Kentucky Court Disbars Class Action Specialist Chesley

An Ohio attorney known as the godfather of the modern class action lawsuit was disbarred Thursday by the Kentucky Supreme Court, which cited Stanley Chesley’s actions in a $200 million settlement involving the makers of a diet drug.

The high court concluded that Chesley, who was based in Cincinnati, acted unethically in settling a dispute over health effects stemming from use of fen-phen. The court concluded that Chesley refused to acknowledge his conduct was wrong and had dishonest or selfish motives. The decision could impact multiple cases Chesley has had a hand in across the country, including Ohio’s case against Fannie Mae.

“While the good reputation he has enjoyed and his generosity serves to exacerbate the tragedy of his fall, they cannot atone for the serious misconduct he has committed in connection with this matter,” Chief Justice James Minton wrote for the court.

The justices opted not to order Chesley to pay $7.5 million in restitution, but docked him $88,579 for the cost of the investigation leading to the decision.

A message left for one of Chesley’s attorneys, Jim Gary, was not immediately returned Thursday.

Chesley’s disbarment affects only his ability to practice law in Kentucky. A spokesman for the Ohio Supreme Court, which handles attorney discipline in that state, was not immediately available.

Chesley rose to legal prominence more than 30 years ago when he won $50 million for victims of the Beverly Hills Supper Club fire, a May 1977 blaze that killed 165 and injured 116 in northern Kentucky. Since then, he’s been involved in cases against Toyota over allegations that cars unintentionally accelerated and a class-action lawsuit against BP on behalf of stockholders who lost money after a well blew out, spewing oil into the Gulf of Mexico in 2010.

The disbarment stems from Chesley’s involvement with former Kentucky attorneys Melbourne Mills, William Gallion and Shirley Cunningham. Gallion and Cunningham were convicted in 2009 of scamming more than 400 clients out of millions they had won against American Home Products, which renamed itself Wyeth and is now a subsidiary of Pfizer. Fen-phen was pulled from the market in 1997 after users had heart problems related to the drug. Prosecutors say they illegally kept the bulk of the settlement, but made more money available to their clients after the federal government began a criminal investigation.

The lawyers sued the drug maker in 2001. The men created a charity, the Kentucky Fund for Healthy Living, with money from the settlement and named themselves and former state judge Joseph Bamberger as directors.

From the settlement, Cunningham received $21 million; Gallion nearly $31 million; Mills almost $24 million; and Chesley more than $20 million. The Kentucky Fund for Healthy Living received $20 million, and several other lawyers divided up $10.5 million. After two distributions, the clients received $73.5 million _ just less than 37 percent of the total settlement.

Minton found those attorneys’ fees excessive and unacceptable.

After the settlement unraveled in Kentucky Bar Association complaints and litigation, Gallion, Cunningham, Mills, Bamberger and David Helmers, an associate of Gallion’s, were disbarred.

Gallion is serving his sentence at a federal prison in Oakdale, La. He is scheduled for release in 2029. Cunningham is serving his sentence at the federal prison in Yazoo City, Miss. He is scheduled for release in 2025.

Gallion and Cunningham were the original owners of 2007 Horse of the Year Curlin, which earned $10.5 during his racing career. Curlin retired from racing in 2008