Stan Chesley

This from the Wall Street Journal

By DIONNE SEARCEY


A groundbreaking plaintiffs' attorney should be disbarred for bilking clients out of millions of dollars in the settlement of a 1998 diet-pill lawsuit, a Kentucky judicial official said.

Trial Commissioner William L. Graham's recommendation Tuesday that Stanley Chesley be stripped of his law license in Kentucky marks the latest legal twist following the suit filed by people who had taken fen-phen over the drug's alleged health risks. The suit ended in a $200 million settlement paid by drug maker American Home Products.

Stanley Chesley's attorneys plan to appeal a recommendation that he be disbarred in Kentucky.

Fee fights among plaintiffs' lawyers involved in the case began early on, and the Kentucky Bar Association was called to investigate alleged misrepresentations about the settlement. Two plaintiffs' attorneys eventually received prison sentences for defrauding clients, and the judge who handled the case stepped down from the bench.

American Home Products faced numerous federal and state suits over the drug, which was later banned for causing heart-valve problems. The company was eventually acquired by a company now part of Pfizer Inc. A Pfizer spokesman didn't respond to a request for comment.

Judge Graham accused Mr. Chesley of defrauding plaintiffs out of about $7.5 million in fees.

Mr. Chesley's actions were essentially "a cover-up of thievery," Judge Graham said in a report that demanded the return of the money. "His callous subordination of the interests of his clients to his own greed is both shocking and reprehensible," Judge Graham wrote.

Mr. Chesley's attorneys said they planned to appeal to the Kentucky Supreme Court, which will make a final determination on the commissioner's recommendation. The attorneys cited a federal probe of the case, which didn't result in charges against Mr. Chesley. "His findings are directly contrary to the findings of federal authorities, who fully investigated this case and never considered Mr. Chesley a target of their investigation," they said in a statement.

The trial commissioner's report accused Mr. Chesley of muscling into fen-phen litigation under way in Kentucky's Boone Circuit Court and strong-arming attorneys into sharing fees with him in exchange for his "expertise" in handling class actions.

The more than 400 plaintiffs weren't notified, at least initially, of Mr. Chesley's involvement nor were they ever told he had reached an agreement with their attorneys to share in 21% of attorneys' fees in the settlement, according to the report.

Mr. Chesley later convinced Boone Circuit Court Judge Joseph Bamberger to boost attorneys' cut to 49% of the total settlement in a February 2002 clandestine meeting in the courthouse jury room, according to the report. Clients weren't told of the new arrangement. And Mr. Chesley received an additional $4 million payment out of the fees, which Judge Graham said amounted to a bonus for securing such a big cut for his colleagues.

Mr. Chesley wound up being paid more than $20 million in fees, when his agreement called for him to earn roughly $12 million, the report said.

Mr. Chesley said he didn't recall the meeting with the judge, according to the report. Judge Bamberger, the trial judge who resigned, had testified he never would have approved the fees had the lawyers told him about prior fee arrangements.

Mr. Chesley, of Cincinnati, rose to fame in legal circles after representing families of those who died in the 1977 Beverly Hills Supper Club fire in Kentucky. In what was a new tactic, he filed suit against more than 1,000 defendants, most of them companies that had sold supplies or services to the club, eventually securing nearly $50 million in settlements and court awards. His strategy became a blueprint for how plaintiffs' attorneys pursue mass torts—gathering large numbers of plaintiffs and casting a wide net for potential defendants.