their remedy
                  against the tobacco companies and were awarded $64,850,000 as "reasonable compensation," to be
                  paid at the rate of $2.5 million per year. This fee was awarded on the assumption that the law firms
                  had logged 26,000 hours in representing the state in the tobacco litigation;
                      WHEREAS, the Utah Fee Payment Agreement (which is part of the Master Settlement
                  Agreement signed by the Utah Attorney General) also provides that the rights and obligations of the
                  state and the law firms (i.e., under the contingent fee agreement) "shall be unaffected by this Utah Fee
                  Payment Agreement" and that the fees paid by the tobacco companies directly to the law firms are
                  to be "credited, on a dollar-for-dollar basis, against any amount payable" to the law firms by the state;
                      WHEREAS, the state and the law firms have been litigating (in the Third Judicial District
                  Court for Salt Lake County) the amount of attorneys' fees payable to the law firms as a result of the
                  tobacco reimbursement litigation settlement, as well as the method and timing of the payment of fees;
                      WHEREAS, based upon the estimated total payout of $1 billion, the total attorneys' fees
                  which could be awarded in the litigation under the contingent fee agreement could possibly be as high
                  as $250 million (i.e., 25% of $1 billion), minus the $65 million being paid under the Utah Fee
                  Payment Agreement, for a net possible sum of approximately $185 million;
                      WHEREAS, approximately 25% of all payments received by the state from the tobacco
                  companies are being held in an escrow account in the United States District Court for the District of
                  Utah, pending resolution of the litigation between the state and the law firms. The current balance
                  in the escrow account is approximately $16.5 million;
                      WHEREAS, the state and the law firms have entered into a stipulation and settlement
                  agreement which, subject to approval by the Legislature, resolves all claims and disputes between the
                  state and the law firms;
                      WHEREAS, in the stipulation and settlement agreement, the state has agreed to pay to the
                  law firms the sum of $9,950,000, in complete satisfaction of the state's obligations to the law firms;
                      WHEREAS, the entire settlement sum of $9,950,000 is to be paid out of the tobacco
                  settlement funds being held in escrow by the United States District Court for the District of Utah,

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                  thus eliminating the need for appropriation by the state;
                      WHEREAS, Utah Attorney General Mark Shurtleff recommends that the Legislature approve
                  the stipulation and settlement;
                      WHEREAS, Section 63-38b-104 requires the Legislature's approval before a state agency can
                  execute a legally binding settlement agreement that might cost government entities more than $1
                  million to implement;
                      WHEREAS, the governor has approved the settlement agreement and is submitting it to the
                  Legislature for approval, as required by Subsection 63-38b-104 (2)(a); and
                      WHEREAS, the Legislature believes that execution and performance of the stipulation and
                  settlement agreement are in the best interests of the state of Utah, given the facts of the case,
                  applicable case law, and the risks of litigation:
                      NOW, THEREFORE, BE IT RESOLVED that the Legislature of the state of Utah approves
                  the stipulation and settlement agreement the Attorney General's Office has negotiated with the law
                  firms of Bendinger, Crockett, Peterson and Casey and Ness, Motley, Loadholt, Richardson and Poole
                  and approves the payment of $9,950,000 to the law firms from the escrowed funds held by the United
                  States District Court for the District of Utah in complete satisfaction of the state's obligations to the
                  law firms.
                      BE IT FURTHER RESOLVED, if approved by two-thirds of all the members elected to each
                  house, this resolution takes effect upon approval by the governor, or the day following the
                  constitutional time limit of Utah Constitution Article VII, Section 8, without the governor's signature,
                  or in the case of a veto, the date of veto override.

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