Judge Weighs How Much Lawyers in Diet Drug Case Owe Plaintiffs

A judge in Kentucky has delayed setting a dollar amount on what more than 400 former fen-phen plaintiffs may receive from the lawyers they sued over their share of a $200 million settlement.

Special Judge William Wehr indicated in an order last week that three Lexington lawyers would have to return some of the money they received from the settlement, but he said he needed more information before deciding on the amount.

Wehr ruled in March 2005 that lawyers Melbourne Mills, William Gallion and Shirley Cunningham Jr. breached their fiduciary duty when their clients said they paid themselves an extra $62 million out of the 2001 diet drug settlement in northern Kentucky.

The plaintiffs had sued the diet-drug maker American Home Products, saying that the drug fen-phen caused heart damage.

More than $105 million went to the attorneys in the case — much more than their individual contracts with their clients said they should be paid. The plaintiffs received $74 million. About $20 million went into a nonprofit fund for which the lawyers paid themselves about $60,000 a year to serve as board members.

A federal grand jury in Covington is investigating what happened in the case.

Mills, Gallion and Cunningham were temporarily suspended from practicing law in August. The judge who approved the settlement and later served as a paid board member of the nonprofit resigned in February 2006 rather than face disciplinary action.

Some of the fen-phen plaintiffs sued their former attorneys in 2004, demanding a full accounting of the funds.

The plaintiffs have asked for more than $120 million in money paid to the lawyers and the nonprofit fund. Attorneys for the plaintiffs asked that the lawyers pay back their fees — about $59.5 million — and also for an order for other damages.

Wehr declined the plaintiffs’ motion to order the lawyers to pay back the fees, but he left the question open. He agreed that the plaintiffs were entitled to other damages, but he declined to name a dollar amount, saying it could not be done until the lawyers’ “legitimate expenses” on the case were calculated.

Angela Ford, a lawyer for the fen-phen plaintiffs, said she will ask Wehr for a complete order, which will cite his reasoning behind the decisions.

A jury may also decide whether Cincinnati-based lawyer Stanley Chesley breached his fiduciary duty to the fen-phen clients. Wehr denied Chesley’s motion to dismiss the case.

But the judge also declined to issue an order saying that Chesley was at fault, saying that there were still questions regarding Chesley’s role.

According to documents filed in the case, the plaintiffs have argued that the lawyers probably would have kept more than $105 million if the Kentucky Bar Association had not sent them a subpoena in 2002 asking for an accounting of the settlement. It was after receiving that subpoena that the lawyers transferred about $59 million from their accounts back into client accounts.

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Information from: Lexington Herald-Leader,
http://www.kentucky.com