By George F. Will

Sunday, February 15, 1998; Page C09

People commenting on, and concocting plans for spending the proceeds from, the tobacco settlement often neglect to mention that there is no settlement. But, then, there is no reason anything should be reasonable about a tobacco policy that rests on the peculiar premise that government is a victim of smokers. Or of tobacco companies. Or something.

The latest wrinkle in this farcical melee is the little matter of the lawyers' big fees. But begin with the root irrationality of policy toward the tobacco industry.

The attorney general of Texas, where exaggeration is not illegal, says that industry ranks "alongside the worst of civilization's evil empires." If so, there is a moral ambiguity in plans to fund social programs from an evil which must be kept very profitable if it is to be the funder.

If smoking is as dreadful as is said by those who advocate stiff new tobacco taxes, the ideal revenue yield from the taxes would be zero. But that thought is considered impertinent by the governments that are becoming dependent partners of the tobacco empire in the continuing extraction of huge sums from smokers, who come disproportionately from the low-income population.

The Economist notes that the tobacco industry's long insistence that smoking is neither harmful nor habit-forming is history's most spectacularly unsuccessful disinformation campaign, there being almost no sentient person who believes it. Furthermore, there are now more Americans who have quit the addiction of smoking than who smoke. And only seven of 34 recent studies have found statistically significant health effects from passive smoking ("secondhand smoke").

Most important, users of cigarettes -- the world's most heavily taxed consumer good -- save society money because one in three of them dies prematurely, thereby minimizing the drain on public pension and nursing home entitlements. Regarding tobacco's effect on state governments, see "From Cash Crop to Cash Cow: How Tobacco Profits State Governments" in Regulation quarterly, by W. Kip Viscusi of Harvard Law School.

However, mere reason and arithmetic are unavailing when the political winds are up, so the tobacco companies are prepared to pay, in effect, protection money, $386.5 billion of it. They hope to buy immunity from future lawsuits arising from the indestructible, because lucrative, fallacies that the Economist and many others refute.

But only Congress can limit the companies' liability. If Congress does not, the settlement will unravel. And among the things that make Congress, among others, irritable about the settlement are the stupendous jackpots, totaling perhaps $45 billion to $55 billion, that may come to lawyers hired by state governments on contingency fee contracts.

For example, a Florida judge, who rejected that state's contingency fee agreement as "unconscionable and clearly excessive," calculated that the lawyers would be paid an hourly rate of $7,716 -- assuming each lawyer billed for working 24 hours a day, every day, during the 42-month case. Some lawyers around the country probably stand to be paid hundreds of thousands of dollars per hour of actual work.

Rep. Chris Cox (R-Calif.), together with Reps. Paul McHale (D-Pa.) and Scott McInnis (R-Colo.), authored legislation that would stipulate a top hourly rate of $150 per hour. Cox argues that the state governments, all of which employ herds of lawyers, had no need to hire outside lawyers for litigation which involved no novel techniques or arcane theories. And hiring them on a contingency fee basis made a mockery of that problematic form of compensation.

Contingency fee arrangements, under which a lawyer is paid nothing if his side loses and a fixed percentage of the settlement if his side wins, have traditionally been deemed unethical. This is because they give a lawyer a financial stake in the outcome of a lawsuit, which, Cox says, "creates an inherent conflict of interest with the lawyer's role as an officer of the court." Contingency fees still are unlawful in Britain and most of the rest of the world.

The United States long ago made a narrow, "necessary evil" exception to the general proscription of contingency fees in order to help give poor people access to the courts. And the American Bar Association's Code of Professional Responsibility stated that "a lawyer generally should decline to accept employment on a contingent-fee basis by one who is able to pay a reasonable fixed fee." State government can pay such a fee.

The states' tobacco lawyers demand, with more brass than plausibility, that their fees be treated as an island immune from Congress's general jurisdiction over the settlement. Not that there is a settlement.