By Charles Babington
Washington Post Staff Writer
Sunday, April 12, 1998; Page A01

Maryland's hopes of winning a multibillion-dollar lawsuit against tobacco companies suffered a setback yesterday when the state's top lawyer attacked legislation that some consider crucial to the government's case.

The surprise statements by Peter G. Angelos derailed the House of Delegates' plans to vote on the measure yesterday. That means the issue -- among the most contentious in the 90-day legislative session -- will be decided in a few hectic hours Monday, when the General Assembly is scheduled to adjourn at midnight.

Yesterday's unexpected furor centered on attorneys' fees, a volatile issue in Maryland and other states that are suing tobacco companies. The states hope to recoup decades worth of Medicaid payments made for residents with smoking-related illnesses, in lawsuits that may assume greater importance with national tobacco legislation in doubt this year.

Angelos, millionaire owner of the Baltimore Orioles and the lawyer hired to handle Maryland's suit, told legislators early in the day that he no longer supports a measure meant to strengthen the state's hand. The reason, Angelos said in a letter, is because senators amended the bill to direct a judge to consider the appropriateness of his fee.

The fee, originally set at 25 percent of any court judgment, could mean $1 billion for Angelos in a $4 billion verdict, which state officials say is possible. Under political pressure last week, Angelos agreed to cut the fee in half, to 12.5 percent. But yesterday he said the Senate amendment further weakens his position, essentially inviting a court to cut the fee later as it sees fit.

Calling the amended bill "unacceptable," Angelos said in a two- page letter to lawmakers: "I do not agree to a reduction of our fee from 25 percent." The fee, he said, "will be addressed in the appropriate forum at the appropriate time." Several legislators interpreted that as a sign that Angelos will sue the state, the very client he represents in the tobacco suit.

Stunned state officials persuaded Angelos to send a second letter late in the day. In that letter, Angelos said he supports every provision of the bill except those addressing his fee.

House leaders said they hoped to round up enough votes Monday to enact the Senate-passed version of the bill. The state and Angelos can settle the fee dispute later, they said.

In a rare Saturday session, lawmakers also gave final approval to two key initiatives offered by Gov. Parris N. Glendening (D). One will extend Medicaid health coverage to about 60,000 children and pregnant women, at acost to the state of about $76 million a year. The other is a state-paid scholarship program that eventually will cost $10 million annually to help 4,300 college students in technology-related fields.

In addition to the tobacco litigation, several other controversial issues will be decided Monday. They include a Senate committee proposal to grant Prince George's County $140 million over the next four years for school construction, but with restrictions the county has resisted.

Away from the Senate and House floors, the politics of tobacco dominated yesterday's activities.

State Attorney General J. Joseph Curran Jr. (D) hired Angelos two years ago to launch the costly process of suing the cigarette industry. A Baltimore judge dealt the state a setback by ruling that the state must prove its damages victim by victim, a difficult standard that could involve hundreds of smokers trooping to the witness stand.

Curran turned to the General Assembly in January for help. His bill, supported by Glendening, essentially would overturn the judge's ruling. It would allow Maryland to make its case with "statistical evidence," or data showing widespread trends of smoking-related illnesses and costs. It also would bar tobacco industry allegations that smokers caused their problems by choosing to smoke.

Tobacco companies and several business groups bitterly oppose the bill. They said it would change the rules unfairly in the middle of a major suit. But Angelos's fee became the biggest political controversy, and it now could threaten the entire measure.

Angelos noted in his first letter that he already has spent about $5 million in pursuing the suit and that he may spend millions more. The state hired him under a contingency arrangement in which he would receive nothing if the suit fails and 25 percent of any verdict if it succeeds.

The first letter, which caught Curran by surprise, "is a land mine bomb of very significant proportions," said Bruce C. Bereano, one of several tobacco lobbyists in the State House yesterday. "It really throws the whole thing into a topsy-turvy spin."

The letter provided new ammunition to critics who say Angelos is mainly interested in a gigantic fee. "Who needs a guy who sticks his thumb in your eye?" said Del. Robert L. Flanagan (R-Howard).

House Speaker Casper R. Taylor Jr. (D-Allegany) quickly withdrew plans to bring the Senate version of the bill to the House floor. "I'm going to vote the bill when I have the votes," Taylor told reporters.

After the second letter arrived, several opponents of the bill -- including Senate President Thomas V. Mike Miller Jr. (D-Prince George's) -- predicted House leaders will find enough votes Monday for passage.

If Angelos's opposition helps kill the bill, he will have blocked the proposed law that could help him win the case, legislators said. Some speculated that Angelos fears a court would overturn the law if enacted and that therefore he needs a substantial fee to compensate possible years of difficult litigation.

Angelos's lobbyist, former senator John A. Pica Jr., said the Senate version of the bill "negates the presumption" that Angelos should receive 12.5 percent of any verdict. "So you may end up with an hourly fee or something," Pica said. "And that's totally unfair. This man may end up spending 30 or 40 million dollars" in the tobacco suit.

Lobbyists and legislators in Annapolis bitterly have debated the tobacco issue since January. Business groups unrelated to tobacco have fought the bill, fearful that future legislation might target other unpopular commodities, such as alcohol, chemicals or fatty foods.

A business coalition issued a statement yesterday saying Angelos's first letter "proved that his only interest . . . is the money that would line his pockets."

In his second letter, Angelos told state officials: "This tobacco legislation is essential to advancing the interests of the state in its efforts to bring the tobacco industry to account for the harm it has caused in the state of Maryland. . . . [But] this legislative process is not an appropriate mechanism for altering the terms of an agreement with the state" regarding the attorney's fee.

Staff writer Daniel LeDuc contributed to this report.