Ala. SC makes ruling in cases over $300M Monsanto settlement

Jessica M. Karmasek May 1, 2012, 7:40am


MONTGOMERY, Ala. (Legal Newsline) - The Alabama Supreme Court issued a ruling last week in three related cases over the terms of a $300 million settlement with the Monsanto Company in 2003.

The first action was filed in the Etowah County Circuit Court on April 15, 2010 by George Bates and David Joyner against Donald W. Stewart, individually and as trustee of the Abernathy trust, and the Abernathy Trust Foundation.

Bates and Joyner appeal from a judgment of the circuit court dismissing their complaint against Stewart and the foundation.

The second action was filed in Etowah Circuit Court on Jan. 20, 2011 by Lindy Adams, Ed F. Davidson and Roosevelt Boyd, who filed what they entitled a "motion to intervene as plaintiffs and for an accounting and other relief" from Stewart, Donald W. Stewart PC, and Kasowitz, Benson, Torres and Friedman LLP.

In the third action, Stewart and Kasowitz appeal from orders entered by the trial court on Aug. 22 and Sept. 9, 2011, purporting to reopen a final judgment in that action entered in 2003.

Stewart and Kasowitz also filed a petition for a writ of mandamus asking the Court to require the trial court in the second action to vacate its orders of Aug. 22 and Sept. 9.

The three proceedings are the most recent in a line of cases arising out of a toxic-tort action filed against Monsanto; its parent corporation, Pharmacia Corporation; and a spin-off corporation, Solutia Inc.

The Monsanto corporations manufactured and disposed of polychlorinated biphenyls, or PCBs, in Anniston, Ala. -- at one point, considered one of the most toxic cities in the country -- from 1935 to 1971.

The manufacturing and distribution of toxic substances, including PCBs, were eventually banned in the United States in 1976.

It wasn't until 20 years later, in 1996, that Thomas Long Sr. sued the Monsanto corporations, alleging they had released PCBs and other harmful chemicals into the air, soil, surface water and groundwater near his property in Calhoun County and that he suffered physical harm and other damage as a result of the release of those chemicals.

Two other actions were filed against the corporations alleging negligence, wantonness, breach of a duty to warn, fraud, misrepresentation, deceit, private and public nuisance, trespass, the tort of outrage, common-law strict liability, assault, battery, and negligent and intentional infliction of emotional distress arising from the release of those chemicals.

The three actions, with more than 3,500 plaintiffs, were consolidated; however, the action resulting from the consolidation was not a class action.

The Monsanto litigation was then transferred from Calhoun County to Etowah County, and Judge Joel Laird, a judge in the Calhoun Circuit Court, was appointed by the state's high court as a special judge in Etowah County to preside over the case.

In January 2002, a jury trial began on claims common to all the Monsanto plaintiffs and on the property-damage claims of 17 of those plaintiffs.

The jury found the Monsanto corporations liable on the plaintiffs' claims of wantonness, the tort of outrage, "suppression of the truth," negligence, trespass, nuisance and public nuisance.

After seven years of litigation, a trial as to liability and about 500 individual trials on damages, the parties reached a settlement for $300 million in 2003.

The settlement agreement required the Monsanto corporations to make an immediate payment of $275 million and 10 annual payments of $2.5 million thereafter, for a total of $300 million.

The $275 million payment, less $35 million, was disbursed to the Monsanto plaintiffs and their attorneys and was used to pay the claims of each settling plaintiff, to fund a relocation/property-adjustment fund for the benefit of about 920 Monsanto plaintiffs who were property owners and residents in the affected area, to pay attorney fees and to reimburse the plaintiffs' attorneys for the costs and expenses incurred in the Monsanto litigation.

The plaintiffs' attorneys were to be paid a 40 percent attorney fee from the $275 million payment, less $15 million in costs and expenses, in addition to a 40 percent attorney fee from each annual $2.5 million payment.

The settlement agreement also provided that of the $35 million not disbursed to the Monsanto plaintiffs $21 million was to be placed into a trust, established to pay health care and educational benefits to those Monsanto plaintiffs who qualified for assistance with medical treatment and other health care services and/or who qualified for assistance with educational grants, scholarships or loans, and $14 million was to be paid as attorney fees.

Of each annual payment of $2.5 million, $1.5 million was to be placed into the Abernathy trust, and $1 million -- 40 percent -- was to be paid as attorney fees.

On Sept. 12, 2003, the trial court entered an order approving the settlement agreement as "fair and reasonable," including the payment of attorney fees and expenses.

However, in 2004, Stewart and Kasowitz were notified that Sarah Avery, one of the Monsanto plaintiffs, intended to file a class action to challenge the attorney fee and costs award in the settlement.

Stewart and Kasowitz filed a motion requesting that the trial court enjoin Avery and any other Monsanto plaintiff from filing an independent action challenging the settlement agreement.

On Oct. 29, 2004, the trial court entered an order reaffirming its prior order and enjoining Avery and all other persons from taking any action to interfere with terms of the agreement.

Avery filed a motion to clarify or, alternatively, to rescind the Oct. 29 order, arguing that Stewart and Kasowitz had "improperly double-dipped" because, Avery said, Stewart and Kasowitz "deducted a 40 percent contingent fee from the $300 million settlement, and then deducted an additional 40 percent fee from each individual plaintiff's award."

On Dec. 15, 2004, the trial court entered an order denying Avery's motion and finding that a 40 percent attorney fee in the Monsanto litigation was reasonable.

On April 15, 2010, Bates and Joyner, both original Monsanto plaintiffs, filed a complaint against Stewart, the foundation and fictitiously named defendants in Etowah Circuit Court, seeking an accounting of the Abernathy trust.

Stewart and the foundation filed a motion to dismiss the complaint, alleging that Bates and Joyner were attempting to reopen a court-approved settlement, that the Abernathy trust was "created under New York law" and, they argued, "therefore is not governed by the Alabama Code."

The trial court entered an order granting Stewart and the foundation's motion to dismiss. The order did not state a reason for dismissing the action.

Then, in April last year, the Adams plaintiffs, all of whom were Monsanto plaintiffs, and Kathy Faye Wynn filed a motion to intervene, seeking to reopen the 2003 judgment in the case and requesting, among other things, an accounting of the funds in settlement of the litigation, including the attorney fees awarded and the distributions from the Abernathy trust.

The Adams plaintiffs alleged that the trial court had never held a hearing on the reasonableness of the attorney fees awarded in the Monsanto litigation. They also alleged that the retainer agreements executed by the Monsanto plaintiffs are void.

In addition, they asked the trial court to order an accounting of the settlement proceeds and of the Abernathy trust, to hold a hearing to review the reasonableness of the attorney fee in the Monsanto litigation, to appoint a special master to review claims for benefits from the Abernathy trust that had been denied by the foundation, and to remove Stewart as trustee of the Abernathy trust.

The trial court, while it denied to remove Stewart as trustee, ordered that certain records of the Abernathy trust be unsealed.

Stewart and Kasowitz filed a motion to vacate the court's Aug. 22, 2011 order. The court orally denied that motion at a hearing held Sept. 9, 2011.

The court then directed Stewart and Kasowitz to provide the required information by Sept. 13, 2011.

Stewart and Kasowitz appealed from the Aug. 22 and Sept. 9, 2011 orders on the basis that the trial court had granted injunctive relief to the Adams plaintiffs.

They also filed a petition for a writ of mandamus asking the state Supreme Court to require the trial court to vacate its orders and to stay further proceedings in the trial court pending the outcome of the mandamus proceeding.

As to the first action, the Court reversed the judgment of dismissal of Bates and Joyner's request for an accounting of the Abernathy trust; affirmed the judgment of dismissal as to all other claims; and remanded the case.

As to the second action, the Court dismissed the appeal as moot.

As to the mandamus petition, it granted the petition for a writ of mandamus as to all portions of the Aug. 22, 2011 order except that portion that seeks a review of the Abernathy trust documents as compared to the terms of the settlement agreement. The Court also granted a Stewart and Kasowitz's motion for a stay.

"The trial court clearly exceeded its discretion in its Aug. 22 (2011) order when it reopened a final judgment entered more than eight years before, scheduled a hearing on the reasonableness of the attorney-fee award in that 2003 judgment, ordered that notice of the hearing on the attorney fees be mailed to all the Monsanto plaintiffs, delved into the administration of the Abernathy trust for the purpose of reviewing claims already paid or denied, ordered confidential medical and financial information to be released to the public, and froze distributions from the Abernathy trust," Justice James Allen Main wrote in the Court's consolidated ruling, filed Friday.

The Court also directed the trial court and Stewart and Kasowitz to immediately lift any freeze of distributions from the Abernathy trust, noting that there are "children and adults who are likely going without medical care or educational assistance" while the cases have been held up in court.

From Legal Newsline: Reach Jessica Karmasek by email at

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