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S.J.R. 102






Sponsor: David H. Steele

             6      A joint resolution of the Legislature approving the settlement agreement between the state
             7      of Utah and the law firms of Bendinger, Crockett, Peterson and Casey and Ness, Motley,
             8      Loadholt, Richardson and Poole. This joint resolution has an immediate effective date.
             9      Be it resolved by the Legislature of the state of Utah:
             10          WHEREAS, on or about October 22, 1996, the Utah Attorney General's Office entered into
             11      a contingent fee agreement on behalf of the state of Utah with the outside law firms of Bendinger,
             12      Crockett, Peterson and Casey (of Salt Lake City, Utah) and Ness, Motley, Loadholt, Richardson
             13      and Poole (of Charleston, South Carolina), wherein, among other things, the state agreed to pay
             14      to the law firms 25% of the amounts, if any, received by the state from the tobacco companies in
             15      the state's tobacco reimbursement litigation;
             16          WHEREAS, the state's tobacco reimbursement litigation (in the United States District
             17      Court for the District of Utah) was settled in 1998, through the signing by the state of Utah and
             18      other participating states of a Master Settlement Agreement with the tobacco companies;
             19          WHEREAS, the Master Settlement Agreement provides, among other things, that the
             20      tobacco companies will pay settlement sums to the state over a period of approximately 25-30
             21      years. The Utah Attorney General's Office has estimated that such payments could total as much
             22      as $1 billion and that sums paid to the state thus far approximate $64 million;
             23          WHEREAS, at the insistence of the attorneys general of the participating states, the Master
             24      Settlement Agreement included a process for payment of attorneys' fees by the tobacco companies
             25      separate from and in addition to the settlement payments due the states under the Master
             26      Settlement Agreement. Pursuant to that process, the law firms entered into a February 4, 1999
             27      Utah Fee Payment Agreement with the tobacco companies. The Utah Fee Payment Agreement

             28      provides that the tobacco companies would offer a single lump-sum cash payment for attorneys'
             29      fees. If the law firms were not satisfied with that offer, the law firms and the tobacco companies
             30      would arbitrate the amount of the attorneys' fees to be paid by the tobacco companies. The law
             31      firms party to the contingent fee agreement with the state of Utah rejected the cash offer and
             32      pursued their remedy against the tobacco companies and were awarded $64,850,000 as "reasonable
             33      compensation," to be paid at the rate of $2.5 million per year. This fee was awarded on the
             34      assumption that the law firms had logged 26,000 hours in representing the state in the tobacco
             35      litigation;
             36          WHEREAS, the Utah Fee Payment Agreement (which is part of the Master Settlement
             37      Agreement signed by the Utah Attorney General) also provides that the rights and obligations of
             38      the state and the law firms (i.e., under the contingent fee agreement) "shall be unaffected by this
             39      Utah Fee Payment Agreement" and that the fees paid by the tobacco companies directly to the law
             40      firms are to be "credited, on a dollar-for-dollar basis, against any amount payable" to the law firms
             41      by the state;
             42          WHEREAS, the state and the law firms have been litigating (in the Third Judicial District
             43      Court for Salt Lake County) the amount of attorneys' fees payable to the law firms as a result of
             44      the tobacco reimbursement litigation settlement, as well as the method and timing of the payment
             45      of fees;
             46          WHEREAS, based upon the estimated total payout of $1 billion, the total attorneys' fees
             47      which could be awarded in the litigation under the contingent fee agreement could possibly be as
             48      high as $250 million (i.e., 25% of $1 billion), minus the $65 million being paid under the Utah Fee
             49      Payment Agreement, for a net possible sum of approximately $185 million;
             50          WHEREAS, approximately 25% of all payments received by the state from the tobacco
             51      companies are being held in an escrow account in the United States District Court for the District
             52      of Utah, pending resolution of the litigation between the state and the law firms. The current
             53      balance in the escrow account is approximately $16.5 million;
             54          WHEREAS, the state and the law firms have entered into a stipulation and settlement
             55      agreement which, subject to approval by the Legislature, resolves all claims and disputes between
             56      the state and the law firms;
             57          WHEREAS, in the stipulation and settlement agreement, the state has agreed to pay to the
             58      law firms the sum of $9,950,000, in complete satisfaction of the state's obligations to the law

             59      firms;
             60          WHEREAS, the entire settlement sum of $9,950,000 is to be paid out of the tobacco
             61      settlement funds being held in escrow by the United States District Court for the District of Utah,
             62      thus eliminating the need for appropriation by the state;
             63          WHEREAS, Utah Attorney General Mark Shurtleff recommends that the Legislature
             64      approve the stipulation and settlement;
             65          WHEREAS, Section 63-38b-104 requires the Legislature's approval before a state agency
             66      can execute a legally binding settlement agreement that might cost government entities more than
             67      $1 million to implement;
             68          WHEREAS, the governor has approved the settlement agreement and is submitting it to
             69      the Legislature for approval, as required by Subsection 63-38b-104 (2)(a); and
             70          WHEREAS, the Legislature believes that execution and performance of the stipulation and
             71      settlement agreement are in the best interests of the state of Utah, given the facts of the case,
             72      applicable case law, and the risks of litigation:
             73          NOW, THEREFORE, BE IT RESOLVED that the Legislature of the state of Utah
             74      approves the stipulation and settlement agreement the Attorney General's Office has negotiated
             75      with the law firms of Bendinger, Crockett, Peterson and Casey and Ness, Motley, Loadholt,
             76      Richardson and Poole and approves the payment of $9,950,000 to the law firms from the escrowed
             77      funds held by the United States District Court for the District of Utah in complete satisfaction of
             78      the state's obligations to the law firms.
             79          BE IT FURTHER RESOLVED, if approved by two-thirds of all the members elected to
             80      each house, this resolution takes effect upon approval by the governor, or the day following the
             81      constitutional time limit of Utah Constitution Article VII, Section 8, without the governor's
             82      signature, or in the case of a veto, the date of veto override.

Legislative Review Note
    as of 6-20-01 1:54 PM

A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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