Fee caps latest weapon in tobacco wars.

As the fight over the proposed tobacco settlement heats up, attacks are increasing on the trial lawyers who helped the state attorneys general bring their landmark cases. In what some argue is an effort to cripple these suits, pro-tobacco senators are trying to cap the fees that states could pay to outside attorneys. These attempts raise serious federalism concerns.

President Clinton's recent announcement of his concerns about the proposed settlement has set back the timetable for congressional action, and it is expected that the start of the case brought by Minnesota Attorney General Hubert "Skip" Humphrey will set it back still further. The tobacco companies' greatest success was lobbying for inclusion in the omnibus tax reconciliation bill of a special $50 billion tax break for tobacco companies, undercutting the-promised settlement payments.

Amendments

During consideration of the Labor, Health and Human Services Appropriations Bill, Sen. Richard Durbin (D-Ill.) offered an amendment that would reverse this "midnight deal," invalidating the tax provision before the benefits could be taken by the companies. But this opened the door to attacks on trial lawyers' fees.

Sen. Jeff Sessions (R-Ala.) offered an amendment to the Durbin tax amendment that would have capped fees for attorneys representing the various state attorneys general. The cap would limit the state officials to spending no more than $5 million on outside attorney fees per state.

The apparent intent was to hamstring the states while leaving the tobacco companies free to spend as much as they want on legal representation. By one report, the companies have already spent some $125 million in Minnesota alone in pre-trial legal costs. After other senators pointed out the lopsided impact of the provision, Sessions modified his amendment to also apply to tobacco company defense lawyers.

The Sessions amendment was adopted by a vote of 49-48, but that did not put an end to the debate. Sen. Paul Wellstone (D-Minn.) offered a second amendment to exempt any contracts attorneys and the states had already entered into. This amendment passed on a vote of 50-48.

Together, the two amendments resulted in a confused policy: Fees of attorneys working for states under an existing contract would not be capped, but states attempting to add attorneys, or states that have not yet brought suit, would be affected by the cap. Also, tobacco company lawyers would be capped in every state. Unless the Conference Committee (meeting as TRIAL goes to press) straightens this out, the provision will set a terrible precedent of federal intervention in fee agreements, and throw state suits into chaos if outside attorneys are forced to withdraw from cases or litigate over the provision.

The cap applying to the states raises important issues of federalism and, in the judgment of some constitutional experts, could be used to set a new precedent for federal-state relations.

A senior specialist in the American Law Division of the Congressional Research Service, Johnny Killian, has analyzed the impact of Supreme Court rulings on congressional action for many years. In a memo dated September 26, 1997, he said that "a serious and, perhaps, successful challenge to the constitutionality of the [Sessions] amendment can be predicted."

Killian said that the trajectory of recent Supreme Court opinions is toward greater protection for states against federal intrusion. He discussed the line of Supreme Court decisions concerning congressional regulation of state action.

Killian's memo follows a line of cases over more than 60 years, from United States v. California (1936) through Printz v. United States (1997). The Court's rulings have been inconsistent, upholding regulations on state wages and hours in some cases and overruling them in others.

The decision in National League of Cities v. Usery (1976) was particularly important. The Court held that the federal government could not interfere with "functions essential to [the states'] separate and independent existence." Killian said that if National League of Cities was still good law, the Sessions amendment would likely be held unconstitutional.

However, Garcia v. San Antonio Metropolitan Transit Authority (1985) overruled National League of Cities. In Garcia, the Court decided that federal powers granted by the Constitution are not limited by state powers--in other words, that powers granted to the federal government can be exercised on the states and private citizens alike. The states' recourse was to the political process and their congressional representatives to preserve their authority.

Which way?

Garcia seemed to indicate that the pendulum was swinging back the other way, toward increased congressional authority over states. But more recent cases indicate that the concept of dual federalism is having a resurgence.

The leading case in the Court's new jurisprudence on federal-state relations is New York v. United States (1992). This case invalidated a federal law that would have required states to carry out federal policy on disposal of radioactive waste. The Court held that the provisions that applied only to the states were an unconstitutional intrusion on state prerogatives.

Most recently, in Printz, the Court held that the federal government cannot "commandeer" state law enforcement officers to enforce the criminal background check the Brady Law requires. These cases demonstrate the Court is now moving toward strengthening the hand of states in opposing federal mandates and directives.

Although Garcia has not yet been overturned, the handwriting is on the wall--and a challenge to the Sessions amendment, if enacted, would be an opportunity to return to the National League of Cities standard. The Court's movement toward greater vigilance over intrusion of the federal government into state affairs may well support future challenges to other "tort reform" efforts, such as federal limits on products liability or medical malpractice liability, should these ever be enacted.