A legal controversy in Bexar County over lawsuits seeking millions from Purdue Pharma, the maker of OxyContin, and other opioid manufacturers is producing echoes from the Great Tobacco Lawsuits of the late 1990s. As with tobacco, opioid companies addicted millions of Americans to life-threatening substances by falsely marketing them as nonaddictive.
Since 1999 more than half a million Americans have died from opioid overdoses.
Tobacco lawsuits filed by states around the country led to billions of dollars in settlements, and opioid settlements are heading the same way. In December, major manufacturers and distributors of opioids proposed a settlement of $26 billion for state and local governments.
For Bexar County, the issue in controversy is the same as it was two decades ago with tobacco. Will the urban public hospitals and health systems, which provide the most services to indigent opioid victims, get their fair shares?
As outlined recently by San Antonio Express-News columnist Gilbert Garcia, the local disagreement is between two local law firms hired by Bexar County. One firm, Watts Guerra, has signed on to a plan by Attorney General Ken Paxton that would pay Bexar County $7 million plus an undetermined amount from a statewide fund established by the settlement.
The other firm, Phipps Mayes, argues that we should hold out for more. County Judge Nelson Wolff is leaning toward the latter, noting that the state’s Republican leadership has been openly hostile to Texas’ largest cities.
The details may make a later column, but for now I want to celebrate something as a citizen, if bemoan it as a columnist: The current opioid litigation appears to be happily/sadly lacking in the sorts of dramatic scandal and controversy that Texas generated in the tobacco wars. The scale of scandal and controversy back then was beneficial to the economic fortunes of newspapers and television news.
The biggest major controversy was over the fees paid to the five members of the who’s who of trial lawyers hired by then-Attorney General Dan Morales. The firms pocketed a hefty $3.2 billion based on the $17.3 billion the State of Texas netted from the settlement. The public was not mollified by the fact that the firms had spent $30 million on the massive litigation and would have received nothing if they lost.
The greatest scandal involved Morales, a San Antonian and a Harvard law graduate who was attorney general at the age of 34 and the first Hispanic elected statewide in Texas. He had been almost monk-like as a legislator and maintained a clean image for much of his term as attorney general. But he ended up in federal prison on a plea deal after being charged with fraudulently attempting to get $260 million in legal fees from the tobacco settlement for a friend who had done little to no work on it. In addition, Morales had been charged with illegally converting $420,000 in political contributions for personal use.
I was working at the Houston Chronicle while Morales was still in prison when I was tipped to another apparent tobacco-related legal scandal – one about lawyerly greed that remarkably turned into a story about lawyerly generosity.
Morales had provided no money for county hospitals out of his massive tobacco settlement, so a group of the largest Texas public hospital districts had held up Morales’ huge settlement by suing to get their share.
Harris, Dallas, and El Paso counties were all represented by a respected Dallas law firm charging $225 an hour. But when that firm recommended a $400 million settlement and the other two counties signaled they were willing to take it, Harris dumped the firm and hired a hotshot Houston attorney who had won many rich malpractice awards.
To say Richard Mithoff was politically well-connected is an understatement. He has raised many millions in campaign dollars for Democrats, hosting fundraisers in the 12,000-square-foot house he owned in Houston’s tony River Oaks community. Just two weeks before receiving his contract from the Harris County Commissioners Court he had played host to one with then-President Bill Clinton as the headliner.
Just three weeks after he won the county’s contract, before work on an anticipated trial was even underway, the case settled and he won a fee of about $30 million.
Some of the other participants in the suit were outraged. How could politicians give $30 million to a lawyer for less than three weeks of work? Suspicions of a kickback must have danced in some minds.
In a way, there was a kickback. But first, the rest of the story.
As for the political connections, Mithoff was selected by Harris County’s elected county attorney, a Republican. When the matter of a fee came up, Mithoff told the county attorney he would agree to whatever was proposed, as long as it won unanimous support from the Harris County Commissioners Court. A majority of that court, including the county judge, was Republican.
The contract was for a contingency fee under which Mithoff would get nothing if the county’s take was based on the state’s $400 million proposal or less. In addition, the contingency fee was between 5.5 percent and 8 percent – much lower than the standard 40 percent for malpractice cases.
(By comparison, the attorneys working for Bexar County’s opioid suit are to share 35 percent of the county’s winnings, though the lawyers will have to pay the expenses.)
Good fortune helped all the counties. The federal judge in the case asked a highly regarded state senator, Bill Ratliff (R-Mount Pleasant) to attempt a mediation. As chairman of the Senate Finance Committee, he was aware that the tobacco settlement included a clause providing that if any state received a richer award Texas would get the same. Minnesota had just provided Texas with a $2.2 billion windfall.
Ratliff decided that the entire amount should be turned over to the counties, despite suggestions by some lawyers from the attorney general’s office that they would settle for less.
“We’re not going to squeeze them,” Ratliff later recalled saying to the AG staffers.
Some of the other attorneys involved, however, thought there was more than magnanimity involved. One of them was Robert Ries, the lead lawyer for Dallas and El Paso, who had been dismissed by Harris County. Working for months, his large Dallas firm had earned only $33,000, yet he was not resentful about Mithoff’s millions.
“Mithoff brought a good additional skill set as a plaintiff’s law type, knowledge of the players and knowledge of the issues,” said Ries. “If the judge did grant our intervention, we would have to go to war against not only Big Tobacco but the state of Texas as well. I was happy to have any big-time help on my side.”
J. Gregory Hudson, representing Montgomery County, just north of Houston, put it this way: Mithoff and his firm “are perceived as being the best trial lawyers in Texas. It made the other parties sit up and pay attention that we were serious and had the horsepower – or Harris County did – to go to trial if we needed.”
In the end Mithoff’s fee, estimated at “way more than $30 million” by the No. 2 official in the county attorney’s office, was never calculated. Mithoff said he would take $20 million.
Here’s where the “kickback” came in: He donated half his take, $10 million, to the county’s hospital.
Sure, he did very well with $10 million for what turned out to be very little work. But he gave up more than $20 million. There are some who would not have.
Bexar County did well. It received $21 million initially as part of the settlement and has been getting an increasing amount annually, about $9 million last year.
Editor’s note: After this article was posted, it was learned that attorney T.J. Mayes had left the Phipps law firm Jan. 11.
