NEW YORK (Legal Newsline) - Eli Lilly & Co. is upset that an attorney hired by West Virginia Attorney General Darrell McGraw didn't send it a copy of a letter faxed to a federal judge regarding contingency fee issues.

Attorneys for Eli Lilly called it inexplicable that McGraw's attorneys did not apprise them of their wish to have the mediator in charge of settlement talks also be involved with the percentage outside counsel would retain from any settlement.

H. Blair Hahn of South Carolina firm Richardson, Patrick, Westbrook & Brickman wrote U.S. District Judge Jack Weinstein May 19.

"Given this court's prior order concerning mediation and the appointment of Michael K. Rozen as mediator, I ask that the court refer to the mediator the issue of setting the contingency fees to be paid to private counsel in the event that mediation results in a settlement between the parties," Hahn wrote.

Hahn also sent the fax to outside attorneys Troy Giatras and Jeaneen Legato and Chief Deputy Attorney General Fran Hughes. His letter continued to say he was prepared to file briefs on the matter.

"Inexplicably, counsel for the State of West Virginia did not copy counsel for Eli Lilly & Co. on his letter asking that the mediator designated by the court to attempt to resolve the merits of this case be authorized to set counsel's fee," the company's attorneys wrote.

"Lilly objects to any order that would direct the mediator at this time to set the fees to be paid to the State's private counsel. any discussion of fees, and their determination, in the context of a mediation on the merits of the State's claims is premature at best."

Weinstein agreed, rejecting Hahn's request. Hahn wrote the court to apologize on Tuesday.

"I apologize to the court and to Eli Lilly for this oversight. It was not intentional," he wrote.

"To clarify my request to the court, it is not an attempt to place West Virginia attorney fees at issue within this litigation. Clearly, it would be inappropriate for the court or the mediator to set contingent attorney fees until after litigation between Eli Lilly and West Virginia has been resolved."

Eli Lilly's attorneys also wrote that its request to view the contract between Hahn and the State has been denied repeatedly. They say the court should urge production of it now that Hahn has brought up the contingent fee issue.

"Although there is plainly a public interest in a contract arranged by a publicly elected official and privately retained counsel for the State, the State has resisted production of the arrangement," they wrote.

"Nonetheless, its counsel has decided to discuss this contract and counsel's potential fee in an ex parte letter to the court."

The suit concerns Eli Lilly's prescription antipsychotic Zyprexa.

In January, Eli Lilly agreed to pay $1.4 billion to settle federal civil and criminal claims. The payment also benefited the Medicaid programs of more than 30 states that collectively received approximately $362 million.

Consumer protection claims by 33 attorneys general were settled for $62 million last year, and 12 states still have claims pending against the company.

West Virginia is seeking only civil penalties for any unlawful activities occurring after 2002 because that's all the four-year statute of limitations allows. It filed suit in 2006.

It also dropped its Medicaid claims after Eli Lilly requested records associated with the program.

In October, Weinstein told the parties to take 30 days off from the case to try to work out a settlement. It did not work.

"While most states have settled their cases against Lilly for a few million dollars each, the states with cases now pending in this court -- Connecticut, Louisiana, Mississippi, Montana, New Mexico and West Virginia -- are seeking, on essentially the same theories and evidence, many billions of dollars in damages in fines," Weinstein wrote.

Eli Lilly has also paid $1.2 billion to settle more than 30,000 individual lawsuits.

Giatras' political action committee Equal Justice gave $1,000 to McGraw's campaign in 2004.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.