King of Torts Dethroned

Stanley Chesley, a class-action plaintiffs’ lawyer who became rich and famous for collecting billions of dollars for his clients in various lawsuits throughout his career, is now facing disbarment, the possibility of paying back $7.5 million in fees, and, arguably worse, a “professional death sentence.” The so-called “Master of Disaster” reportedly built his career around a simple strategy: swoop in after a disaster, round up as many clients as possible, and launch a “legal assault” against as many of the deep-pocketed bad guys as possible. How might one who follows such a business model go astray? He allegedly got greedy, with conduct his hearing officer called “shocking and reprehensible” behavior related his keeping far more than his share of a $200 million product liability settlement in Kentucky.

The case at issue was a 1998 class-action lawsuit involving the now withdrawn anti-obesity drug fen-phen, which consisted of more than 400 plaintiffs and was pending in Kentucky’s Boone County. The Wall Street Journal Law Blog reports that Chesley was not initially involved in the litigation, but at some point “muscled” his way into the case and strong-armed the attorneys into sharing fees with him in exchange for his “expertise” in handling class actions. Apparently, though, those attorneys did not notify the plaintiffs of the new arrangement.

The suit eventually resulted in a $200 million settlement with the maker of fen-phen, of which the plaintiffs’ lawyers reportedly kept tens of millions of dollars more than permitted. Of the total settlement, Chesley reportedly received a $20 million fee for his helping settle the case, including a reported additional $4 million for convincing the sitting judge to increase the attorneys’ take on the settlement to 49 percent. That judge later resigned from the bench when it was discovered he allegedly took financial benefit from the settlement in a secret deal.

Of the four plaintiffs’ attorneys involved in that case, three faced criminal charges of fraud and conspiracy. Two were sentenced to 25 and to 20 years in federal prison. As reported at Overlawyered, at the time of those guilty verdicts, it was a mystery as to why Chesley was not similarly charged. Despite that omission, Kentucky’s trial commissioner recently issued his opinion that Chesley should lose his Kentucky law license permanently and return more than $7.5 million in fees collected in the settlement.

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