Negotiations over how much Baltimore Orioles owner Peter G. Angelos should be paid for handling Maryland's lawsuit against the big tobacco companies threaten to bottle up the flow of millions of dollars the state is set to receive from a national settlement.

The first payment of approximately $55 million is expected next month, and state officials are embroiled in discussions with Angelos over his fee. Until an agreement is reached, the money will be paid into an escrow account partly controlled by Angelos, preventing either side from spending it.

Angelos's Baltimore law firm represented Maryland in the national tobacco litigation, which garnered the state more than $4 billion over the next 20 years. His fees have been a source of controversy since it became clear how much the state would collect.

Angelos has a three-year-old contract with Maryland to pay him 25 percent of the proceeds from the litigation, or about $1 billion. The legislature, concerned about a payout that large, voted last year to cut his fee in half. Angelos has maintained that the contract should be honored at 25 percent.

State officials hope to further reduce the payout if Angelos can get some of his money from a special account, funded by the tobacco industry, that is meant to help pay fees of attorneys throughout the country who represented the various states. Angelos has yet to apply for compensation from the fund.

The lawyer's "continued failure to seek compensation from the tobacco industry could substantially reduce the flow of cash to the state's Cigarette Restitution Fund for cancer research, health and crops conversion programs and other purposes," according to a letter to General Assembly leaders last week from Warren G. Deschenaux, who oversees the budget process for the nonpartisan Department of Legislative Services.

In June, Gov. Parris N. Glendening (D) announced ambitious plans to spend $1 billion of the $1.7 billion Maryland will receive from the settlement over the next 10 years on anti-smoking programs and research to fight cancer. He said the rest of the money would go to education. Glendening spokesman Michael Morrill said the governor did not anticipate scaling back those plans to meet Angelos's fees.

"When the governor announced the anti-cancer initiatives, he said we had set aside money for potential legal fees," Morrill said, declining to say how much the governor considered appropriate.

Angelos did not respond to messages over the past two days.

"He believes he still has a contract enforceable for 25 percent. The question is what do we do about that claim," said Deputy Attorney General Carmen M. Shepard, one of the lead negotiators for the state. "We want to make sure we're fair to Peter but also maximize the money for the state."

Angelos is one of the nation's most prominent plaintiff's attorneys. In addition to owning the Orioles baseball team, he is a major contributor to state and national Democrats. He won the contract to sue the tobacco industry on Maryland's behalf in 1996 after competitively bidding for the work and agreeing to front any expenses in the case. The 25 percent fee is less than lawyers working on a contingency basis normally charge; typically in such cases, lawyers receive 33 percent of what they recover.

Lawyers for Florida, Texas and Mississippi, the leaders in the lawsuits against the industry, received 19 to 35 percent of their states' awards. Recently, the arbitration panel overseeing the tobacco-paid attorneys' fund has awarded smaller amounts--lawyers for Hawaii received 6.5 percent and those for Illinois received 1.3 percent, the Wall Street Journal reported.

State Senate President Thomas V. Mike Miller Jr. (D-Prince George's) and House Speaker Casper R. Taylor Jr. (D-Allegany) maintain that the legislature's decision to cut Angelos's fee means he should receive no more than 12.5 percent.

Miller said Angelos should seek compensation from the national fund for attorneys' fees and that the state should make up any difference between what he receives there and the 12.5 percent. He noted that when the legislature reduced Angelos's fee, it changed state law specifically for the tobacco case to make Angelos's job easier.

"Mr. Angelos, in my opinion, agreed to accept 12.5 percent if and only if we agreed to change tort law, which was no small feat. We changed centuries of precedent to ensure a win in this case," said Miller, who said he and Taylor would meet with Angelos next week.

Ultimately, the change in law wasn't used in the lawsuit because Maryland's case did not go to trial. Instead, the state joined in the national agreement to settle the litigation last November.

Taylor said Angelos should seek money from the national fund and, if that compensation is substantial enough, agree to accept less than 12.5 percent from the state. He noted that the lawyer is lauded for his philanthropic activity in Baltimore and the rest of the state.

Failing that, Taylor said, he believes Maryland made a "moral commitment" to Angelos for 12.5 percent.

CAPTION: Peter G. Angelos's law firm represented the state in the national tobacco lawsuit.