Ky. SC upholds $42M judgment against plaintiffs' attorneys at center of fen-phen class action

Jessica M. Karmasek Aug. 30, 2013, 1:30pm

FRANKFORT, Ky. (Legal Newsline) -- The Kentucky Supreme Court on Thursday upheld a $42 million civil judgment against three plaintiffs' attorneys who allegedly stole from more than 400 clients in a class action over the diet drug fen-phen.

The original summary judgment was entered by a Boone County Circuit Court judge in 2006.

The attorneys at the center of the case -- Lexington-area lawyers Shirley Cunningham, William Gallion and Melbourne Mills Jr. -- have since been disbarred. Two, Cunningham and Gallion, were sentenced to 20 years in federal prison for their roles in stealing the settlement money. All three have lost their law licenses.

"There are no material facts in dispute, and plain application of the law to the undisputed fact demonstrates that CGM (Cunningham, Gallion and Mills), by taking greater fees than their contracts allowed and leaving a correspondingly lesser share of the settlement money for their clients, breached their contracts with Appellants and simultaneously breached their fiduciary duties to Appellants," Justice Daniel Venters wrote in the court's 32-page opinion.

"The trial court correctly concluded that the breach of those contracts was a breach of CGM's 18 fiduciary duties to Appellants."

In its 32-page opinion, the state's high court also ruled that the trial court's designation of the damages as joint and several was proper.

"In effect, they (CGM) formed an ad hoc partnership for a commercial purpose that precisely fits the definition of a joint enterprise, or joint adventure," Venters wrote.

Attorney Angela Ford, who has represented the class members against their former attorneys, said she was pleased with the court's ruling.

"The opinion provides finality on most of the claims that have been pending for nearly nine years against those attorneys," she said in a statement Thursday.

However, Ford said she plans to go back to state court to sue well-known Cincinnati plaintiffs' attorney Stanley Chesley, who was not part of the original civil judgment, for the $7.5 million he allegedly stole from the fen-phen plaintiffs, plus the $20.5 million he was paid in legal fees and punitive damages.

"The case will now move forward on all claims against Stanley Chesley," she said.

The trial court did not enter a judgment against Chesley after his attorney asked for more time to respond to the summary judgment motion, and the motion was eventually denied. A cross appeal then was filed against Chesley.

Ford argued Chesley should have been included in the $42 million judgment.

"Since the appeal has been pending, Chesley has been disbarred and testified, with immunity, in the criminal trial against his co-counsel," she said.

"Since I believe that Chesley was the chief architect behind the cover up of the fraud, we will be seeking a very large verdict on punitive damages."

Chesley, who has been disbarred from practicing law in Kentucky, has maintained he was not co-counsel for the plaintiffs in the controversial class action. He also has said he was not aware that other attorneys were deceiving their clients. He has argued he was simply brought in to negotiate the 2001 settlement.

In March, the Kentucky Supreme Court said his ethical violations warranted permanent disbarment in the state and that his share of fees was "unreasonable."

"He has shown nothing to demonstrate that he expended a great deal of time and labor on the case," Chief Justice John D. Minton Jr. wrote for the court.

"The issues of liability were not particularly difficult or novel, and even if they were, Respondent did not do the heavy-lifting on that aspect of the case."

However, the court declined to order restitution, saying the remedy is "not appropriate" in a case of permanent disbarment.

The high court has disbarred a total of five attorneys who worked on the settlement with American Home Products, the manufacturer of the fen-phen drug. They include Chesley, Cunningham, Gallion, Mills and David Helmers, who was a relatively new associate at the law firm Gallion Baker & Bray PSC at the time of the settlement.

Cunningham, Gallion and Mills received roughly 50 percent of the $200 million settlement. Their 431 clients received the rest.

Chesley, himself, collected a $20.5 million fee for negotiating the settlement. He has since retired from practice in Ohio.

In October 2011, the court also permanently disbarred Joseph F. Bamberger, a senior status special judge who approved the settlement, calling his ethical violations "highly egregious."

"Respondent's conduct shocks the Court's conscience," Minton wrote at the time.

It was revealed that Bamberger, who had resigned, was paid $5,000 a month as a director of a phony charitable entity, The Kentucky Fund for Healthy Living, which was funded by the settlement and allegedly directed by the lawyers.

From Legal Newsline: Reach Jessica Karmasek by email at

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