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In re Estate of Williams

Court of Appeals of Oregon

December 31, 2014

In the Matter of the Estate of Jesse D. Williams, Deceased. Mayola WILLIAMS, in her capacity as Personal Representative of the Estate of Jesse D. Williams, Appellant,
v.
William A. GAYLORD; Gaylord Eyerman Bradley, P.C.; Raymond F. Thomas; Swanson, Thomas & Coon; James S. Coon; Charles S. Tauman; Charles S. Tauman, P.C.; Richard A. Daynard; Clifford E. Douglas; Maureen Leonard; Kathryn H. Clarke; and Center for Constitutional Litigation, Respondents

Argued and Submitted March 18, 2014.

970590843. Multnomah County Circuit Court. Nan G. Waller, Judge.

John W. Stephens argued the cause for appellant. With him on the briefs was Esler Stephens & Buckley LLP.

James R. Cartwright argued the cause for respondents. With him on the brief was Cartwright Whitman Baer, PC.

Before Sercombe, Presiding Judge, and Hadlock, Judge, and Tookey, Judge. Hadlock, J., dissenting.

OPINION

[268 Or.App. 109] SERCOMBE, P. J.

Mayola Williams, as personal representative of the Estate of Jesse D. Williams (the estate), appeals the trial court's limited judgment approving a payment of attorney fees and costs to a group of attorneys (the attorneys) who provided representation to the estate. The estate asserts that the trial court incorrectly interpreted ORS 31.735(1) and, as a result of that erroneous interpretation, granted the attorneys' motion for summary judgment and entered the limited judgment approving payment of the requested

Page 203

fees.[1] In particular, the estate received a sizable punitive damages award in underlying litigation. Although the estate's share of the punitive damages award was limited by ORS 31.735(1),[2] as a result of a settlement with the state and work by the attorneys assisting the state in secondary litigation, as described below, the estate received an additional recovery. The estate now asserts that the attorney fee cap contained in ORS 31.735(1)(a) limits the amount of fees the attorneys may receive from that additional recovery. The trial court concluded that ORS 31.735(1)(a) did not limit the amount of fees from that additional recovery. For [268 Or.App. 110] the reasons set forth below, we affirm the judgment of the trial court.

The undisputed background facts of this case are set forth in the trial court's judgment.[3] In 1997, the estate entered into a contingency fee agreement with the attorneys pursuant to which the attorneys would represent the estate in an action against Philip Morris for the smoking-related illness and death of Jesse Williams.[4] Pursuant to the agreement, the attorneys would receive " forty (40%) percent of the gross amount of money collected, whether this money is collected by settlement or by a successful lawsuit and judgment."

The estate filed an action against Philip Morris and, in 1999, following a trial, the jury returned a verdict in favor of the estate. It awarded the estate economic and noneconomic damages as well as $79.5 million in punitive damages. Approximately a decade of subsequent appeals, primarily involving the punitive damages award, ensued.[5] Ultimately, however, the judgment was affirmed and an appellate judgment issued. See Williams v. Philip Morris, 344 Or. 45, 176 P.3d 1255 (2008), cert dismissed as improvidently granted, 556 U.S. 178, 129 S.Ct. 1436, 173 L.Ed.2d 346 (2009).

Under Oregon's split recovery statute, 60 percent of the jury's punitive damages award was allocated to the state. ORS 31.735(1). However, after the jury returned its verdict, Philip Morris notified the state that it believed that the state had released Philip Morris from any obligation to pay the state its 60 percent share of the punitive damages award because, in 1998, the state--along with 45

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other states--had entered into a Master Settlement Agreement [268 Or.App. 111] (MSA) with Philip Morris and other major tobacco companies. See Williams v. RJ Reynolds Tobacco Company, 351 Or. 368, 372-73, 271 P.3d 103 (2011). Accordingly, the state filed an action seeking a declaration that it was entitled to its 60 percent share of the punitive damages award. The trial court stayed the declaratory judgment proceedings pending resolution of the appeals relating to the validity of the punitive damages award.

While the punitive damages case was on appeal, the state and the attorneys, on behalf of the estate, conferred. In the attorneys' view, both the estate and the attorneys themselves had valid grounds to challenge the state's entitlement to 60 percent of the punitive damages. However, after discussions, the state sought to settle any potential constitutional claims that the estate or the attorneys might raise challenging the state's entitlement to a share of the punitive damages award.[6] Ultimately, the parties agreed that they would release all claims against each other and the estate would assist the state in its secondary litigation with Philip Morris. In return, the estate and its attorneys would receive some of the state's share of the punitive damages award.

In particular, in 2004, the state and the estate, represented by the attorneys, entered into an agreement. The agreement provided that the state claimed an interest in the punitive damages awarded in the Williams litigation under ORS 31.735 and that the estate claimed that the state's [268 Or.App. 112] taking of punitive damages (and the attorneys' contingent fees thereon) violated the state and federal constitutions and, " in any event the attorneys representing the Estate herein are entitled to reasonable contingent fees from the State for the value of their services, their time and their money risked in this matter[.]" To " resolve th[ose] legal differences," they agreed that the estate would intervene in the declaratory judgment action and the estate and the state would cooperate in that action to ensure that Philip Morris was required to pay the entire amount of punitive damages awarded in the underlying action for damages. See RJ Reynolds Tobacco Company, 351 Or. at 374 n 7. Under the agreement,

" [a]ny amount recovered by the State of Oregon or by the Williams Estate or both in [the declaratory judgment action], whether by litigation to final judgment, by settlement, or by any other means, shall be paid 55% to the State of Oregon and 45% to the Williams Estate and its attorneys. In the event that Philip Morris pays 100% of the final appellate judgment in Williams v. Philip Morris with or without litigating [the declaratory judgment action], the State of Oregon would receive 33.33% of the total punitive damages recovered, and the Williams Estate and its attorneys would receive 66.67% of the total punitive damages recovered."

The agreement stated that it concerned " only allocation of recovered punitive damages as between the State of Oregon on one hand and the Estate and its attorneys on the other hand." The agreement was intended to have " no effect on the division between the Estate and its attorneys on any amounts recovered."

After the punitive damages award was affirmed in 2009, Philip Morris paid the estate " over $61 million in full satisfaction of the

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award of economic and noneconomic damages, and in full satisfaction of the estate's interest in 40 percent of the punitive damages award allocated to the Williams estate under ORS 31.735, plus costs and interest on those awards." Id. at 374. It did not, however, pay out the other 60 percent of the punitive damages award. The trial court then lifted the stay in the declaratory judgment action and recommenced proceedings to " decide the legal questions [268 Or.App. 113] surrounding entitlement to the punitive damages award: viz., whether by signing the MSA, the state released its allocated share in the Williams punitive damages award and, if so, what should happen to that money." Id. That case, in which the attorneys participated, ultimately made its way to the Oregon Supreme Court, which, in 2011, decided that the state did not release its right to 60 percent of the punitive damages award in Williams when it executed the MSA. Id. at 388.

Eventually, in 2012, Philip Morris paid more than $102 million to the state, representing 60 percent of the punitive damages award plus interest. Thereafter, pursuant to the 2004 agreement, the state paid just over $46 million of that amount to the estate. Under the terms of the fee agreement, approximately $18.4 million of that money would have been paid by the estate in fees to the attorneys, who filed petitions for attorney fees seeking that amount in the probate court. The court awarded the attorneys the fees to which the parties agreed the attorneys were entitled (approximately $8.4 million). However, as to the approximately $10 million remaining that the attorneys asserted was due ...


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