Pat Murphy, The Daily Record Newswire
Stanley M. Chesley’s fabled career appears to be at an end in the wake of last week’s decision by the Kentucky Supreme Court to disbar the pioneering class action lawyer for taking an “unreasonable” fee from a $200 million fen-phen settlement.
“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 John D. Minton Jr. wrote in the unanimous decision.
Chesley, 76, lives in Cincinnati, Ohio. As recounted by The Associated Press, the attorney is widely recognized as the “godfather of the modern class-action,” first making his mark more than 30 years ago when he won $50 million for victims of the Beverly Hills Supper Club fire. The May 1977 blaze killed 165 and injured 116 in northern Kentucky.
The Kentucky Supreme Court on March 21 found Chesley guilty of eight separate violations of the state’s rules of professional conduct related to his dealings in a class action brought on behalf of 431 Kentucky residents who claimed injuries from the diet drug fen-phen.
The infractions included engaging in dishonest, fraudulent, or deceitful conduct. The court also found that Chesley made false or misleading statements concerning his fee arrangements with co-counsel, both to a state judge and in the course of the Kentucky State Bar’s disciplinary investigation.
The fen-phen lawsuit was originally brought by three Kentucky lawyers in 1998. Chesley later joined the class action and was involved in the negotiation of a $200 million settlement with American Home Products in 2001.
Chesley received more than $20 million as his contingent fee in the case. The state high court concluded the fee violated the rule of professional conduct prohibiting unreasonable compensation.
Justice Minton wrote that Chesley’s $20 million fee “was unreasonable, especially in light of his professed ignorance and lack of responsibility for any aspect of the litigation except showing up at the mediation and going through the motions of announcing the agreement.”
The justice said that Chesley “has shown nothing to demonstrate that he expended a great deal of time and labor on the case. The issues of liability were not particularly difficult or novel, and even if they were, [Chesley] did not do the heavy-lifting on that aspect of the case.”
In February 2009, a federal jury convicted two of the three Kentucky lawyers who collaborated with Chesley in the fen-phen case for engaging in a scheme to take twice what they were owed under their retainers. The two convicted Kentucky attorneys were sentenced to 20 and 25 years in prison, respectively, and ordered to pay their former clients $127 million in restitution.
Justice Minton yesterday tied Chesley to the misdeeds of his Kentucky colleagues, stating that the “vast amount of evidence compiled and presented in this matter demonstrates convincingly that [Chesley] knowingly participated in a scheme to skim millions of dollars in excess attorney’s fees from unknowing clients.”
Because of his disbarment in Kentucky, Chesley faces the strong possibility of reciprocal disbarment by the Ohio Supreme Court.
In December, The Cincinnati Enquirer reported that lawyers were leaving Chesley’s firm, Waite, Schneider, Bayless & Chesley, in the wake of his disciplinary troubles.
