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Disbarred ‘Prince of Torts’ Could be on the Hook for at Least $25 Million

Wall Street Journal, August 5, 2014

By Jennifer Smith

Stanley Chesley, the Ohio trial lawyer brought low by his involvement in a disputed diet-drug lawsuit, could be on the hook for at least $25 million to settle claims that he took $7.5 million more than his share of a 2001 settlement.

Once known as the “Prince of Torts,” Mr. Chesley was disbarred last year in Kentucky after that state’s Supreme Court sanctioned him for professional misconduct in the case, though the court did not require him to pay any restitution.  Soon after he surrendered his Ohio law license, effectively ending a decades-long career in mass tort litigation.

Now a Kentucky judge has ruled that Mr. Chesley is indeed “jointly and severally liable” for $42 million in damages awarded to plaintiffs in 2007 against three other lawyers in the case, all of whom were found to have violated their fiduciary duty to their clients.

Mr. Chesley, who acted as lead negotiator in the 2001 settlement with American Home Products over alleged health problems caused by the diet drug fen-phen, has said that his circumstances were different than those lawyers, for example, because he was not party to the contracts they negotiated with clients in the case.

Boone County Circuit Court Judge James Schrand disagreed, writing in an Aug. 1 decision that Mr. Chesley had engaged in a joint enterprise with the other lawyers and had breached his fiduciary to his clients:

“The Supreme Court found that Chesley knowingly participated in a scheme to skim millions of dollars in excess attorney’s fees from unknowing clients, and that he received and retained fees that he knew were improperly taken. The Supreme Court further found that he purposefully attempted to avoid conversation and correspondence that would expose his knowledge of the nefarious schemes of his co-counsel… Chesley’s conduct caused Plaintiffs to receive only a portion of the settlement monies they were entitled to.”

Sheryl Snyder, a Louisville, Ky.,  lawyer representing Mr. Chesley, said he was disappointed with the decision. “We are analyzing our procedural options,” he told Law Blog on Tuesday. “We have maintained all along, and the Supreme Court of Kentucky actually said in the case involving the other lawyers that Mr. Chesley was situated differently from the other lawyers, and during a significant period of time was not a participant at all.”

Attorney Angela Ford of Lexington, who represents some 400 of the clients in the case, said $17 million has been collected so far, but that interest has been accruing on the part of the three other lawyers that could drive the total settlement price tag higher.

“Out of a $200 million settlement the attorneys paid themselves $126 million,” Ms. Ford said. “Because they acted together, they are all jointly responsible for the entire damage amount of $42 million.”

She said she intends to file a motion seeking prejudgment interest from Mr. Chesley once the judgment becomes final and appealable.