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Did Big Tobacco's Barrister Set Up A Smokescreen?


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DID BIG TOBACCO'S BARRISTER SET UP A SMOKESCREEN?

In Christopher Buckley's satirical novel Thank You For Smoking, Smoot, Hawking is an Omaha-based law firm doing whatever it takes to beat back dying smokers' claims against the tobacco industry. In real life, that onerous task for the past three decades has fallen to Shook, Hardy & Bacon, a Kansas City (Mo.) firm that has made the most of the opportunity. In hundreds of cases, Shook Hardy has made sure its tobacco clients have never paid out a dime to plaintiffs who blame tobacco makers for the deaths of thousands of Americans. "These are ferocious litigators," says Donald W. Garner, a professor at Southern Illinois University School of Law who worked as a consultant to the government's Office on Smoking & Health.

Yet Shook Hardy is more than just the hired gun for the cigarette industry. The firm is a singular amalgam of mostly country lawyers working side by side with scientists and other experts in fields ranging from endocrinology to zoology to pharmacology. Shook Hardy has leveraged its tobacco representation so successfully that it is now the law firm of choice for many companies plagued by high-stakes and often controversial product-liability woes. Several clients would top a who's who of the politically incorrect. In addition to cigarette makers Philip Morris, Brown & Williamson Tobacco, and Lorillard, Shook Hardy represents gunmaker Colt Industries and is national counsel for Upjohn Co. in cases involving the sedative Halcion. It also defends Eli Lilly, Marion Merrell Dow, Bristol-Myers Squibb, Merck, and other drug and medical device makers hit by claims that their products harm consumers.

BIAS LABEL. Even the firm's pro bono work is controversial, such as its defense of the Ku Klux Klan in a 1993 free-speech case. Shook Hardy knows that some of its clients are, well, unpopular. But firm President Patrick McLarney insists that "everybody is entitled to a lawyer." Says McLarney: "Just because nobody likes them, people think they can do things to them that they could do to nobody else."

Now Shook Hardy needs a good lawyer of its own. Earlier this year, the firm was sued in federal court in Tyler, Tex., for allegedly conspiring with Upjohn to keep information about the dangers of Halcion from the public. The firm denies the charges and contends that suing lawyers is merely a means for getting at corporate clients. "Shook Hardy will be fully vindicated," asserts partner Harvey L. Kaplan.

The Halcion charges aren't the only ones dogging Shook Hardy. In a 1992 smoker's case, Judge H. Lee Sarokin issued a stinging opinion suggesting that the tobacco industry, with the help of its counsel, withheld from the public supposedly independent scientific studies, depending on their potential impact mn liability suits. "If that is true, then the `use' of selected information generated for `litigation' purposes...in and of itself establishes fraudulent intent," wrote the judge, who was later forced off the case by the industry for allegedly being biased. Sarokin was "mistaken," says David K. Hardy, co-chair of the firm's 40-lawyer tobacco group."Researchers were encouraged to publish, and much of the research was published."

Nonetheless, Sarokin's opinion, along with a steady stream of leaked documents illustrating Shook Hardy's intimate involvement with tobacco-related health research, has sparked numerous inquiries. Soon, Shook Hardy is expected to be named co-defendant in several suits pending against its tobacco clients. Plaintiff lawyers say that by funneling scientific research through the law firm, cigarette makers and their lawyers improperly used the attorney-client privilege to ensure that information damaging to the industry would remain secret.

Shook Hardy freely acknowledges its close ties to the industry's scientific efforts. But the firm steadfastly denies any wrongdoing, noting that any studies with which the firm was involved were connected to ongoing or anticipated litigation. "We're aware mf the black-hat image tobacco has, so we've been super careful," says Hardy. "We know we're under a microscope."

That's not surprising, given the devastating consequences facing the industry if plaintiffs can prove their case. Many documents about the tobacco companies' health-related research would be made public for the first time. "The lawyers have kept the genie in the bottle by keeping the cap on the bottle," argues Ronald L. Motley, a plaintiff lawyer suing tobacco companies who plans to add Shook Hardy to his list of defendants. "They have allowed the legal process to insulate corporations from legal liability."

According to documents obtained by BUSINESS WEEK, Shook Hardy lawyers have had a hand in selecting scientists as well as choosing particular research projects for industry funding. In more than 10 letters between Shook Hardy and tobacco company officials or researchers, the level of lawyer participation in scientific endeavors appears considerable. A 1979 letter from Shook Hardy to Martin J. Cline, at that time a professor of medical oncology at the University of California at Los Angeles, not only includes $350,000 in checks payable to the school and Dr. Cline but also requests review of a press release concerning industry-funded research before it is made public.

SCIENCE LESSON? Such arrangements between Shook Hardy and the scientific community aren't novel. Dr. Gary Huber, a lung specialist at the University of Texas Health Science Center in Tyler, has been performing smoking- and health-related research for years. His articles debunking government conclusions about the dangers of secondhand tobacco smoke are often cited. Since 1986, Shook Hardy has reimbursed the health center for time Huber spends on smoking-related projects. "I'm sure the other side, so to speak, would argue that Huber is not completely independent because he's done work for a number of years, whether directly or indirectly, paid for by tobacco companies," says Hardy, whose father tried the first smoking case back in 1962. He maintains that their relationship has been completely open and above board, and that all of Dr. Huber's work is "objective science."

Huber could not be reached for comment. But a statement issued by the health center states: "As with any extramural funding source, these monies have been used in the course of his research....Dr. Huber has stated that he has not received personal compensation or benefit from the tobacco industry since he has been at the University of Texas Health Center."

Still, critics wonder whether Shook Hardy took its job of defending its clients too far. That suggestion is being taken seriously--perhaps in part because it threatens to undermine the firm's bread-and-butter business, which contributes an estimated $15 million annually to Shook Hardy's coffers. McLarney says the firm recently hired defense counsel and has taken out "all the insurance we can get." But these precautions, McLarney adds, are being taken only out of fear of the havoc wreaked by costly and protracted litigation, not because of liability concerns. "It doesn't matter if they're right or wrong," explains McLarney. "The concern is that litigation drags you down."

It does, however, pay extremely well if you're good at it. Thirty-one years ago, Shook Hardy was a 16-lawyer firm devoted primarily to insurance defense work. Now, the firm operates from 10 floors in a swank skyscraper, boasts 600 employees, and generates some $60 million in annual revenues. Despite the growth, however, partners say the firm hasn't strayed from its roots as a country law firm whose attorneys are fresh off the farm or from small-town Middle America. Among the highest accolades a litigator can receive after winning a jury trial is a rubber chicken hung on the victorious lawyer's door. "Getting the chicken is more important than how much you get paid," says McLarney.

MIXED BLESSING. That perception seems at odds with what one former Shook Hardy partner describes as litigators' willingness to "take off their gloves and put on brass knuckles." The firm's lawyers bristle at the suggestion that they fight dirty. Says John C. Dods, head of the firm's general litigation division: "We are playing in the big leagues and throw some hard pitches. But I don't believe we win at all costs."

In the courtroom, such tenacity can yield impressive results. In one of hundreds of cases against G.D. Searle & Co., a woman claimed the company's allegedly defective Copper-7 IUD left her infertile. Borrowing a tobacco-litigation technique, Shook Hardy's Kaplan attacked the woman's husband, a former female impersonator, to convince jurors that the husband's alleged promiscuity, bisexuality, and history of venereal diseases was more likely the cause of the infertility, not Searle's product. The plaintiff's expert medical witness, Dr. Richard L. Sweet, says Kaplan even tried to subpoena his personal income-tax records. "They use anything they can," says Sweet.

Yet Shook Hardy offers more than savvy courtroom tacticians. In addition to 203 lawyers, the firm employs more than 100 so-called analysts. And that, ironically, is the source of much of the firm's tobacco-related troubles. The analysts are mostly PhDs and other experts. This in-house capability has proved a mixed blessing: True, it impresses clients and lets Shook Hardy dabble in areas outside the traditional purview of lawyers. But it provides ammunition to adversaries who contend that Shook Hardy gets too close to its clients' operations.

The firm contends that its unusual infrastructure gives it an edge over competitors in complex litigation. For instance, a veterinarian on staff helped prove that a farm in Texas was substituting healthy hogs to obtain state certification for its diseased animals. To prove the fraud, Shook Hardy showed a jury frozen snouts from the diseased hogs, which the veterinarian had cut off and tested. The verdict: $2.1 million for Shook's client, Plainview Farms Inc. "They can deal with the medical intricacies of a case and have developed an expertise shared by only a handful of firms," says John C. Jenkins, Eli Lilly & Co.'s assistant general counsel. But given the growing furor surrounding tobacco companies and other clients, Shook Hardy is wary about relying too heavily on drug and cigarette manufacturers' business--which alone accounts for half of the firm's revenues. That's why the partners have taken a tip from their tobacco clients: diversify.

FINANCE FOCUS. Reading the firm's brochure these days, there's barely a mention of the tobacco business. Instead, the emphasis is on efforts to go global. With offices already in London and Zurich, Shook Hardy approved plans on Aug. 19 to open an outpost in Milan. In addition, corporate work is emerging as a big part of the firm's portfolio, primarily because of Jennings J. Newcom, a dealmaker hired 15 years ago to build a corporate practice from scratch. "My end of the bargain was to round out a three-legged stool--tobacco, pharmaceuticals, and corporate finance," says Newcom, whose division now contributes 20% of the firm's revenues and is staffed by 44 attorneys.

So Newcom and other corporate lawyers have looked elsewhere for lucrative opportunities, such as the $19 billion debt restructuring of Italy's Ferruzzi-Montedison Group.

Still, tobacco and Shook Hardy are likely to be inseparable for some time. Almost weekly, new lawsuits and charges are being brought against the industry. And even as the legal team becomes a target of growing antismoking forces, its attorneys say they won't back down. No doubt experience from all those years spent in the trenches for clients will come in handy in what looks to be Shook Hardy's greatest challenge yet.

THE ROOTS OF SHOOK, HARDY & BACON

1889 Alderson & Sebree, which later became Shook, Hardy & Bacon, is founded. The firm specializes in general litigation defense work.

1962 Partner David R. Hardy successfully tries first smoking case, Ross vs. Philip Morris. The victory is the start of a relationship with tobacco manufacturers that has lasted more than three decades.

1972 Shook Hardy launches into pharmaceutical work representing Eli Lilly in an oral contraceptive case. Plaintiffs win $10,000.

1979 Jennings J. Newcom, a corporate finance specialist, joins Shook Hardy to diversify the firm's practice.

1988 Survivors of Rose Cipollone are awarded $400,000 in the first and only case in which a cigarette maker is found liable for a smoking-related illness. Although the award against Liggett is later overturned, Shook Hardy's clients in the case, Philip Morris and Lorillard, have no liability.

1993 Shook Hardy becomes lead counsel in a $19 billion debt restructuring of Ferruzzi-Montedison Group.

1994 Shook Hardy is sued in connection with its work for Upjohn in a Halcion case. Other suits are expected relating to the firm's tobacco work.

DATA: SHOOK, HARDY & BACON; BUSINESS WEEKA SAMPLING OF SHOOK HARDY'S PRODUCT-LIABILITY WORK

CLIENT PRODUCT

AMERICAN BRAND TOBACCO Tobacco

BROWN & WILLIAMSON Tobacco

CIBA-GEIGY Herbicides

COLT INDUSTRIES Guns; truck brakes

ELI LILLY DPT; smallpox vaccine; DES

FORD MOTOR Automobiles

G.D. SEARLE CU-7 IUDs; Lomotil

LORILLARD Tobacco

OCCIDENTAL PETROLEUM Agent Orange

PHILIP MORRIS Tobacco; beer; food

UPJOHN Halcion

DATA: SHOOK, HARDY & BACON

Linda Himelstein and Richard A. Melcher in Kansas City


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