The lawyers who fought the state of California's case during the 1990s "tobacco wars" are looking at a sharply reduced payday.

A team of 60 law firms which represented California in the 46-state suit against the cigarette companies - settled for $206bn settlement in 1998 - had been awarded total fees of $1.25bn by an arbitration panel. But a New York judge has ruled that the bill for the services of the Castano Group, as the team is called, is excessive. "Whatever the merits of the Castano Group's laudable efforts during the tobacco wars," wrote State Supreme Court Justice Nicholas Figueroa in his ruling, "the rationale chosen by this panel to reward those efforts exceeded their power under the arbitration clause." Adding it up However much of the $1.25bn the laywers end up receiving, none of it will be coming from the pockets of California taxpayers. As part of the settlement of the long-running case, the tobacco giants assumed responsibility for the legal bills, with binding arbitration where there was disagreement. The massive court case started in 1994 when Mississippi became the first US state to sue in an attempt to recover the immense costs of treating smoking-related diseases. Almost every state had joined in by 1996. At length the tobacco majors were forced to back down on their long-standing insistence that they had never known nicotine to be addictive, in the face of documents proving they were well aware of the drug's dangers decades ago. As well as the main $206bn settlement, another case involving the state of Florida - which went all the way - fined five companies almost $145bn in 2000. Hard hit Individual cases are still continuing, and only this week two of the big seven - Philip Morris and RJ Reynolds - lost suits which will cost them a total of $1.35m in damages. Despite this, tobacco stocks have generally been seen as a safe bet - largely because of the captive nature of their clientele. But an announcement on Friday 27 September from Philip Morris that increasing taxation of cigarettes in the US meant its customers were switching to cheaper brands sent its shares diving.

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