By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
U.S. District Judge David Folsom wants to know why a state arbitration panel that awarded attorney Marc Murr millions in fees from the litigation did not include anyone representing his court. The panel ruled last October that Murr was entitled to 1.5 percent of the settlement for his work on the case, or $260 million. Murr used that ruling as the basis for a lawsuit in Folsom's court that seeks payment from the state.
A separate national arbitration panel had previously awarded Murr only $1 million in fees, which would be paid directly by the tobacco companies rather than from the taxpayers' settlement.
"I think [Folsom] is a little upset with Marc Murr," says Ted Delisi, a spokesman for Texas Attorney General John Cornyn.
The judge isn't alone in questioning the fees for Murr, a friend and onetime associate of former Attorney General Dan Morales, who spearhead the state's lawsuit against the tobacco industry.
Cornyn campaigned on a pledge to look into alleged improprieties with the fees outside lawyers received in the settlement and has filed a motion in Folsom's court to dismiss Murr's claim. The attorney general argues that Murr should seek his money from the state Legislature.
The judge will hear arguments about Cornyn's motion to dismiss Murr's suit in early May, but Folsom already has made it clear he has some concerns about the state arbitration panel.
In an order issued March 17 granting Cornyn a hearing, the judge asked Murr's lawyers to explain why a representative of the court was not present at the panel, as a January 1998 order by Folsom made clear would be required.
"The court has never selected any panel member for such an arbitration," the judge wrote in March.
Murr has declined to comment on the case. "I'm not saying anything until it's over," he said in a telephone interview.
A lawyer working on Murr's case who did not want to be named says that after waiting on the judge for months to appoint a panel member, the state and Murr gave up and modified the agreement to allow for an arbitration panel that didn't include a court representative.
Murr's claims to a share of the tobacco settlement are muddied by both his relationship with Morales and the secretive way he came into the case. Early on in the tobacco litigation, Morales hired Murr under terms that Morales kept confidential--not even letting his assistants know about the arrangements.
Murr and Morales met after they began working in 1981 at the Houston law firm Bracewell & Patterson. Morales left the firm less than two years later, ran a successful campaign for the Legislature, and eventually won the attorney general's seat--making a name for himself as a young, handsome, Harvard-educated Hispanic politician, perhaps the most prominent in Texas. Through the years, Morales stayed in contact with Murr, and when the tobacco litigation began to take shape, Morales told the Dallas Observer last year, he turned to Murr as a sort of kitchen-cabinet advisor.
At the time, Morales had made much fanfare of his appointments of five well-known plaintiff lawyers led by Walter Umphrey and Wayne Reaud of Beaumont to assist the state in its case, as well as his commitment to pay them 15 percent of any settlement. An arbitration panel eventually awarded five outside attorneys or their firms $3.3 billion.
But Morales refused to reveal a separate contract that gave Murr the right to "reasonable fees," despite open-records requests from news organizations.
At this point, conspicuously absent from the courthouse is Morales, who didn't return telephone calls to his Austin office for this story. Murr says that he has "no idea" about whether Morales will appear before Folsom on his behalf. Meanwhile, Morales faces a number of questions about his management of private lawyers on the tobacco litigation.
The FBI has been questioning lawyers who were approached by Morales to handle the state's tobacco case, Delisi says. Texas Lawyer has reported that FBI agents interviewed Ron Krist and Wayne Fisher, two Houston plaintiff lawyers who had talked to Morales about handling the state's tobacco case.
Joe Jamail, a prominent Houston plaintiff lawyer, filed a deposition during the heat of the debate over private attorney's fees last year claiming that Morales tried to impose "legally questionable" terms and conditions on a prospective agreement to hire him. The Observer reported last September that Jamail said Morales had asked for $1 million for a fund to defend himself against the attacks the tobacco industry likely would launch against him. Two other lawyers told the Observer that they had heard a similar proposal from Morales.
For his part, Ron Dusek, a former spokesman for Morales who now works at a private public relations firm, just wanted to get a little help from his old boss. Earlier this month, Dusek asked Morales to appear before the Senate Finance Committee. Dusek was trying to get the Legislators to commit more money--roughly $25 million instead of $11 million--to an education project aimed at curbing teen cigarette use. The tobacco settlement set up a permanent $200 million fund, but Dusek and others wanted the state to provide extra money to expand an education campaign. Morales declined to testify.
"He didn't want to go," Dusek says. "I don't know why.