Litigation

$42 Million Judgment Against Fen-Phen Lawyers Vacated

FRANKFORT, Ky. -- A $42 million summary judgment in favor of 431 fen-phen plaintiffs against a group attorneys, two of whom are serving lengthy prison sentences stemming from allegations that they pocketed twice what their fee agreements called for, has been vacated by the Kentucky Court of Appeals, which said in a Feb. 4 opinion that the defendants had presented an issue of triable fact regarding their handling of legal fees (Shirley A. Cunningham, et al., v. Mildred Abbott, et al., No. 2007-CA-1971-MR, Ky. App.; 2011 Ky. App. LEXIS 24). 

The appeals panel said an expert opinion offered by former Judge Kenneth R. Feinberg on behalf of the defendants was sufficient to create issues of material fact, including whether the $200 million settlement with manufacturer American Home Products Corp. (AHP), minus fees and expenses, was to be split between the 431 settling claimants; whether the claimants were fairly and adequately compensated; whether the Kentucky Fund for Healthy Living (KFHL) was funded with $20 million that should have gone to the claimants; and whether defendants William J. Gallion, Shirley Cunningham, Melbourne Mills Jr. and Stanley M. Chesley were obligated to indemnify AHP for additional claimants who might come forward after the settlement had been disbursed.  

Judge Christopher Shea Nickell wrote for the court, with Judges Janet L. Stumbo and Thomas B. Wine concurring.  

In August 2007, Boone County Circuit Court Judge William Wehr, sitting as a special judge, awarded the $42 million against Cunningham, Gallion and Mills in Mildred Abbott, et al. v. Stanley M. Chesley, et al. (No. 05-CI0436, Ky. Cir., Boone Co.).  Judge Wehr said the plaintiffs could be entitled to as much as $62.1 million in misappropriated funds and interest but awarded the lesser amount as what the appeals panel called "baseline compensatory damages."  Judge Wehr said the facts presented against Chesley, who allegedly helped the other three negotiate the settlement with AHP, now Wyeth, were not sufficient to warrant summary judgment.  The appeals panel agreed and denied Mildred Abbott's cross-appeal on that issue. 

Circuit Judge Joseph F. Bamberger, who approved the settlement and creation of the KFHL, resigned in 2006 after a reprimand order by Kentucky's Judicial Conduct Commission, saying the judge's activities in the case "shock the conscience." 

A jury in April 2009 found Gallion and Cunningham guilty of one count of conspiracy to commit wire fraud and eight counts of wire fraud.  Prosecutors said the two kept approximately two-thirds of the settlement with AHP, or approximately twice what they were due.  U.S. Judge Danny Reeves of the Eastern District of Kentucky sentenced Gallion, whom the judge had described as the ringleader of the conspiracy, to 25 years in prison.  He sentenced Shirley Cunningham to 20 years and ordered the two to pay $127 million in restitution and $30 million forfeiture.An earlier criminal trial jury had deadlocked on charges against Gallion and Cunningham and acquitted Mills. 

[Editor's Note:  Full coverage will be in the February issue of Mealey's Litigation Report: Diet Drugs.  In the meantime, the opinion is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #87-110209-006Z.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.] 

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For more information, call editor Michael Lefkowitz at 215-988-7732, or e-mail him at michael.lefkowitz@lexisnexis.com.