PHILIP MORRIS, INC.; R.J. REYNOLDS TOBACCO COMPANY; BROWN & WILLIAMSON TOBACCO CORPORATION; B.A.T. INDUSTRIES P.L.C.; LORILLARD TOBACCO COMPANY; LIGGETT GROUP, INC.; UNITED STATES TOBACCO COMPANY; HILL AND KNOWLTON, INC.; THE COUNCIL FOR TOBACCO RESEARCH - U.S.A. INC.; and THE TOBACCO INSTITUTE, INC.,

PLAINTIFF'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO DISQUALIFY COUNSEL

INTRODUCTION

The Attorney General, as the chief civil law enforcement officer for the State of Connecticut, is statutorily entrusted with broad powers to protect the public interest of the State and enforce its laws. Given the imposing scope of his duties, the Attorney General has been granted substantial discretion over the particular means by which he fulfills his responsibilities, including the authority to procure such assistance as he requires. For years, successive Connecticut Attorneys General have routinely exercised their authority to seek assistance from private counsel, on a contingent fee basis, to augment the resources of the Attorney General's Office and fully protect the interests of the State.

Despite the State's long history of retaining private counsel on a contingent fee basis, the defendants, in the present motion, challenge the Attorney General's authority to enter into such agreements. Although the defendants' challenge seemingly has nothing to do with the merits of the plaintiff's claims against the tobacco industry, in fact it will have a decisive effect on whether the merits of the plaintiff's claims in the present case are ever fully and fairly adjudicated. As many former plaintiffs have discovered, the costs of litigating against the tobacco industry are staggering. Indeed, one of the defendants' counsel has confessed in another lawsuit that:

[T]he aggressive posture we have taken regarding depositions and discovery in general continues to make these cases extremely burdensome and expensive for plaintiffs' lawyers, particularly sole practitioners. To paraphrase General Patton, the way we won these cases was not by spending all of [RJR]'s money, but by making that other son of a bitch spend all of his.

Haines v. Liggett Group, Inc., 814 F. Supp. 414, 421 (D.N.J. 1993) (quoting an April 29, 1988 memorandum authored by J. Michael Jordan, counsel for R. J. Reynolds). Because, as the defendants well know, the State would be unable to contest the multi-billion dollar tobacco industry on anything approaching an even playing field without a contingent fee agreement with its chosen counsel, the defendants, in effect, seek to prohibit the State from proceeding with this lawsuit.

Defendants' arguments are fundamentally flawed as a matter of law. Indeed, two of the three states that have already considered the defendants' arguments on this issue have expressly rejected them. See Philip Morris, Inc. v. Parris Glendening, Case No. CG 2829 (Talbot County Circuit Ct, Md, August 8, 1996) (attached hereto as Exhibit C); State of Minnesota v. Philip Morris, Inc., No. C1-94-8565 (D. Minn. Nov. 29, 1994) (Exhibit D). [The State notes that a contingent fee agreement entered into by the Attorney General of West Virginia was invalidated in Attorney General ex rel State of West Virginia v. The American Tobacco Co. et al , No. 94-C-1707 (Kanawha County Circuit Ct., W.Va., Nov. 30, 1995) (Exhibit E) on the ground that, under West Virginia specific statutory provisions, the Attorney General may only hire assistant attorneys general at compensation expressly appropriated by the legislature. As discussed infra , no such limitations exist under Connecticut statutory law, which expressly authorizes the Connecticut Attorney General to "procure such assistance as he shall require." Conn. Gen. Stat. § 3-125. ] For all of the reasons set forth below, the defendants' motion should be denied.

STATEMENT OF FACTS

On July 18, 1996, the State of Connecticut filed this action against ten tobacco companies and affiliated entities. The suit, which asserts violations of the Connecticut Unfair Trade Practices Act ("CUTPA"), the Connecticut Antitrust Act and Connecticut common law, inter alia, seeks to end the defendants' conspiracy to hide and suppress their knowledge of the dangerous and addictive qualities of tobacco products, to stop their practice of aggressively targeting their products to children, and to recoup the millions of dollars in Medicaid and other expenses that the State has incurred in treating the thousands of state residents who have suffered, and are suffering, from tobacco-related illnesses.

Pursuant to his broad authority under Connecticut common law and, inter alia, Sections 3-125, 42-110m, 35-32, and 33-301 of

the Connecticut General Statutes, the Attorney General is responsible for managing all aspects of this case. Prior to filing the complaint, the Attorney General determined that, given the nature of this case, counsel with particular expertise in complex litigation, and the resources to pursue such litigation, should be hired to assist him in representing the State. He therefore issued a request for proposal and retained the law firms of Silver Golub & Teitell of Stamford, Connecticut, and Berger & Montague, P.C. of Philadelphia, Pennsylvania. An agreement between the State, acting through its Attorney General, and these two private firms was signed on July 17, 1996. On September 10, 1996, the agreement was amended to provide that two additional private firms, Carmody & Torrance of Waterbury, Connecticut, and Emmett & Glander of Stamford, Connecticut, would also assist the State (as amended, the "Agreement," attached hereto as Exhibit A).

Under the Agreement, the private attorneys agreed to assist in the litigation and to advance up to $100,000 per year to pay disbursements for expenses and costs. (Exhibit A, §3.5) In return, the State agreed to pay the firms 25% of the amount recovered and collected by the State, after reimbursement for costs and expenses. (Exhibit A, §3.1) Any and all compensation due to the private attorneys under the Agreement is contingent upon a monetary recovery being obtained. In the event a non-monetary settlement is reached, the Attorney General has agreed to seek compensation for the private attorneys from the defendants or the Court, or to petition the General Assembly to appropriate funds for that purpose, although the Attorney General has no authority to, and has not committed to, require or obligate the General Assembly to make such an appropriation. (Exhibit A, §§3.7-3.8) Thus the private attorneys have assumed the risk that, despite what will undoubtedly be a huge investment of time and money, they may never be compensated.

Significantly, despite the substantial assistance to be rendered to the State by the private attorneys, the Agreement makes clear that the Attorney General retains the ultimate authority over all aspects of the litigation. Specifically, the Agreement states, in pertinent part, that:

The Attorney General retains and shall exercise final authority over any and all aspects of the Litigation, including, but not limited to, hiring of experts and consultants, legal positions, litigation strategy and the decision to mediate, settle or withdraw the Litigation with

respect to any and/or all parties to the Litigation. The Attorney General shall designate a member or members of his staff to monitor the conduct of the Litigation, and the Attorney General and/or any of his designees shall personally participate in any aspect of the Litigation at the discretion of the Attorney General.

(Exhibit A, §1.2). The duties of private counsel are made expressly subject to this provision of the Agreement. (Exhibit A, § 1.1 referring to § 1.2). Thus, the private attorneys are at all times subject to the authority of the Attorney General with regard to their handling of this case.

The use of private counsel to assist the Attorney General in this case is consistent with the long-standing practice of Connecticut Attorneys General to hire outside counsel as necessary to augment the resources of their office. [The first biennial Report of the Connecticut Attorney General, filed by Attorney General Charles Phelps on January 9, 1901, indicated that assistance from private counsel was sought as early as 1899 to handle out-of-state mortgage foreclosures and to assist with other matters "when interests at different places in the state require attention at the same time." The report lists seventeen instances in which private counsel were hired by the Attorney General in 1899-1900. (Exhibit F). Similarly, subsequent reports indicate this practice. See Biennial Reports of the Attorney General dated 1905 through 1927. Id .] In many situations, a contingent fee agreement is the only method of compensation by which the State, given its considerable budget constraints, can feasibly supplement its resources and employ necessary assistance. As a result, contingent fee agreements have been used by the State in a variety of contexts, such as to prosecute antitrust cases, to handle collection matters for individual state agencies, to collect unclaimed property, and to recover judgments in specific cases. [The Attorney General has copies of contracts evidencing multiple instances in which the State has entered into contingent fee agreements with private counsel over the past twenty five years. (Exhibit B ¶4; Exhibit J) In none of these instances was the propriety of such an agreement ever questioned. (Exhibit B ¶ 8)] (Exhibit B, ¶ 5; Exhibit J) The money to pay the private attorneys in each of these cases typically comes from the money collected or created through the efforts of the private attorneys themselves or from general appropriations for state agencies. (Exhibit B, ¶ 7)

ARGUMENT

THE DEFENDANTS LACK STANDING TO CHALLENGE THE ATTORNEY GENERAL'S AUTHORITY TO ENTER INTO A CONTINGENT FEE AGREEMENT WITH PRIVATE COUNSEL

The defendants first seek to challenge the Attorney General's Agreement with private counsel in this case on the grounds that the Attorney General lacks the authority to enter into such an agreement and/or that, under the Agreement, the Attorney General may potentially be appropriating funds in violation of Connecticut law. The State submits that these contentions are without merit. Moreover, defendants lack standing to raise these challenges to the State's Agreement with its counsel.

"It is a basic principle of law that a plaintiff must have standing for the court to have jurisdiction." Unisys Corp. v.

Department of Labor, 220 Conn. 689, 693 (1991). "Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy." Id. at 693. In the present case, the defendants do not have any right, title or interest in the plaintiff's contingent fee agreement with its private counsel that is sufficient to confer standing to invoke the jurisdiction of this Court to challenge the Attorney General's authority to enter into the Agreement. [The State does not, however, dispute that defendants have standing to contend that the Agreement violates their due process rights, although, as discussed infra , the State disputes the existence of any due process violation.]

The defendants claim to have standing to bring the current motion based on their status as Connecticut taxpayers. Defendants' Brief at 2 n.1. Under Connecticut law, "[a] taxpayer has standing only if the threatened action would result directly or indirectly in an increase in taxes or would in some other fashion cause him irreparable injury." Hiland v. Ives, 28 Conn. Supp. 243, 245 (1966). It is not enough for the taxpayer simply to show that he is a taxpayer, or that the conduct at issue is illegal; he must also show that "the illegal conduct has caused or will cause him a pecuniary or other direct loss as a taxpayer." Id. at 246. "Such a loss may not be based on argument, conjecture or hypothesis." Nania v. Borges, 41 Conn. Supp. 90, 95 (1988). These rules apply to both municipal and state taxpayers. Id. at 94.

In the present case, the defendants have made no showing, or even any claim, that they will suffer a pecuniary or other direct loss as a result of the Agreement. Indeed, the entire purpose of the contingency fee Agreement is specifically to enable the State to undertake this litigation without burdening state taxpayers with the enormous cost of hiring additional assistant attorneys general to handle the case "in-house" or paying private counsel up-front on an hourly basis.

Under the Agreement, compensation due to the private attorneys is contingent on there being a monetary recovery by the State. (Exhibit A, §3.1) In the event that the State loses the case, the State will owe nothing to its attorneys. Even if the case results in "in-kind" payment or purely injunctive relief, the State has agreed to seek attorneys' fees and disbursements first from the Court or the defendants, and, only if unsuccessful, to petition the General Assembly to appropriate funds. (Exhibit A, §§3.7 and 3.8) Only in the unlikely event that the State withdraws the litigation prior to judgment or settlement will it petition the General Assembly for an appropriation without first seeking fees and costs from the defendants or the Court. (Exhibit A, §3.9) Even if an appropriation is sought, however, there is no guarantee that it

will be approved. As all parties to the Agreement acknowledge, "the Attorney General has no authority to require or otherwise obligate the General Assembly to make such an appropriation and such a decision is within the sole discretion of the General Assembly." (Exhibit A, §§3.7, 3.8, 3.9) [The fact that the private attorneys have contractually agreed to these provisions, which govern even in the event they are discharged by the Attorney General prior to settlement or judgment, (Exhibit A, §4.3) distinguishes this case from the cases involving claims for fees in quantum meruit cited by the defendants. See Defendants' Brief at 14, citing Cole v. Myers , 128 Conn. 223 (1941); R & S Landscaping v. Barberino , No. 326769, 1992 WL 124115 (Conn. Super. June 1, 1992) (Defendants' Exhibit J). In those cases, there either was no express contract or the contract did not cover the situation at issue. In the present case, the agreement is comprehensive and explicitly states that private counsel have assumed the risk that they may not be paid at all. When there is an express agreement regarding the amount of payment, the quantum meruit theory does not apply. Perlmutter v. Johnson , 6 Conn. App. 292 (1986), cert . denied , 479 U.S. 1035 (1987).] In any event such action by the General Assembly would not be incumbent upon it as a result of the Agreement challenged by the defendants. Thus, regardless of the outcome of this case, the conclusion that it will result in a tax increase as the result of an appropriation by the General Assembly is, at best, pure speculation. Such speculative loss does not confer standing on the defendants to bring this motion.

Nor can the defendants claim any other interest in the Agreement sufficient to establish standing. In particular, the Agreement has no relationship to the merits of the plaintiff's claims in the present case and its alleged illegality cannot be relied upon by the defendants as a defense to those claims. See Rice v. Farrell, 129 Conn. 362, 367 (1942); Perry v. Puklin Co., 100 Conn. 104, 110 (1923). As stated by the Connecticut Supreme Court:

The usual [champertous agreement] is that a stranger to the litigation will assist one having a pre-existing right to enforce it in court in return for a share in the proceeds of the action. The right, to enforce which the action is brought, does not originate in the illegal agreement nor is proof of that agreement necessary to its establishment and the agreement is therefore not so related to the action that the court will regard it.

Rice, 129 Conn. at 367 (emphasis added). [It should be noted that Connecticut has never adopted the common law rule against champerty and maintenance in civil actions. Mall v. LaBow , 33 Conn. App. 359 (1993).] Thus, as a general rule, the fact that a third party has enabled the plaintiff, through a private agreement, to bring suit against a defendant does not give the defendant standing to challenge the agreement.

Because the Agreement is unrelated to the plaintiff's claims against the defendants, and the defendants cannot show that they will suffer any pecuniary or other direct loss as a result of the agreement, the defendants lack standing to challenge the Attorney General's authority to enter into the Agreement.

THE ATTORNEY GENERAL HAS BROAD AUTHORITY TO HIRE PRIVATE ATTORNEYS AND TO COMPENSATE THEM ON A CONTINGENT FEE BASIS

In Connecticut, contingent attorneys' fee agreements are both lawful and ethical. See Connecticut Rules of Professional Conduct, 1.8(e) and 1.8(j); Marcus v. DuPerry, 223 Conn. 484, 489 (1992). For years, successive Connecticut Attorneys General have routinely exercised their broad authority under Section 3-125 of the Connecticut General Statutes to appoint outside counsel from the private sector, on a contingent fee basis, to assist them in carrying out the responsibilities of the office. In challenging the authority of the Attorney General to enter into a contingent fee agreement with private counsel in the present case, the defendants totally ignore the broad scope of the Attorney General's authority.

Under the Connecticut Constitution, and Section 3-125 of the Connecticut General Statutes, the Attorney General is the chief civil law officer for the State of Connecticut. Commission on Special Revenue v. Freedom of Information Commission, 174 Conn. 308, 318-19 (1978). As such, he is responsible for the general supervision of "all legal matters in which the state is an interested party," [The sole exception is for "legal matters over which prosecuting officers have direction." Conn. Gen. Stat. §3-125. In Connecticut, the division of criminal justice, under the direction of the chief state's attorney, is responsible for the investigation and prosecution of all criminal matters. Conn. Const. Amend. XXIII (1984); Conn. Gen. Stat. §51-277.] and must, among other duties, represent the State and its officers in all suits and other civil proceedings in which the State is a party or is interested, represent the public interest to protect any gifts, legacies or devises intended for public or charitable purposes, provide all legal services required by state boards and officers in the performance of their official duties, and render legal advice and opinions to legislators, executive departments, state boards and commissions as requested. Conn. Gen. Stat. §3-125. All suits in which the Attorney General appears for the State, its officers or legislators must be conducted by the Attorney General or under his direction. Id.

In order to carry out his substantial responsibilities, the Attorney General is statutorily empowered to hire others to assist him. In particular, Section 3-125 of the Connecticut General Statutes states that the attorney general: (1) "shall appoint a deputy;" (2) "may also appoint not more than four associate attorneys general who will serve at the pleasure of the attorney general and be exempt from classified service;" (3) "shall appoint such other assistants as he deems necessary, subject to the approval of the governor" and (4) "may procure such assistance as he shall require."

Because all words in a statute must be given independent meaning, and cannot be treated as mere surplusage, Harris Data Communications, Inc. v. Heffernan, 183 Conn. 194, 197 (1981), the latter provision, authorizing the Attorney General to "procure such assistance as he shall require," must authorize the Attorney General to procure assistance other than that of deputy, associate or assistant attorneys general. Any other interpretation would render the provision duplicative of the other provisions in the statute. Indeed, the Attorney General has

long interpreted this provision as the source of his authority to hire outside counsel. [When the Office of the Attorney General was first created in 1897, the Attorney General had the authority "to secure such assistance as the duties of the office may require." 1897 Conn. Pub. Acts, Chap. CXCI, §4. In 1902, this language was amended to read, as it currently does, that the Attorney General "may procure such assistance as he may require." Conn. Gen. Stat., Revision of 1902, §146. The additional statutory provisions authorizing the Attorney General to hire a deputy and "such other assistants as he shall deem necessary" were not enacted until 1927. 1927 Conn. Pub. Acts, Chap. 132. The authority to appoint four associate attorneys general was not added until 1983. 1983 Conn. Pub. Acts No. 83-548. (Exhibit G) Because the Attorney General hired private counsel on many occasions prior to 1927, see footnote 2, supra , and biennial reports cited therein, the source of his authority must have been the only statutory language on the issue that existed at the time, namely the authorization to "procure such assistance as he may require."]

Significantly, the Attorney General's authorization to "procure such assistance as he shall require," contains no restrictions on whom he may hire, or under what conditions. It does not state that he cannot hire private counsel, or may do so only if compensation is on an hourly basis. Nor does it require an appointment or specific approval. [The fact that Section 3-125 grants the Attorney General such broad authority to hire assistance distinguishes it from the statute at issue in Attorney General ex rel. State of West Virginia v. The American Tobacco Co. et al , Civil Action No. 94-C-1707 (Kanawha County Circuit Ct., W.Va., Nov. 30, 1995) (Exhibit E), on which defendants rely. In that case, the Attorney General was only authorized to hire assistant attorneys general, and the compensation of such assistants was statutorily limited to amounts appropriated by the legislature. In Connecticut, the Attorney General is authorized to procure other types of assistance, without any restrictions on the method of compensation. To the extent that there are any statutory or constitutional limits on the compensation of assistant attorneys general, they are wholly irrelevant to the present case.]

When the language of a statute is clear and unambiguous, the court must regard the statutory language as conclusive and should look no further to determine the legislative intent. Berry v. Loiseau, 223 Conn. 786, 830 (1992); State v. Spears, 234 Conn. 78, 86 (1995). Most importantly, the court must not, by judicial implication, read provisions into the statute that the legislature did not see fit to include. Glastonbury Co. v. Gillies, 209 Conn. 175, 179 (1988); Houston v. Warden, Connecticut Correctional Institute, 169 Conn. 247, 251 (1975).

In the present case, given its clear and unambiguous language, Section 3-125 must be construed to mean exactly what it says, without any limitation on the Attorney General's discretion to procure assistance on a contingent fee basis. [The sole state statutory or constitutional limitation on the payment of contingent fees to private attorneys is contained in Conn. Gen. Stat. §52-251c. Section 52-251c simply caps the contingency fee percentage in certain actions, however, and has no relevance to the present case.] Indeed, this was precisely the conclusion reached by the courts in Maryland and Minnesota in rejecting the tobacco companies' challenges to contingent fee arrangements in those states. See Philip Morris, Inc. v. Parris Glendening, (Exhibit C); State of Minnesota v. Philip Morris, Inc., (Exhibit D).

In the Maryland case, the relevant state statute authorized the Attorney General to hire "assistant counsel" in "extraordinary or unforeseen" cases, but did not explicitly authorize him to compensate such counsel on a contingent fee basis. Despite this fact, and despite the fact that the Maryland Attorney General does not have any common law powers, the court concluded that fundamental rules of statutory construction prohibited it from reading a prohibition on contingent fee contracts into the statute. As stated by the court:

[T]he plain language of [the statute] does not place any limitation on the source of funds from which assistant counsel may be compensated. Therefore, the Court declines to read the provision to bar affirmatively the Attorney General from entering into a contingent-fee contract with private counsel. To so construe an unambiguous provision would be to adopt an overly rigid interpretation that would limit

unreasonably the scope of its operation.

Philip Morris, Inc. v. Parris Glendening, at 23 (Exhibit C).

Likewise, in Minnesota, the relevant statute did not explicitly authorize the Attorney General to enter into contingent fee contracts. Nonetheless, the court held that the Attorney General had such authority based on his broad grant of statutory authority to "employ such assistance... as [he] deems necessary," the state's long history of using contingent fee retainers, and the fact that the defendants "failed to cite any statutes or case law which explicitly states that the attorney general is prohibited from utilizing contingent fee arrangements in the prosecution of civil matters." State of Minnesota v. Philip Morris, Inc., at 4 (Exhibit D). [The use of private counsel by government on a contingent fee basis is not a new phenomenon. See , e.g ., State ex rel Bermudez v. Heath , 20 La. Ann. 172 (1868) (approving employment of lawyer on contingency basis for collection of unsatisfied judgments); Waterbury & Co. v. City of Laredo , 60 Tex. 519,522 (1883); Town of Mannford v. Wetson , 394 P.2d 506 (Okla. 1964). See also discussion and cases cited, infra , at p. 20. ]

The same arguments apply in this case and compel the conclusion that the Attorney General is authorized under Connecticut law to enter into contingent fee agreements with private counsel.

Finally, the State submits that it is not for defendants to second guess the decisions of its chief civil law enforcement officer that it is necessary, in order to pursue this case, for the State to retain private counsel on a contingent fee basis to preserve the resources of the State. Plainly, however, the wisdom of the Attorney General's decision is evident even from the brief five month history of these proceedings. Defendants in this action are represented by over ten of this state's and nation's largest law firms, with over thirty attorneys filing appearances on behalf of defendants, and no doubt legions more assigned to work on this matter. A number of the defendants have filed a so-called preemptive lawsuit in federal court and all defendants attempted to remove this action to federal court--litigation steps that have already required substantial legal time and expertise. Defendants have represented in a pleading filed with this Court that they have already spent tens of millions of dollars in defending the action brought against them by the State of Minnesota, see Def. Mem. in Support of Motion for Case Management Order at 8 n.5 , and have publicly stated that they will defend this case aggressively as well.

THE COMPENSATION OF PRIVATE ATTORNEYS ON A CONTINGENT FEE BASIS IS NOT AN UNLAWFUL APPROPRIATION OF STATE FUNDS

Despite the Attorney General's broad authority under Conn. Gen. Stat. 3-125, the defendants would have this court hold that the contingent fee agreement is nonetheless void because it constitutes an unlawful contract to pay counsel with public funds that the General Assembly has not appropriated. This argument is based on the wholly erroneous assumption that any and all funds

that may be recovered in this action belong to the State and must be deposited into the general fund. Because such finds do not belong to the State and are not required to be deposited in the general fund, the defendants' argument that they cannot be paid to private counsel without an appropriation is wrong as a matter of law.

Contingent Fees owed to private counsel do not belong to the state and need not be deposited into the general fund

The defendants base their claim on an erroneous interpretation of Sections 4-32 and 35-32a of the Connecticut General Statutes and Article IV, Section 22, of the Connecticut Constitution. Conn. Gen. Stat. §4-32 provides that:

Each ...state agency and official....receiving any money or revenue for the state, shall, within twenty-four hours of its receipt...pay the same to the treasurer or deposit the same in the name of the state in depositories designated by the treasurer.

Article IV, Section 22 states that:

The treasurer shall receive all moneys belonging to the state, and disburse the same only as he may be directed by law. He shall pay no warrant or order for the disbursement of public money, until the same has been registered in the office of the comptroller.

Section 35-32a, which is limited to antitrust actions, requires that:

All (1) gifts or grants made to the state for antitrust enforcement purposes, (2) funds awarded to the state or any agency of the state for the recovery of costs and attorney's fees in an antitrust action, (3) civil penalties imposed pursuant to section 35-38, and (4) damages collected by the state for injuries to its business or property pursuant to a judgment or settlement agreement in an antitrust action, shall be deposited in the general fund.

By their express terms, Conn. Gen. Stat. §4-32 and Article IV, Section 22, apply only to money that is "received" by state officials "for the state." Likewise, Section 35-32a only applies to funds awarded "to the state" for the "recovery" of costs and attorney's fees [Moreover, with regard to damages, Section 35-32a refers only to amounts "collected by the state for injuries to its business or property" but is not applicable by its terms to monies collected as damages to "persons residing in the state" or to "damages to the general economy of the state" as provided for in Conn. Gen. Stat. § 35-32(c)(1) and (2), both of which are claimed in the complaint.] , thereby limiting its application to costs and attorney's fees that were paid by the State and are being recovered by the State on its own behalf. [An earlier version of Conn. Gen Stat. § 35-32a provided that antitrust judgments, settlements and civil penalties had to be deposited into a special fund to be used by the Attorney General's Office to finance antitrust litigation. See 1976 Conn Pub. Acts No. 76-327, as amended by 1980 Conn. Pub. Acts No. 80-111. The defendants speculate, without citing any legislative history or legal support whatsoever, that the fact that the provision for a special fund was repealed in 1985 means that the Attorney General cannot fund antitrust litigation from actual or prospective antitrust awards. See 1985 Conn. Pub. Acts No. 85-410. This conclusion is totally unfounded. The special fund obviously did not, and could not, contain prospective antitrust awards. It only included awards that had already been recovered. Thus, financing an antitrust suit through a contingent fee agreement based on a prospective award was an alternative to financing a suit up front from the special fund. Indeed, the State entered into multiple contingent fee agreements during the nine years when the special fund was in existence. (Exhibit J; Exhibit B, ¶6) The fact that the fund no longer exists does not mean that alternative methods of financing, such as a contingent fee agreement based on a prospective award, are therefore foreclosed.] A contingent fee, however, is not a recovery for previously expended state funds, nor is it received for the State. Indeed, it typically never goes to the state treasury at all. Rule 1.5(c) of the Connecticut Rules of Professional Conduct states that "[u]pon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination." Thus, the rule contemplates that the attorney will retain the attorney fee portion of the recovery and remit to the client only the client's share. This is consistent with Connecticut common law which gives a lawyer, in order to secure his fee, an equitable lien on funds recovered for his client. The lien allows him to retain that portion of the recovery that constitutes his fee prior to remitting the balance to his client. Perlmutter v. Johnson, 6 Conn. App. 292, 298 (1986), cert. denied, 479 U.S.1035 (1987); Cooke v. Thresher, 51 Conn. 105 (1883). In the present case, the contingent fee would be retained by private counsel and only the State's share of the recovery, net of attorneys' fees, would be received by the State and deposited into the state treasury.

Even if the recovery is not remitted directly to private counsel, nothing in the Connecticut General Statutes or the state constitution prohibits the State's portion of the recovery from being received and deposited net of attorneys' fees. Indeed, this is precisely the procedure contemplated by numerous other Connecticut statutes which require funds created for the State by the efforts of third parties to be deposited into the state treasury after the costs incurred in creating the funds have been subtracted. For example, Conn. Gen. Stat. §10-4f authorizes the State Board of Education to obtain copyrights and patents for the State, although only the "net proceeds" derived from these patents and copyrights must be deposited in the general fund. Conn. Gen. Stat. §3-20(f) provides that the net earnings on the investment of bond proceeds, and accrued interest and premiums on the issuance of bonds, shall be deposited into the general fund after payment of expenses incurred by the treasurer or State Bond Commission in connection with their issuance. Conn. Gen. Stat. §3-62e requires the state treasurer to pay all costs incident to the collection and recovery of escheated funds prior to depositing the remainder into the general fund for the use of the

State, and Conn. Gen. Stat. 53-397(b)(5)(A) provides that the receiver of property forfeited to the State under the Corrupt Organizations and Racketeering Activity Act shall remit to the court clerk the "net proceeds" of the property sale. In each of these examples, the expenses incurred in generating the funds at issue are paid before the funds are deposited into the state treasury.

Courts in other jurisdictions have likewise concluded that money recovered for a governmental entity should be remitted to the government net of the costs of recovery. See, e.g., State v. Musgrave, 370 P.2d 778, 785-86 (Idaho 1962), citing State v. National Surety Co., 161 P. 670 (Idaho 1916) (Sullivan, J., dissenting) ("[U]ntil money actually reaches the state treasury it is not state money and only the remainder of the recovery after payment of expenses is state money...[T]he courts may properly provide for the payment of such expenses before the recovery is paid to the state"); Barnard v. Young, 251 P. 1054, 1057 (Idaho 1926) ("The contingent fee herein provided for was not a charge against, nor to be paid out of the revenues of the county, but was to come out of such moneys as might be recovered in the several suits"); State v. West, 21 N.E. 2d 987 (Ohio 1939) (attorneys' fees may be paid out of a fund collected for the state prior to its remittance despite a state constitutional provision prohibiting payment of claims against the state without legislative approval); Board of Commissioners v. Clapp, 86 N.W. 775, 777 (Minn. 1901) (attorneys' fees for collection of delinquent taxes may be deducted prior to remitting the remainder of the money to the county, despite the existence of a statutory procedure for claiming payment of fees from the county treasury); Button's Estate v. Anderson, 28 A.2d 404, 410 (Vt. 1942) (attorney's equitable rights to attorney's fees paid out of a fund recovered on behalf of the state were not defeated by constitutional and statutory provisions requiring appropriations for the expenditure of state revenues). See also n.11, supra.

The defendants cite no law to the contrary. The only cases cited by the defendants on this issue are either clearly distinguishable from the present case or simply do not address the critical question. [The out-of-state cases cited by the defendants, see Defendants' Brief at 6 n.5, are inapposite and need not be discussed individually because they all hold that state funds must be deposited into the state treasury and properly appropriated, but do not consider whether fees or expenses necessary to generate those funds belong to the state.] For example, Erickson v. Foote, 112 Conn. 662 (1931), involved costs, not legal fees, and concluded that an individual who voluntarily contributes the costs of suit, but is not a party to the suit, nor the attorney to a party, cannot enforce an execution for costs against the will of the party. Unlike the present case, there was no indication in Erickson that there was any form of agreement between the donor of the costs and the donee that the donor would be reimbursed. On the contrary, the court repeatedly described the donor as a "volunteer," who contributed to the suit "of his own volition." Id. at 666-67.

Under these circumstances, the fact that the court referred to the costs as the property of the donee is not significant.

Rapaport & Benedict, P.C. v. Stamford, 39 Conn. App. 492 (1995) is equally unilluminating. It held that the language of a collective bargaining agreement created a direct obligation from the City of Stamford to the plaintiff union member to pay the plaintiff's legal fees, but did not create any such direct obligation to the plaintiff's attorney. Because the case was based on the particular language of a collective bargaining agreement, rather than on common law, it has no relevance to the present case.

The only other case cited by defendants on this issue, Connecticut v. Levi Strauss & Co., 471 F.Supp. 363 (D.Conn. 1979), involved civil penalties and attorneys' fees sought by the Attorney General as parens patriae on behalf of the State under the State Antitrust Act, but did not address the issue that is critical to this case, namely whether attorneys' fees payable to private counsel pursuant to a contingency fee agreement must be deposited in the same manner as attorneys' fees that are intended to reimburse the state for its own attorneys' time. Because the case did not address this issue, and nowhere indicates whether the fees at issue were contingent fees, it is of no help to the defendants' case. [The two Attorney General's opinions cited by the defendants likewise do not support their claim that contingent attorneys' fees belong to the state and must be deposited to the general fund. The first, 28 Op. Conn. Atty Gen. 112 (1953), merely holds that state money coming into the state treasury without authorization to be placed in a special fund must be deposited into the general fund, but no way supports the contention that contingent fees belong to the State. The second, 1975 Op. Conn. Atty Gen. 1975 WL 283555 (June 18, 1975), holds that a state hospital board of trustees cannot deviate from a statutorily mandated employee compensation schedule, but does not govern the situation presented here in which there is no statutorily mandated method of compensation.]

Given the dearth of caselaw supporting the defendants' argument, it is not surprising that the two state courts that have explicitly considered the defendants' argument that contingent fees must be deposited to the state treasury have explicitly rejected it. See Philip Morris Inc. v. Glendening, (Exhibit C); State of Minnesota v. Philip Morris, Inc., (Exhibit D). [The West Virginia decision on which defendants rely did not address this issue because the statute at issue in West Virginia, unlike the Connecticut statutes, expressly stated that the compensation of assistants hired by the Attorney General would be limited to "amounts appropriated by the Legislature." See Attorney General ex rel State of West Virginia v. The American Tobacco Co. et al , Civ. No. 94-C-1707 (Kanawha County Circuit Ct., W. Va. Nov. 30, 1995). Given this language, the court did not have to decide whether contingent fees belonged to the state and had to be deposited in the general fund, but rather could hold for the defendants based on the fact that the fees at issue were never appropriated as required by the statute. ] In Maryland, the relevant language of the state constitution regarding the receipt of public funds is very similar to that of the Connecticut Constitution. [Article VI, Section 3, of the Maryland Constitution states, in pertinent part, that: The Treasurer shall receive the moneys of the State and, until otherwise prescribed by law, deposit them, as soon as received, to the credit of the State, in such bank or banks as he may, from time to time, with the approval of the Governor, select. Md. Code Ann. Const. art. VI, §3 (1981 repl. Vol.). Article III, Section 32, states that: No money shall be drawn from the Treasury of the State, by any order or resolution, except in accordance with an appropriation of law. Md. Code Ann.. Const. art. III, §32.] Nonetheless, the court upheld the Attorney General's contingent fee agreement with private counsel on the same grounds advanced by the State in the present case, namely that the fee would not come out of public funds held by the treasurer, but rather would be paid from the proceeds of the lawsuit prior to deposit in the state treasury. To hold otherwise, according to the court, would require the legislature to appropriate, in advance, monies that clearly belonged to the tobacco companies. Such legislative action, according to the court, would "not qualify as an 'appropriation' in any traditional sense, for an 'appropriation' constitutes an authorization to withdraw funds from the Treasury," and the funds at issue were not in the treasury. Philip Morris Inc. v. Glendening, at 25 (Exhibit C) (emphasis in original).

In addition to concluding that the defendants' argument was legally insupportable, the court further concluded that it defied common sense. According to the court, if the defendants' argument were adopted, it would mean that the Attorney General could never settle a case for less than the state's initial claim without an appropriation, because to do so would result in the opposing party retaining funds that "belonged" to the state. Id. at 26-27 .

The court further concluded that viewing the entire potential recovery as state money subject to the appropriations process would contravene the public interest. As characterized by the court, Maryland's suit against the tobacco companies was a "win-win" situation for Maryland taxpayers because they would not be significantly worse off if the suit failed and yet, if the suit succeeded, the state could recover billions of dollars that it had to spend at taxpayers' expense treating tobacco-related illnesses. Recognizing that the entire suit was driven by the contingent fee agreement, without which the state could not pursue what would undoubtedly be protracted and expensive litigation, the court concluded that "[t]o require this fiscally sound arrangement to be funded by the General Assembly would be to hamstring the Attorney General, for his efforts would likely be delayed, if not thwarted, by the cumbersome legislative process." Id. at 27.

In Minnesota, the court likewise rejected the defendants' argument. Choosing not even to discuss the merits of the defendants' argument that the fee was an unlawful appropriation, the court summarily denied the defendants' motion, finding that the authority of the Attorney General to hire assistance had no express limitations, that the Attorney General had historically relied on contingent fee arrangements, and that the defendants had failed to cite any statutes or caselaw that explicitly prohibited the Attorney General from utilizing contingent fee agreements in prosecuting civil matters. State of Minnesota v. Philip Morris, Inc., at 3-4(Exhibit D). For all the same reasons, a similar result is warranted here.

Contingent fees that are not deposited into the general fund need not be appropriated in order to be paid

As a general rule, state funds that are deposited into the state treasury cannot be expended without an appropriation. Because contingent attorney fees are not required to be deposited into the state treasury, however, no appropriation is necessary. Thus, the defendants' claim that the Attorney General has not sought an appropriation for the contingent fees in the present case is irrelevant and their reliance on statutes and caselaw concerning the appropriations process is completely misplaced.

In particular, the defendants erroneously rely on Conn. Gen. Stat.§ 4-98a and 4-100, which prohibit agencies from contracting for expenditures in excess of appropriated funds. Although the defendants cite a 1975 Attorney General's opinion that concluded that an agency that expends funds in excess of appropriations in violation of Section 4-100 may incur a penalty, they neglect to point out that a 1993 opinion explicitly held that contingent fees do not come out of appropriated funds and thus contingent fee agreements do not violate Section 4-100. In that opinion, the Department of Administrative Services ("DAS") questioned whether DAS would violate Conn. Gen. Stat. 4-100, or any other provision of the Connecticut General Statutes, if it hired a private collection agency on a contingent fee basis. The Office of the Attorney General concluded that Section 4-100 would not be violated, and indeed was inapplicable to the situation, because Section 4-100 "only applies where an agency spends in excess of its appropriated amounts. When an agency uses a private collection agency on a contingency fee basis it is not using appropriated funds because the fee comes out of the collected moneys, which moneys otherwise would be lost to the State". 1993 Conn. Op. Atty Gen. (1/13/93) (Exhibit H).

The defendants' reliance on two legislative bills that were never passed is also misplaced. The two bills, Conn. HB 6991, 1995 Sess., and Conn. HB 5817, 1996 Sess., were introduced in order to clarify various aspects of the Attorney General's authority to bring suit against the tobacco industry and included reference to the fact that the suit might be brought pursuant to a contingent fee agreement with private counsel. [Conn. HB 5817, 1996 Sess., provided, in pertinent part, that: The Attorney General may enter into an agreement with an attorney who is not an employee of the state to provide assistance in an action against a manufacturer of tobacco products, provided any provision to pay such attorney a percentage of the amount actually collected shall not exceed thirty per cent of the amount actually collected as a result of the efforts of such attorney.] As the Attorney General noted at the time, the bills were not intended to provide authorization for the present suit, because the Attorney General already has that authority, but rather to eliminate potential sources of litigation, including certain defenses the defendants might attempt to assert. Judiciary Committee Hearing, p. 1928, 2355A-C, March 21, 1996 (remarks of Attorney General Richard Blumenthal). Although neither bill made it to the House floor, discussion before the Judiciary Committee indicated that there were many questions about a number of different aspects of the bill. See Judiciary Committee Hearing, p. 1923, March 21, 1996 (comments of Rep. Scalettar); pp. 2042-2045 (comments of Elizabeth Gara) (Exhibit I). To conclude, as the defendants suggest, that the fact that these bills did not pass was in any way related to the fact that they would have explicitly authorized

the Attorney General to enter into a contingency fee contract with private counsel is, at best, pure speculation. As the Connecticut Supreme Court has explicitly stated, no weight can or should be given to legislation that does not pass. Robinson v. Unemployment Security Board of Review, 181 Conn. 1, 20 n. 5, (1980) (refusing to attach any significance to the General Assembly's failure to pass a statutory amendment, given the myriad of possible reasons for rejection and the "generally accepted proposition that the fact of a refusal to adopt an amendment is an unreliable guide to statutory construction").

THE CONTINGENT FEE AGREEMENT DOES NOT CREATE A CONFLICT OF INTEREST OR VIOLATE DUE PROCESS

Nothing in the contingent fee agreement creates a conflict of interest for private counsel

The defendants' contention that the contingent fee agreement creates a conflict of interest for private counsel because counsel will be motivated to seek the maximum possible monetary recovery for the State, regardless of whether injunctive relief would be preferable, totally ignores the plain language of the Agreement. Under the Agreement, the Attorney General explicitly retains "final authority over any and all aspects of the Litigation, including, but not limited to, hiring of experts and consultants, legal positions, litigation strategy, and the decision to mediate, settle or withdraw the Litigation with respect to any and/or all parties to the Litigation." (Exhibit A, ¶1.2). If a decision is made to seek purely monetary relief, rather than injunctive relief, it will be the Attorney General, not private counsel, who will make the decision.

Moreover, the Agreement explicitly provides that in the event the litigation is resolved by settlement or judgment involving only injunctive relief, or the provision of goods, services or other "in-kind" payment, the Attorney General will seek attorneys' fees and disbursements from the court or from the defendants. To the extent that the Attorney General is unsuccessful in obtaining such compensation and expenses, he has agreed to petition the General Assembly to appropriate funds to compensate private counsel. (Exhibit A, §§3.7-3.8) Even if this were not the case, however, under the defendants' theory, no private attorney could ever be hired by anyone on a contingent fee basis to handle any case seeking both monetary and

non-monetary relief. Not surprisingly, the defendants fail to cite any authority to support this claim.

The fact that the Agreement provides that the private attorneys will be reimbursed for costs and expenses out of any recovery is likewise not a conflict of interest. In fact, this is precisely the type of arrangement contemplated by Rules 1.8(e)(1) and 1.5(c) of the Connecticut Rules of Professional Conduct. Under Rule 1.8(e)(1), "[a] lawyer may pay court costs and expenses of litigation on behalf of a client, the repayment of which may be contingent on the outcome of the matter." Rule 1.5(c) states that a contingent fee agreement must set forth, among other provisions, "whether and to what extent the client will be responsible for any court costs and expenses of litigation, and whether such expenses are to be deducted before or after the contingent fee is calculated." Clearly, these two Rules permit private counsel not only to advance the costs and expenses of litigation, but also to obtain reimbursement out of any recovery. There is no suggestion whatsoever that such an arrangement is unethical if the recovery happens to be less than the costs and expenses. Indeed, there is always a risk in such agreements that expenses could exceed the recovery, and yet Rule 1.8(j)(2), in providing that a contract for a reasonable contingent fee in a civil case [Although the defendants speculate that the civil penalties sought by the plaintiff under CUTPA and the State Antitrust Act are penal in nature, rendering this a criminal rather than civil case, they cite no authority that so holds. ] is an exception to the prohibition against lawyers acquiring a proprietary interest in a client's cause of action, clearly reflects an acknowledgment that contingent fee agreements, by their nature, vest the attorney with some degree of proprietary interest in his client's case. Nothing in the Rules renders such an interest unethical. [Landsman v. Moss , 579 N.Y.S.2d 450 (App. Div. 1992), cited by defendants, is inapposite. It involved a contingency fee of 100% on the first $12,000 of recovery, whereas the 25% fee in the present case is well below the significantly higher fees deemed reasonable by Connecticut courts. See Grievance Committee v. Ennis , 84 Conn. 594 (1911) (upholding a 50% contingency fee); In re Knudsen Bros. Dairy, Inc. , 24 B.R. 418 (D. Conn. 1982) (holding that contingency of one third of award was reasonable).]

the contingent fee agreement does not violate due process

The defendants' final argument, that the contingent fee agreement violates the defendants' right to due process because it gives private counsel an improper financial stake in the outcome of the underlying litigation, is equally unfounded.

The defendants base their argument almost exclusively on decisions involving either criminal prosecutors or judicial and quasi-judicial officers. The unique and powerful position of these individuals, however, is very different from that of plaintiff's counsel in a civil proceeding. In the case of criminal prosecutors, the life and liberty interests of individual criminal defendants are at stake. In the case of judicial officers, there is a danger that any financial incentive will affect the officer's impartiality as a decision-maker. None of these concerns, however, are applicable to plaintiff's counsel in a civil case such as this one.

The fact that this is a sovereign enforcement action in which the Attorney General is, in part, seeking civil penalties for violation of the Connecticut Unfair Trade Practices Act and the State Antitrust Act does not alter this conclusion. In Marshall v. Jerrico, Inc., 446 U.S. 238, 100 S.Ct. 1610 (1980), on which defendants rely, the Supreme Court distinguished between officials performing judicial or quasi-judicial functions and those performing civil prosecutorial functions, and concluded that the strict requirements of neutrality applicable to the former officials do not apply to the latter. The plaintiff in Marshall was an employer who challenged a government agency's assessment of civil penalties for violations of child labor laws. According to the employer, the fact that the agency both assessed the penalties and retained the moneys for its own purposes created "an impermissible risk and appearance of bias by encouraging the assistant regional administrator to make unduly numerous and large assessments of civil penalties." Id. at 241. The Supreme Court rejected this argument, concluding that the arrangement did not violate the due process clause because "[t]he rigid requirements...designed for officials performing judicial or quasi-judicial functions, are not applicable to those acting in a prosecutorial or plaintiff-like capacity," and, in the case before it, the actual risk of undue influence was remote. Id. at 248. In so holding, the Court further explained that:

Our legal system has traditionally accorded wide discretion to criminal prosecutors in the enforcement process and similar considerations have been found applicable to administrative prosecutors as well. Prosecutors need not be entirely "neutral and detached." ...The constitutional interests in accurate finding of facts and application of law, and in preserving a fair and open process for decision, are not to the same degree implicated if it is the prosecutor, and not the judge, who is offered an incentive for securing civil penalties.

Id. at 248-49.

In the present case, the risk of undue bias is non-existent. Whereas in Marshall the government agency itself assessed the fines, in the present case the assessment of damages and penalties will be left to the court and the jury, not to the Attorney General or the private attorneys. Moreover, the Agreement in the present case has been carefully drafted to ensure that the Attorney General, not the private attorneys,

"shall exercise final authority over any and all aspects of the Litigation," and "shall have the right ... to substitute himself or an Associate or Assistant Attorney General for the [private attorneys] on any facet or aspect of the Services wherein the Attorney General, in his sole discretion, finds that such substitution would either best serve the interests of the State of Connecticut or would be cost efficient." (Exhibit A, § 1.2) Such provisions protect the State against the bias that concerned the plaintiff in Marshall.

The plaintiffs cite only one case, People ex. rel. Clancy v. Superior Court, 39 Cal. 3d 740, 705 P.2d 347, 218 Cal. Rptr. 24 (1985), cert. denied, 475 U.S. 1121 and 479 U.S. 848 (1986), that strikes down a contingent fee agreement in a civil enforcement context. In Clancy, a city retained private counsel on a contingent fee basis to bring an abatement action against an adult bookstore under a public nuisance ordinance. The court disqualified the city's counsel because it concluded that an action to abate a public nuisance involves a "delicate weighing of values" and that private counsel's balancing of these values might be skewed if he had a financial interest in the outcome of the abatement action. Id. at 352. In addition, the court specifically noted that "[p]ublic nuisance actions share the public interest aspect of eminent domain and criminal cases, and often coincide with criminal prosecutions." Id. at 352. According to the court, this connection between the civil and criminal aspects of public nuisance law further supported the need for a neutral prosecuting attorney. Id. at 353. In so holding, however, the court emphasized that "[c]ertainly there are cases in which a government may hire an attorney on a contingent fee to try a civil case." Id. at 352 (emphasis added). The court also recognized that even in the prosecutorial context, a contingent fee arrangement will not disqualify a private attorney who assists a government attorney but does not appear "in the place of the State's duly authorized counsel." Id. at 352-53 n. 3, citing Sedelbauer v. State, 455 N.E.2d 1159 (Ind. App. 1983).

Defendants' argument that disqualification of the attorneys retained by the State of Maryland on a contingent fee basis was required under Clancy was expressly rejected by the Maryland courts. See Philip Morris, Inc. v. Parris Glendening, at 32-35 (Exhibit C). As the court pointed out, the states' suits against the tobacco companies do not implicate First Amendment or other constitutional values as the Clancy case did, and are unlikely to trigger criminal prosecutions. Moreover, the contingent fee agreement entered into in Maryland placed an independent check on the conduct of the private attorneys in that it gave the Attorney General, who had no financial stake in the outcome of the litigation, "final, sole and unreviewable"

authority to control the attorneys' handling of the case. Id. slip op at 34. The same is true in the present case, in which the Attorney General "retains and shall exercise final authority over any and all aspects of the Litigation." Agreement, §1.2.

Although the Clancy decision is readily distinguishable from the present case, it is doubtful that it would ever be followed by the Connecticut courts. The Connecticut Supreme Court, like the U.S. Supreme Court in Marshall, has refused to hold prosecutors to the higher standards of neutrality applicable to judicial and quasi-judicial officers. Instead, the court has scrutinized the conduct of prosecutors under the same standards of conduct generally applicable to non-governmental lawyers.

For example, in State v. Jones, 180 Conn. 443, (1980), overruled on other grounds, 186 Conn. 547 (1982), substantive holding aff'd, 193 Conn. 70 (1984), the court considered whether to disqualify every prosecutor in the New Haven state's attorneys office based on a conflict of interest arising from a supervisory prosecutor's prior representation of the defendant. The court applied conflict rules generally applicable to all lawyers and concluded that disqualification of the entire office was not warranted because there was no evidence that any attorney other than the supervisor had a prior professional relationship with the defendant. According to the court, "the appearance of impropriety alone is 'simply too slender a reed on which to rest a disqualification order except in the rarest of cases.'" Id. at 452-453 (quoting Board of Education v. Nyquist, 590 F.2d 1241, 1247 (2d. Cir. 1979)); see also State v. Bunkley, 202 Conn. 629, 652-654 (1987). [Two justices dissented from the opinion in Jones, arguing that a higher standard should apply "where a public official acts in a prosecutorial capacity in which the functional interests or relationship may affect the office and create an appearance of possible conflict." Id . at 458. Despite this dissent, the court has continued to refuse to apply higher standards of professional conduct to prosecutors than to lawyers in general. See State v. Bunkley , 202 Conn. 629, 652-654 (1987).]

Another opinion, State v. Powell, 186 Conn. 547, cert. denied, 459 U.S. 838 (1982), suggests that in evaluating the issue of disqualification, it is not the existence of a personal interest that matters, but rather whether the personal interest actually has an improper influence on the prosecutor's performance of his functions. In Powell, the defendant sought disqualification of a state's attorney on the basis that the defendant had a pending civil rights lawsuit against the state's attorney and that the criminal trial would have a bearing on the outcome of the civil rights action. The court did not reach the merits of the case because it found no appellate jurisdiction. Nonetheless, it noted that the defendant "conceded at oral argument that the existence of the civil rights lawsuit alone would not be sufficient to require [the state's attorney's] disqualification." Id. Rather, the basis of the claimed disqualification was the state's attorney's seeking an action in the criminal litigation due to the action's effect on the civil rights lawsuit." Id. The U.S. Supreme Court has similarly stated that the constitutional test is not whether the prosecutor has a

personal interest in the outcome, but rather whether the personal interest brings "irrelevant or impermissible factors into the prosecutorial decision." Marshall v. Jerrico, Inc., 446 U.S. 238, 249-250, 100 S.Ct. 1610, 1617 (1980).

Applying these standards to the present case, there is no basis for disqualifying the plaintiff's private counsel. There no evidence that the contingent fee agreement has had an improper influence on the performance of private counsel, and the fact that private counsel are subject to the authority of the Attorney General fundamentally distinguishes this case from Clancy. Accordingly, the defendants' due process argument should be rejected.

CONCLUSION

For all of the foregoing reasons, the defendants' motion to disqualify counsel or for other relief with respect to the contingency fee Agreement should be denied.

PLAINTIFF STATE OF CONNECTICUT

BY________________________________

PHILIP MORRIS, INC.; R.J. REYNOLDS TOBACCO COMPANY; BROWN & WILLIAMSON TOBACCO CORPORATION; B.A.T. INDUSTRIES P.L.C.; LORILLARD TOBACCO COMPANY; LIGGETT GROUP, INC.; UNITED STATES TOBACCO COMPANY; HILL AND KNOWLTON, INC.; THE COUNCIL FOR TOBACCO RESEARCH - U.S.A. INC.; and THE TOBACCO INSTITUTE, INC.,

APPENDIX TO PLAINTIFF'S MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO DISQUALIFY COUNSEL

Exhibit A -Contingent Fee Agreement

Exhibit B -Affidavit of Robert W. Werner, Associate Attorney General

Exhibit C - Philip Morris, Inc. v. Parris Glendening, Case No. CG 2829 (Talbot County Circuit Ct, Md, August 8, 1996)

Exhibit D - State of Minnesota v. Philip Morris, Inc., No. C1-94-8565 (D. Minn. Nov. 29, 1994)

Exhibit E - West Virginia v. The American Tobacco Co. et al, No. 94-C-1707 (Kanawha County Circuit Ct., W.Va., Nov. 30, 1995)

Exhibit F - First Biennial Report of the Connecticut Attorney General, dated January 1, 1901, and portions of subsequent reports dated 1903 to 1927.

Exhibit G - Public Acts preceding Conn. Gen. Stat. §3-125:

(1) 1897 Conn. Pub. Acts, Chap. CXCI, §4

(2) Conn. Gen. Stat., Revision of 1902, §146

(3) 1927 Conn. Pub. Acts, Chap. 132

(4) 1983 Conn. Pub. Acts No. 83-548

Exhibit H - Opinion of the Connecticut Attorney General:

1993 Conn. Op. Atty Gen. (1/13/93)

Exhibit I - Portions of the legislative history of 1996 House Bill 5817

Exhibit J- Copies of Contingent Fee Agreements Between the State and Private Counsel from the files of the Attorney General's Office.

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