Two law firms suing Massachusetts for a record $1.3 billion in legal fees from the state’s tobacco settlement funds received a setback from a Superior Court judge yesterday who denied their motion for a summary judgment.

The firms, led by Brown Rudnick Berlack & Israels of Boston, contended they are owed a 25 percent contingent fee from the $8.3 billion the state was awarded because they had a ”valid, binding, and enforceable contract.”

But Justice Allan Van Gestel cited several reasons for turning them down, saying he wants to fully air the complex issues involved in the case. He also said the lawyers face ethical issues in their pursuit of the fees because the case raised questions as to whether the fees ”must be reasonable and, if so, whether they are.”

State officials have suggested the fees sought are excessive. The firms have already received $775 million in fees over 25 years directly from the tobacco industry for their work.

The issue has created considerable debate within the Boston legal community and elsewhere.
Brown Rudnick’s lawyer, R. Robert Popeo, argues that the issue is a matter of contractual law, with the state’s integrity at stake.

Popeo has compared the law firms’ decision to take on the case to an extremely high-risk business venture, noting lawyers were agreeing to take the case when most analysts believed the state had little chance of prevailing.

The other firm suing to recover fees is San Francisco-based Lieff Cabraser Heimann and Bernstein. Another firm, Thornton & Naumes of Boston, is supporting the suit, but is not a plaintiff.

Van Gestel said there is ”substantial” public interest because of the state’s fiscal problems. He also said that ”there are elements involving the reputation of the bar that ought to be considered.”

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