The Kentucky Supreme Court has determined that a trial court did not err in granting partial summary judgment to Kentucky residents who alleged that their attorneys breached their fiduciary duties in settling claims related to the residents’ use of the diet drug Fen-Phen, thus upholding a $42-million verdict awarded to the residents. Abbott v. Chesley, No. 2011-SC-000291-DG (Ky., decided August 29, 2013).
According to the court, each of the 431 residents had a contingency-fee agreement with attorneys Shirley Cunningham, William Gallion or Melbourne Mills Jr., who each maintained a separate law office. The attorneys later entered an agreement that also included Stanley Chesley outlining their respective responsibilities and fee sharing in negotiating a settlement of the claims of all their clients. The defendant agreed to pay an aggregate sum of $200 million to settle the claims of these clients, and the attorneys, without court approval or notification to their clients, distributed nearly $73.3 million to the clients, $20 million to a non-profit they had established and $106 million to themselves in fees, an amount that far exceeded the 30 percent to 33.33 percent allowed in the contingency-fee agreements.
The court observed that “the only question for the trial court was whether those facts established a breach of fiduciary duty that entitled Appellants to summary judgment . . . as a matter of law.” Stating, “It is beyond rational dispute that [the attorneys] breached their fee agreements with Appellants by claiming excessive fees and, in doing so, that [the attorneys] failed to ensure that each Appellant received his or her contractual share of the settlement,” the court agreed that the breach was established as a matter of law. An intermediate appellate court had faulted the trial court for not finding that an affidavit submitted by renowned mass-tort litigation attorney Kenneth Feinberg raised a genuine issue of material fact. According to the supreme court, Feinberg’s comments were simply his opinion on an issue of law and did not controvert “the essential facts upon which Appellants’ claims are based.”
Among other matters, the court also determined that (i) the plaintiffs could not appeal the trial court’s denial of summary judgment against attorney Chesley, because it was an interlocutory order; (ii) the trial court properly designated the damages as joint and several because the underlying claim was essentially contractual and because the way the defendants structured their efforts in the Fen-Phen litigation constituted a joint enterprise, and joint and several damages are available for breach of contract and for conduct involving a joint enterprise or partnership; and (iii) the trial court improperly incorporated Mills’s overhead expenses into the calculation of expenses for contingency-fee agreements. The court remanded the matter to the trial court for further proceedings.