Future Forum: Guilt, Innocence, and the Death Penalty 
So What's the Truth About Dan Morales and Tobacco?
He says he took on entrenched corporate interests against impossible odds and won a $17 billion settlement for the state of Texas. His critics say he needlessly paid hefty fees to greedy trial lawyers and then tried to cut one of his pals in on the action. Now the question is whether his hopes of being governor have gone up in smoke.
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Morales was elected attorney general in 1990 after three terms in the state House of Representatives. He took office in 1991, when Democrats still held the House, the Senate, and most statewide offices. Within a few days of his arrival, Lieutenant Governor Bob Bullock and House Speaker Gib Lewis called Morales to a legislative summit in the Speaker's office to devise a redistricting plan favorable to Democrats. When Bullock, who was widely feared at the Capitol, said he would direct redistricting lawsuits, Morales interrupted him. "In the past one hundred and fifty years the attorney general has represented the Legislature in redistricting matters," Morales said flatly. "Now the state's first Hispanic attorney general is going to be told he can't represent the state. Governor, I don't think that's going to sit too well with your Hispanic legislators."
Morales says that the 61-year-old lieutenant governor leaped from his chair and slapped him across the face. "You little Mexican piece of shit!" Bullock shouted, as an aide restrained him. But Morales refused to back down. In spite of Bullock's protests, he did handle the redistricting lawsuits. When I asked why he had challenged Bullock, Morales said simply, "I'm an independent person, and the office of attorney general requires independence."
The new attorney general soon became famous for keeping his own counsel and for taking stands that seemed to defy conventional wisdom. There was perhaps no better evidence of this than his decision file a lawsuit that at the time seemed to have little chance of success against the tobacco companies. Even before Mississippi attorney general Mike Moore filed the first state lawsuit against the industry in 1994, Morales had been dispatching his assistants to national conferences to organize seminars for attorneys general willing to take action against the tobacco companies. Texas, like other states, had incurred huge expenses in treating the victims of illnesses caused by tobacco.
The main problem with any lawsuit was that, at the time, no tobacco company had ever paid a dime to any plaintiff. The cigarettemakers' defense attorneys relied on a bulletproof "personal choices" defense: The smoker was aware of the health risks involved with the product, so the industry couldn't be held responsible for tobacco-related diseases or deaths. Knowing that such a suit would be both extremely risky and hugely expensive for taxpayers, Moore conceived of the idea of using private lawyers working on something like a contingency basis to sue the tobacco companies. In standard contingency fee agreements, the plaintiff's lawyer incurs all costs and gets paid—up to 33 percent of an award or settlement—only if he prevails. The State of Mississippi, rather than an individual, would be the plaintiff.
Morales decided to adopt a similar strategy. He knew that the Texas Legislature would never appropriate $10 million to $20 million to fund a tobacco suit tried by the attorney general's staff. And he believed that staff attorneys in the AG's office could not take on the tobacco industry, even if the money was available. Morales talked to lawyers from more than a dozen firms and had at least two meetings with Houston trial attorney Joe Jamail, who he decided was too independent.
The deal Morales cut with the Big Five tobacco lawyers—Walter Umphrey, Wayne Reaud, John Eddie Williams, John O'Quinn, and Harold Nix—represented no risk for the state. The lawyers would bankroll the lawsuit. Only if the state prevailed would they collect a 15 percent contingency fee. (In the end, the fees did not come out of the state's settlement, as tort reformers and radio talk-show hosts frequently complain. The settlement agreement stipulates that the attorneys' fees be paid by the tobacco companies, separate from the state's monetary award.) The lawyers brought to the courtroom decades of experience in trying complex cases: asbestosis in Beaumont and Port Arthur, chemical carcinomas in plant refineries in Houston, class-action breast-implant suits across the country. Walter Umphrey, the Beaumont lawyer designated the managing partner of the trial team, described the group as "tobacco's worst nightmare. They couldn't money-whip us, which is how they win most of their cases, and they couldn't take our clients away from us." On March 28, 1996, Texas became the seventh state to file in the national tobacco war started by Mike Moore.
TEXAS V.AMERICAN TOBACCO WAS in most ways Dan Morales' finest hour. Even before the suit was filed, he proved he could play in the same league as Big Tobacco. When the tobacco companies tried to intimidate him with a push poll—a political tool designed to disseminate negative information about its subject—Morales served notice to every contract lobbyist on tobacco's payroll that all their files were subject to pre-trial discovery. In response, six of the biggest names in the Austin lobby walked away from their tobacco clients, leaving the industry underrepresented as the legislative session began. Morales strongly suggested that the lawyers hire his political consultant, George Shipley, to coordinate strategic thinking and public relations. Shipley has a reputation as a tough inside player. And it was probably no coincidence that Democratic legislators who had worked with Shipley in the past began to file anti-tobacco bills, which had the companies defending themselves against legislation in Austin while they defended themselves against litigation in Texarkana.
If Mississippi started the states' march to the courthouse, Texas was the first state to file in federal court and the first state to file under the Racketeer Influenced and Corrupt Organizations (RICO) Act, originally designed as a tool to prosecute the mafia. A successful RICO case would have resulted in the tobacco business being declared an illicit enterprise and regulated by the state and the companies being forced to pay treble damages. "The lawyers representing Mississippi told us we were screwing everything up when we filed the RICO suit," Beaumont attorney Wayne Reaud said after the industry settled. "But it put enormous pressure on the industry."
When the judge ruled that the RICO claim would be tried first, the pressure became unbearable. Rather than defend itself against a RICO suit, Big Tobacco capitulated. In January 1998 the judge signed a preliminary agreement that secured a $15 billion settlement for the State of Texas. When Minnesota settled, a clause in the Texas settlement agreement providing that no state would get a higher per-capita settlement than Texas pushed the amount up to $17.3 billion.
Morales had presided over what could be described as the perfect lawsuit—with the exception of two remarkable flaws. The first involved the payment to Murr. Back in January 1997, at a meeting at the Four Seasons Hotel in Austin, Morales told the Big Five that he was hiring at least two more lawyers in the tobacco case: Marc Murr, a trial lawyer he had worked with in Houston shortly after graduating from Harvard, and Will Pryor, a Harvard classmate who had once worked for Morales as an assistant attorney general. The Big Five objected. "We don't need any help trying this suit," Umphrey told Morales. He said he would resign if Morales persisted, and the other four attorneys working for the state said they too would quit.
There are two versions of what happened next. According to the Big Five, Morales backed down and then went out and hired Murr and Pryor without informing any of them. This claim is supported by Harry Potter, who said that Murr and Pryor were hired in secret and that he found out about it later and informed the outside lawyers. Morales insisted that that is not true—that the protests by the five lawyers were common under such contracts and that they, in effect, had backed down. He insisted that he told them that he was going to hire both Murr and Pryor anyway.
Whatever the case, Pryor quickly backed out of the contract, which did not become public until January 1998. Murr did not. Though he had spent none of his own money in a case that cost the five other lawyers more than $30 million—they had to pay the full cost of litigation since the state paid no legal expenses—he showed up with a contract that allowed him to claim $506 million in attorneys' fees. After the Big Five protested, Murr submitted his contract to an arbitration panel and was awarded 1.5 percent of the settlement, or $260 million. Murr's arbitration deal was not only bold but odd, because Morales, as attorney general, got to appoint two of the three panelists. And Murr, as the disputant, appointed the third. Two months later a national arbitration panel with members appointed by the tobacco companies and the Big Five met in New York and awarded $3.2 billion to the Big Five and only $1 million to Marc Murr.
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