Archive for February, 2011

FINDINGS OF JUDGE WILLIAM GRAHAM ACTING AS KBA TRIAL COMMISSIONER IN CASE AGAINST STANLEY M. CHESLEY

Sunday, February 27th, 2011

 The next step in the KBA Discipline proceedings is for the Board of Governors to review the findings.  They can take additional evidence.

 After the ruling by the Board of Governors, either party may appeal to the Ky. Supreme Court.

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SUPREME COURT OF KENTUCKY

KBA FILE 13785 pi, »_

KENTUCKY BAR ASSOCIATION COMPLAINANT

vs.

STANLEY M. CHESLEY RESPONDENT

REPORT OF TRIAL COMMISSIONER

I. THE CHARGE

Pursuant to SCR 3.190, the Inquiry Commission charges that Stanley M. Chesley,

whose Kentucky Bar Association member number is 11810, engaged in professional

misconduct by violating the following nine ethical rules:

1. SCR3.130-1.5(a)

2. SCR3.130-1.5(c)

3. SCR3.130-1.5(e)

4. SCR 3.130-1.7

5. SCR3.130-1.8(g)

6. SCR3.130-3.3(a)

7. SCR3.130-8.1(a)

8. SCR3.130-8.3(c)

9. SCR 3.

Each rule will be specifically quoted in the Conclusions of Law.

II. THE PROCEEDINGS

A hearing regarding these charges began on November 5-6, and 12-13,2009, with

Judge Rod Messer presiding as the Trial Commissioner. Present representing the KBA

were Linda Gosnell, Esq., Carey Howard, Esq., and other staff members of the Bar. The

Respondent Stanley Chesley was present on some of the days with counsel (appearing at

various times), Kent Westberry, Esq., James Gary, Esq., Frank Benton, IV, Esq., Scott

Cox, Esq., Mark Miller, Esq., and the Honorable Susan Dlott, wife of the Respondent.

Prior to the hearing, testimony of video depositions from five witnesses located

out of the state were provided to the Trial Commissioner. These video recordings were

entered of record at the hearing. In this initial hearing 44 exhibits were introduced by the

Complainant through the out-of-state testimony of John Vardaman, Esq., Heidi Levine,

Esq., Helene Madonick, Esq., all three of whom represented the Defendant in the

underlying action, American Home Products. Also presented was the deposition of Faye

Stilz, Esq., an employee of the Respondent Chesley, and Frank Dominguez, a

representative of one of the banks in which the settlement funds from the underlying

action were held.

Approximately one week into the hearing, Judge Messer learned of a potential

conflict and recused with respect to the Respondent Chesley, but continued with the

charges against David Helmers. Subsequently, on March 9, 2010, this Trial

Commissioner was appointed to continue the hearing with respect to the Respondent

Chesley. That hearing resumed on September 13-15,20-24, 2010. Prior to the hearing

this Trial Commissioner reviewed all the pertinent records including the pleadings, the

depositions mentioned above, and all of the testimony given at trial prior to Judge

Messer’s recusal. Again the KBA was represented by Ms. Gosnell and Mr. Howard,

along with Bar Counsel paralegals. The Respondent was present and represented by

Mr. Gary, Mr. Benton, Mr. Cox, Mr. Miller, Esq., and Sheryl Snyder, Esq. Forty-three

witnesses gave testimony either by deposition or in person. The Trial Commissioner also

considered 124 exhibits.

At the conclusion of the hearing Counsel requested a briefing schedule. This

motion was granted, the transcript prepared, and briefing was concluded and the case was

submitted to the Trial Commissioner on January 31, 2011.

III. FACTUAL HISTORY

Both the Board of Governors and the Supreme Court are no doubt familiar with

many of the underlying events that led to these charges against the Respondent Chesley

from their review of the disciplinary cases of the other plaintiffs’ counsel in the

underlying action. These counsel include Shirley Cunningham, Melbourne Mills,

William Gallion, and David Helmers. The actions of the presiding judge, Joseph

Bamberger, are also before the Court in disciplinary proceedings taken against him. The

Judicial Conduct Commission also took action against Judge Bamberger, which resulted

in his resignation from the bench. We will focus therefore on a review of some of the

facts in this case as they relate specifically to the Respondent Chesley.

Chesley has argued and would have the Trial Commissioner believe that he was

brought into this case by plaintiffs’ other counsel for a very limited purpose of lending

his “expertise” to the case in acquiring a favorable settlement from the Defendant,

American Home Products (hereinafter AHP.) This argument is misleading and not

supported by the facts.

The lawsuit at issue in this proceeding, Darla Guard, et al or Jonetta Moore, et al

versus A.H. Robins Company, et al, (herein after the Guard case) was filed in Boone

Circuit Court as Civil Action Number 98-CI-759 in 1998. Counsel of record in that

action were William Gallion, Shirley Cunningham, and Melbourne Mills. The action was

filed and certified as a class action complaint on behalf of individual named plaintiffs and

“all those similarly situated” in Kentucky who claimed injury from certain diet drugs

commonly referred to as the fen-phen drugs. Cunningham and Mills, primarily through

advertising, had signed up hundreds, if not thousands of potential clients for the tort

claims against the manufacturer of the fen-phen drugs, AHP, and a doctor who prescribed

the drugs in Kentucky, Dr. Rex Duff. Gallion, who had previously shared offices with

Cunningham, was brought in as a litigator who would prepare the case and try it. David

Helmers was his associate.

Near the same time as the filing of the Guard case, many similar diet drug cases

were being filed in many jurisdictions across the country. Most were being consolidated

in a federal court action as multidistrict litigation (MLD) in the Eastern District of

Pennsylvania. Respondent Chesley was involved in representing plaintiffs in that federal

litigation and became a member of its management committee for purposes of settlement

negotiations with AHP. This federal action resulted in an agreed settlement for many diet

drug cases throughout the country.

The Guard case in Boone Circuit Court, however, was not removed to the federal

court and many plaintiffs in the Guard action signed opt-out agreements from the national

settlement. These cases were to proceed toward trial in the Boone Circuit Court.

Shortly after the Guard case had been certified as a class action on behalf of “all

Kentuckians who had consumed diet drugs prescribed by Dr. Duff,” another class action

(seeking a remedy of medical monitoring) was filed in Leslie Circuit Court by four

attorneys, Kenneth Buckle of Hyden, Kentucky, Alva Hollon of Florida, but licensed in

Kentucky, Michael Gallagher of Texas, and Robert Arledge of Mississippi. The

presiding judge of the Leslie Circuit Court certified this case as a class action on the same

day it was filed. This case was styled Feltner, et al versus AHP, et al, Case Number 99-

CI-127, Leslie Circuit Court. The two suits created problems for the AHP counsel as an

issue arose as to whether these cases were overlapping in their certified classes. This

problem seemingly was resolved, however, when the Feltner case nearly immediately

was removed to the U. S. District Court for the Eastern District of Kentucky. It appeared

that the Feltner case would likely be transferred to the MDL proceedings in Philadelphia.

On July 30, 1999, Respondent Chesley filed his own class action complaint in the

Boone Circuit Court styled Courtney, et al versus AHP, et al, Case Number 99-CI-842.

His clients included three individuals. Two weeks later Respondent Chesley filed a

motion to consolidate his case with the Guard case. The Guard counsel, including

Gallion, strongly objected to this motion to consolidate. Interoffice memos between

Helmers and Gallion at this time reveal their strong objection to any attempt by Chesley

to enter their case.

Next, while the Feltner case was under stay in the federal court pending a possible

transfer to the MDL in Philadelphia, Respondent Chesley entered his appearance as

counsel for that plaintiff class on September 29,1999, in that case. Shortly thereafter, on

October 12, a notice of an Agreed Order to Remand the case to Leslie Circuit Court was

entered. Attorney Buckles’ signature on the order of remand contains the initials “SMC.”

David Schaefer, counsel for AHP, testified that the remand had been worked with AHP

by the Respondent Chesley. Upon remand of the Feltner action, cocounsel in the Feltner

case quickly moved to intervene in the Guard action in Boone Circuit Court. Almost at

the same time, Respondent Chesley filed a “status report” in the Courtney action in

Boone Circuit regarding the current status of his negotiations with Gallion to work

together in the Courtney and Guard cases. That status report contended that the Court

should consolidate Courtney and Guard despite the inability of the attorneys to come to

an agreement. The status report also informed Judge Bamberger of the order to remand

the Feltner case to the Leslie Circuit Court. Chesley cited this as an additional reason

that his case should be consolidated with the Guard case. He failed to inform the Boone

Circuit Court that it was he himself who had arranged for the remand.

Soon thereafter, Gallion and his cocounsel in the Guard case threw in the towel on

their efforts to resist Respondent Chesley’s entry into their case. The Guard counsel and

Respondent Chesley entered into a written stipulation to consolidate and the Courtney

case was thereby consolidated with the Guard action for “all purposes.” Once Courtney

was consolidated with the Guard class action, the Feltner matter fell by the wayside as far

as any involvement by these attorneys. Many of the Feltner claims were later settled as

part of an inventory settlement administered in another state. Likewise the Courtney

plaintiffs were not included in the Guard settlement but were sent back to the national

case. Respondent Chesley, however, had accomplished his goal ofjoining the class

action as counsel in the Boone Circuit Court. Soon thereafter, Gallion, Cunningham, and

Mills entered into a fee splitting contract with the Respondent Chesley and one other

Cincinnati attorney who had some clients in the class action. This agreement (KBA

Exhibit 147) was reached following a negotiation of all the attorneys in a meeting in

Cincinnati.

Under specific language in the agreement the attorneys agreed to be cocounsel in

the Guard action, but with designated roles for the various counsel. Respondent Chesley

agreed to act as “lead negotiator” in any attempts to settle the case. In this initial

agreement, if the case were successfully settled, he was to receive 27 % of the attorney

fees generated by the settlement of any individual opt-out cases or a settlement of the

entire class action. Gallion would be lead trial counsel in the event that the case had to be

tried. If there were no settlement but the plaintiffs prevailed at trial, Chesley’s portion of

the attorneys’ fees would be reduced to 15 %. This agreement had an expiration date of

December 31, 2000. The agreement also provided a specific provision allowing all

attorneys to review the fee contracts with the clients. Chesley claims that he never did

this. The agreement provides that the clients are to be notified, but they were not.

During the year 2000, attempts to negotiate a settlement with AHP were fruitless.

The Respondent Chesley conversed with John “Jack” Vardaman, a Washington lawyer,

who represented AHP and with whom Chesley had a longstanding professional

acquaintance. At the end of that year Chesley wrote a letter to Gallion requesting that

their fee agreement be renewed. This renewal of the agreement was accomplished and

resulted in a change in the fee splitting portion of the agreement. In the new agreement

Chesley’s percentage was reduced to 21 % (KBA Exhibit 148), upon a successful

settlement.

Meanwhile, the Boone Circuit Court set the matter for trial in the summer of

2001. Before trial, however, the Court directed parties to make another attempt at a

negotiated settlement through a mediation. All parties met for mediation for two days,

April 30 and May 1 of 2001, in the offices of their mediator in Lexington, Kentucky.

Counsel present for the Defendant AHP were Jack Vardaman, Helene Madonick, and

local counsel David Schaefer. Counsel present for the Plaintiff class were Gallion,

Helmers, the Respondent Chesley, and for the second day Cunningham. Also present

was a “trial consultant” named Mark Modlin, a longtime personal friend of the presiding

judge.

In preparation for the mediation David Helmers sent both the mediators and

defense counsel binders of materials relating to the medical conditions of the Kentucky

opt-out clients with whom they attorneys had contracts. He also sent materials to

Chesley, which included a detailed chart breaking down proposed settlement ranges for

clients in these various injury categories. Included in that chart prominently near the top

was a notation that the fee contract rate to be applied to the settlement amounts was 30

percent (KBA Exhibit 261). After two days of negotiation, an agreement was reached for

an aggregate settlement of the Guard claims against AHP for $200 million. A settlement

agreement letter was drafted by counsel memorializing this “inventory” settlement.

Respondent Chesley did not sign this settlement letter agreement as one of the “settling

attorneys.” The only class plaintiffs included in the aggregate settlement were persons

who had fee contracts with either Gallion, Cunningham, Mills, or Lawrence. This letter

of agreement by its terms incorporated and contained reference to three exhibits, two of

which were, at the time the letter was signed, not yet in existence. One exhibit not yet in

existence was to contain the names of each individual client whose claims were settled by

the aggregate agreement. The other exhibit was to be a list of the amounts to be

designated to be the allocations of the total settlement fund for each of the individual

clients. These allocations to the individual clients were to be determined by plaintiffs’

counsel.

The settlement agreement also contained two conditions precedent to the

agreement’s effectiveness that could only be ratified by order of the Boone Circuit Court.

One of those conditions was the decertification of the previously certified class action

and the other was the dismissal of the Guard lawsuit. The dismissal with respect to the

settling plaintiffs would be with prejudice; as to all other class members who were not the

opt-out clients of the settling attorneys, the dismissal was without prejudice. The

agreement also referred to and incorporated a “side letter” which outlined an agreement

by the settling attorneys and their clients that they would indemnify AHP for any claims

brought against Dr. Duff or his clinic up to $7.5 million (no such claims were ever made).

The clients were not informed of this indemnity nor in fact were they informed of any of

the terms of the settlement.

On May 9,2001, the Respondent Chesley, Gallion, Helmers, Cunningham, and

David Schaefer appeared before the Boone Circuit Court to present the results of this

negotiated settlement. No notice of this hearing was ever sent to a member of the class.

This astonishing hearing was recorded. It would be the last of any such recorded

proceedings before the Court. Before the hearing begins, counsel had presented the

presiding judge with a jointly drafted and proposed Order Decertifying Class and

Dismissing Action. At no point, however, either during or after the hearing did any of

the lawyers provide Judge Bamberger with a copy of the letter agreement itself. Judge

Bamberger’s questions and the Respondent Chesley’s response to those questions are

well worth viewing. Chesley deftly deflects the judge’s concerns about lack of notice to

either the class or any of the settling clients. In spite of his concerns, Judge Bamberger

signs the Order Decertifying Class and Dismissing Action that same day. This order was

not filed for record with the Boone Circuit Court, however, until May 16, 2001.

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Following the settlement agreement and the hearing before Judge Bamberger

resulting in the Order Decertifying Class and Dismissing Action, Gallion, Cunningham,

Mills, and their employees began meeting with their clients and collecting releases from

them. No client was informed of the amount of the settlement or that the settlement

represented an aggregate settlement for 431 individuals. They were not told that the case

had already been dismissed by the Boone Circuit Court. Many of these clients have

testified in this proceeding as well as other disciplinary proceedings and court actions, all

to the same general effect of what they were told. Not one was ever shown the settlement

document, even though some asked to see it. The disclosure requirements specifically

required within the settlement document, as well as by Court rule, were essentially

ignored by class counsel. The clients were threatened with dire consequences if they

revealed the amounts and circumstances of their settlement to anyone, including their

own families.

After obtaining the requisite percentage of client releases, David Helmers, on

instructions from the Respondent Chesley, flew to New York City to hand-deliver them

to the appropriate officials at AHP. Shortly after the delivery of these releases, AHP

made its initial deposit of $150 million (three-fourths of the total) to a Cunningham client

trust account. Shortly thereafter, on June 19, 2001, Chesley received a check for

$12,372,534.37. Later on July 5 and August 4, 2001, two additional checks totaling

$4,124,287.50 were mailed to Chesley. As a result of this initial distribution to class

counsel, Chesley received a total of $16,497,121.87. We deem Respondent Chesley to be

reasonably conversant with fifth grade arithmetic. Even a rough calculation would reveal

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that the sixteen and a half million dollars received by Chesley is several million in excess

of the 21 % of the attorney’s fees to which he was contractually entitled.

The criminal schemes of Gallion, Cunningham, and Mills began to unravel soon

thereafter. The story, well documented in other disciplinary proceedings before the

Kentucky Bar, are by now familiar to both the Board of Governors and the Court. It is a

sordid tale worthy of the pen of Charles Dickens were he alive and well. Alas, this tale is

not fiction.

Initially, the law practice partners of both Gallion and Mills became suspicious of

the handling of the proceeds from the Guard settlement. Both Michael Baker (against his

former partner Gallion) and David Stuart (against his former partner Mills) brought suit

alleging entitlement to proceeds from the settlement. In the course of their discussions

regarding their grievances, Baker informed Stuart that the settlement had been for $200

million. This was a surprise to Stuart, and when he mentioned this to Mills, Mills was

shocked. Mills had not attended the settlement negotiations and, at the time of the

settlement, Gallion had lied to Mills and told him that the settlement was for $150

million. On February 6, 2002, Gallion attended an office birthday party for Mills. In a

heated exchange, Mills confronted Gallion concerning the $50 million lie. He demanded

that an additional distribution be made to the clients from these funds and then ordered

Gallion to leave his office.

That very evening, Gallion, Cunningham, and Judge Bamberger’s good friend

Modlin met with the Respondent Chesley in Boone County. The party then paid a visit to

Judge Bamberger in the jury room of the Boone Circuit Courthouse. No motion had been

filed, no notice given, and no record made of this extraordinary ex parte meeting with the

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Judge. Respondent Chesley claims that he does not recall this meeting, but his failure to

recollect is not credible. The Commissioner finds by a preponderance of evidence he did

attend this meeting and played a leading role in the presentation made to Judge

Bamberger on that evening. Among other issues taken up with the Judge, Chesley argued

the appropriateness of an application of the cy pres doctrine to dispose of “extra” funds

remaining in the possession of the attorneys and provided a legal memorandum in

support of this argument. He also made an argument for an order approving attorneys’

fees and cited factors from a case called Grinnell v. Detroit as governing the issue. It is

unclear which Grinnell case was cited. In any event, no mention was made to the Judge

of the fact that the attorney’s fees were governed by contracts with the clients and by a

contract among the lawyers. Still Judge Bamberger at the time of this “meeting” had

never been provided with settlement documents or any other financial or accounting

documents in the case. The result of this extraordinary “meeting” was Judge

Bamberger’s oral approval of attorneys’ fees totaling 49 % of the $200 million settlement

as appropriate. The resulting written order was signed somewhat later.

Meanwhile, both Baker and Stuart had contacted the Kentucky Bar Association

with their concerns over the handling of this settlement money. On January 30, 2002, an

application requesting the Kentucky Bar’s Inquiry Commission to issue subpoenas to

Gallion, Cunningham, Mills, and Bank One was filed and served upon Mills. February

11, 2002, was the hearing date set for this application.

On February 11, 2002, the Inquiry Commission, over the objection of Mills’

counsel, authorized issuance of the subpoena application for bank records and other

records relating to the receipt and disbursement of the settlement funds from the Guard

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case. That same afternoon, five wire transfers totaling approximately $59 million were

made by Gallion and Cunningham from several of their personal accounts into an account

at First Union Bank in the joint names of Gallion, Cunningham, and Mills.

On February 15,2002, Judge Bamberger signed the order which he had orally

agreed to a few nights previously. This order approved all attorneys’ fees paid but made

no mention of an amount either in numbers or percentages. This order also authorized

further distributions of funds to clients of half the remaining funds, the amount of which

was not specified. This order, although apparently signed on February 15, was not filed

for record with the Boone Circuit Clerk until June 6, 2002.

Sometime after the “meeting” with Judge Bamberger, Respondents Chesley and

Gallion both contacted David Helmers who was then established in his own firm and

asked him to assist in a “second distribution” to the clients. Helmers received a letter

from Respondent Chesley’s office providing him with a document to show to each client

and have them sign. David Helmers, along with employees from the other firms,

followed these instructions with all of the clients.

On April 1, 2002, Respondent Chesley received an additional check for $4

million, not drawn on the client trust account from which his previous fees had been paid,

but drawn on a different account in a bank outside of Kentucky. Respondent Chesley’s

fees now totaled in excess of $20 million.

Over the spring months in 2002, the Guard clients received a second distribution

from their attorneys. However, Judge Bamberger’s order approving the second

distribution and approving additional attorneys’ fees was not filed with the Boone Circuit

Clerk until June 6, 2002. Concurrently with this filing, the Judge entered an order sealing

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the record and restricting the Clerk’s certificate of service in the Guard case to only Mills,

Gallion, Cunningham, Helmers, and Chesley. All subsequent orders over the following

months were mailed only to those individuals. Judge Bamberger’s order approving

additional attorneys’ fees listed no amount and provided no accounting. Again, there was

no motion, no notice and no hearing for the entry of this order.

The Respondent Chesley received this June 6, 2002, order and must have been

well aware of its factual inaccuracies. He claims, unconvincingly, that he did not read it.

The Respondent Chesley also was noticed on the series of subsequent orders purporting

to create the nonprofit corporation funded by the undistributed remains of the settlement

moneys. We now know those remaining proceeds to be $20 million, although this

amount was never mentioned in an order.

On another front in 2002, William E. Johnson of Frankfort, Kentucky, was

representing Mills in his response to the Kentucky Bar Association’s Inquiry

Commission’s subpoena. Whitney Wallingford represented Gallion and Cunningham in

responding to the subpoenas which they had been issued. At a meeting attended by

Wallingford, Mills, Johnson, Gallion, Cunningham and Chesley, Chesley urged that all

counsel from the Guard case who had received subpoenas from the Bar Association be

represented by the same counsel, William E. Johnson. The Respondent Chesley attended

this meeting and urged the joint representation by Mr. Johnson even though he had not

received subpoenas from the Inquiry Commission. After that meeting, Wallingford

agreed to withdraw as counsel for Gallion and Cunningham, but he completed a

submission to the Bar on which he had previously been working. Before filing his

submission, as he had been instructed, he sent a copy to Chesley for his approval. This

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submission contained a chart which inaccurately and grossly inflated the amounts of

money that had been paid to the clients. Chesley called Wallingford and told him to go

ahead and submit it to the KBA, and Wallingford complied.

On still another front, David Stuart had filed an action against Mills relating to the

dissolution of their law firm. Stuart demanded that Mills provide an accounting of the

firm’s total income, including amounts received from the settlement of the Guard case.

As part of Stuart’s discovery, Stuart’s counsel had obtained a commission from the

Fayette Circuit Court authorizing the out-of-state deposition of the Respondent Chesley

and the authorization of an appropriate subpoena. Mediation of this lawsuit was ordered

and Mills attended along with his former partner, Stuart, their respective counsel and

others. The others included an employee of Mills, Rebecca Phipps, who had been in

contact with Chesley in her efforts to be appointed to the Board of Directors for the

Kentucky Fund for Healthy Living, the nonprofit corporation founded to dispose of the

$20 million “leftover” fund. Chesley had made arrangements with Rebecca Phipps to

contact him if it appeared that the parties were encountering difficulties with the

settlement. Mills’ offer for settlement fell short of Stuart’s demand. At some point

Phipps excused herself from the mediation and called the Respondent Chesley to inform

him of this stalemate. Chesley informed her that he would contribute the difference to

get the matter settled. Respondent Chesley ended up wiring $500,000 to a client trust

account to be combined with Mills’ money and then used to pay the Stuart settlement.

Apparently $250,000 of that amount was later reimbursed to him from his other

cocounsel, Gallion and Cunningham. Stuart’s action was settled without the necessity of

Respondent Chesley’s deposition.

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A new fire soon developed on another front. An attorney in Lexington in January

2005 filed an action in Boone Circuit Court on behalf of several of the Guard clients

against the Respondent Chesley, Cunningham, Gallion, Mills and the Kentucky Fund for

Healthy Living. In his response to this action, Chesley admits having acted as class

counsel in the Guard case. Subsequent pleadings denied that he had ever acted as class

counsel. He also filed a motion to dismiss and attached redacted copies of his fee

agreements wherein language identifying him as cocounsel had been removed.

Also in 2005, when the Kentucky Judicial Conduct Commission preferred charges

against Judge Bamberger for his alleged misconduct in the Guard case, the Respondent

Chesley met with Bamberger to prepare for his meeting with the Commission. He

attended this meeting before the Conduct Commission and apparently argued in support

of Bamberger’s application of the cy pres doctrine and the establishment of the Kentucky

Fund for Healthy Living. After this appearance, Judge Bamberger resigned his office and

has since been disciplined by the Kentucky Bar.

With the civil action against Chesley and his Guard co-counsel under way,

(Abbott, et al. v. Chesley, et al., Case No. 05-CI-735, Boone Circuit Court), Chesley

called his friend, Kenneth Feinberg, to enlist his assistance in obtaining an affidavit in

support of the actions by co-counsel in the Guard settlement. Feinberg obtained the

information for the preparation of his affidavit from Gallion. In this proceeding Feinberg

disavowed the information which he provided in his affidavit and stated that if he knew

what he knows now he would have thrown the affidavit in the wastebasket. He was

supposed to have been paid $50,000 by Gallion, but Gallion never paid this amount.

Chesley testified that he was embarrassed to discover that Gallion had not paid Feinberg,

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so he gave him $10,000. Feinberg was never informed that this affidavit had been filed

of record in the Abbott case by a codefendant of the Respondent.

Sometime in 2006 Chesley also dropped by the office of AHP’s counsel in

Washington, D.C., Jack Vardaman. He left a copy of the settlement agreement with

handwritten notes attached and asked Vardaman to send him a letter along the lines of

Chesley’s notes. Chesley’s first note read: “This case was settled as a class action.

Decertification was not relevant to the collateral issues of attorneys’ fees or

administration of the settlement proceeds and process.” Vardaman testified that this was

not a true statement. Nor were other statements suggested thereon by Chesley.

Vardaman wisely did not send the requested letter. (Vardaman deposition, pp. 67-71).

In late March of 2006, Respondent Chesley was informed that the Inquiry

Commission was now investigating his conduct in the Guard case. The Commission

requested written responses to a number of questions. The Commission received its

responses on May 9, August 8 and October 4, 2006. The Respondent’s responses are in

some instances misleading, other instances incomplete, and in some instances outright

falsehoods. These responses will be dealt with individually in the conclusions of law.

On December 4,2006, the Inquiry Commission issued its Complaint of

Misconduct against Respondent Chesley and this hearing ensued.

IV. CONCLUSIONS OF LAW

The Respondent Chesley is charged with violating three provisions of Kentucky’s

Rules of Professional Conduct with respect to his collection in the Guard case of fees in

excess of $20 million.

1. Supreme Court Rule 3.13 0-1.5 (a) provides in pertinent part:

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“[a] lawyer’s fee shall be reasonable. Some factors to be considered in

determining the reasonableness of a fee include the following: (1) The time

and labor required, the novelty and difficulty of the questions involved, and

the skill requisite to perform the legal service properly; (2) The likelihood that

the acceptance of the particular employment will preclude other employment

by the lawyer; (3) The fee customarily charged in the locality for similar legal

services; (4) The amount involved and the results obtained; (5) The time

limitations imposed by the circumstances; (6) The nature and length of the

professional relationship with the client; (7) The experience, reputation and

ability of the lawyer or lawyers performing the services; (8) Whether the fee is

fixed or contingent.”

Without question the Respondent’s acceptance of fees of more than $20 million in

this litigation is unreasonable and a violation of the above quoted rule. Not only is the

Respondent’s fee part and parcel of the grossly unreasonable fees collected by the

lawyers in this case in light of what the clients had contracted to pay, it is ethically

unreasonable under the above criteria per se. The evidence presented by Vicki Hamm

based upon the financial records of the transactions documenting the fees paid by counsel

to themselves is unrefuted. Even a simplistic calculation of what Chesley was entitled to

under the contractual agreements with the clients is somewhat less than $13 million, not

in excess of $20 million. Respondent Chesley was present and participated in argument

to Judge Bamberger wherein the Judge approved fees in the case of 49 %. In fact, he

argued the holdings of the Grinnell case to Judge Bamberger. In that case a fee of 15

percent was reversed as excessive. The greed evidenced by the plaintiffs’ attorneys in

this case is astounding, and Chesley, although his avarice may not be as breathtaking as

that of Cunningham, Gallion and Mills, is culpable of unethical conduct under this rule.

2. Supreme Court Rule 3.13 0-1.5 (c) provides in pertinent part:

“[a] fee may be contingent on the outcome of the matter for which the service

is rendered, except in a matter in which a contingent fee is prohibited by

paragraph (d) or other law. Such a fee must meet the requirements of Rule

1.5(a). A contingent fee agreement shall be in writing and should state the

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method by which the fee is to be determined, including the percentage or

percentages that shall accrue to the lawyer in the event of settlement, trial or

appeal, litigation and other expenses to be deducted from the recovery, and

whether such expenses are to be deducted before or after the contingent fee is

calculated. Upon recovery of any amount in a contingent fee matter, the

lawyer shall provide the client with a written statement stating the outcome of

the matter and showing the remittance to the client and the method of its

determination.”

Without question the Respondent Chesley has violated this ethical standard. All

the clients in this class action had contractual contingency fee agreements with class

counsel. These fees were either for 30 % or 33 1/3 %. Under the contractual agreements

counsel were also permitted to charge expenses up to 3 %. All attorney fees in the Guard

case should have been calculated from the total recovery of each individual client based

upon the contractual percentage agreed to by that client. The above quoted rule was

completely ignored by all class counsel. Chesley participated with his co-counsel in

charging a 49 % contingency fee to these clients with no accurate written statement of the

fees, expenses or method of determining the fee provided to anyone. Chesley’s

contractual agreement with class counsel was for 21 percent of fees upon successful

settlement of the case. Ms. Hamm’s chart based upon the financial records of these

transactions clearly demonstrates what Chesley’s fees should have been under these

contingent fee contracts. Chesley’s share should have been $12,941,638.46. This

amounts to a bit more, (a relative term in these circumstances), than his initial payment

on June 19, 2001. The circumstances of the later payments is of record. Of course the

final $4 million payment came only after Chesley lent his critical assistance in persuading

Judge Bamberger to sign the order approving the unjustified fees after their unrecorded

19

meeting in Boone County. Chesley was paid some $7,555,000 in excess of his proper fee

calculations under the contracts.

3. Supreme Court Rule 3.130-1.5(e) provides in pertinent part:

“[a] division of a fee between lawyers who are not in the same firm may be

made only if: (1) (a) The division is in proportion to the services performed

by each lawyer or, (b) By written agreement with the client, each lawyer

assumes joint responsibility for the representation; and (2) The client is

advised of and does not object to the participation of all lawyers involved; and

(3) The total fee is reasonable.”

The Respondent Chesley has violated the above quoted rule in numerous respects.

No client was ever advised of Chesley’s participation nor ever given an opportunity to

object. Chesley himself took no measures to ensure compliance with this rule and made

no inquires concerning advice to the clients. As noted above the total fees are clearly

unreasonable. Chesley argues that he was hired to represent Gallion, Cunningham and

Mills in this case – not the class. This argument is belied by all the actions and

documents in the case. The obligation to inform the clients and obtain their consent to a

division of fees among lawyers from different firms lies with all the lawyers involved.

The lack of notice to, and advice and consent of, the clients in the Guard class was

obvious to all class counsel. Indeed, Chesley’s own expert witness was at a loss to

explain how this rule had been followed.

4. Supreme Court Rule 3.130-1.7 provides in pertinent part:

“[a] lawyer shall not represent a client if the representation of that client will

be directly adverse to another client unless: (1) The lawyer reasonably

believes the representation will not adversely affect the relationship with the

other client; and (2) Each client consents after consultation, (b) A lawyer

shall not represent a client if the representation of that client may be

materially limited by the lawyer’s responsibilities to another client or to a

third person, or by the lawyer’s own interest, unless: (1) The lawyer

reasonably believes the representation will not be adversely affected; and (2)

20

The client consents after consultation. When representation of multiple

clients in a single matter is undertaken, the consultation shall include

explanation of the implications of the common representation and the

advantages and risks involved.”

The Commissioner cannot find a clear violation of this rule in the evidence. Bar

counsel argues violation of this ethical principle in two respects. First, the Respondent

Chesley and other counsel in the Guard action, agreed to the decertification of the case

and a dismissal “without prejudice” with respect to the 70 “unknown” members of the

Guard class without notice of either the May hearing before the Boone Circuit Court or

notice after entry of the order. Without question the identity of these 70 opt-out class

members could have been discovered from AHP. But the obligations of class counsel

with respect to such notice under Civil Rule 23 or any other legal principle is unsettled.

Notice, in our view, is the better rule, but some jurisdictions hold otherwise.

Second, Bar counsel argued that Chesley’s actions in settling three other

individual claims for severely injured plaintiffs who suffered from PPH as a result of

ingesting fen-phen drugs conflicted with his representation of the Guard class. Although

such practices merit close examination, this Commissioner can find no evidence that

these settlements affected or impacted the aggregate settlement made for the 431

members of the Guard class in any adverse way.

5. Supreme Court Rule 3.130-1.8(g) provides in pertinent part:

“[a] lawyer who represents two or more clients shall not participate in making

an aggregate settlement of the claims of or against the clients…., unless each

client consents after consultation, including disclosure of the existence and

nature of all the claims… and of the participation of each person in the

settlement.”

21

A more egregious violation of this ethical rule by all plaintiff counsel in the Guard

case is difficult to imagine. This includes the Respondent Chesley. The settlement

agreement itself specifically provides contractually for compliance with this rule by the

“settling” attorneys. Chesley points out that he did not sign the settlement agreement as

one of the “settling” attorneys, even though he was noticed with the final agreement. It is

important to note that this ethical rule exists separately from the settlement agreement

and is an independent requirement in and of itself in any aggregate settlement. There is

no evidence in the record that clients were consulted concerning the aggregate settlement

before, during or after the mediation before it was presented to the Boone Circuit Court.

No notice was given to either settling claimants or those 70 who were dismissed without

prejudice. Respondent Chesley does not escape liability for this rule simply because he

had the foresight not to sign the settlement document. He was class counsel pursuant to

his agreement with Cunningham, Gallion and Mills. Chesley was fully aware that his

clients had not been informed concerning the settlement at the time the agreement was

reached and afterward. He was fully aware that no notice had been sent to the settling

clients prior to the hearing on May 9, 2001, in Boone Circuit Court. Chesley himself

bamboozled Judge Bamberger with his often non-sensical answers to the Judge’s queries

about notice. The actions of the Respondent Chesley and his co-counsel were deliberate

and dishonest. Their failure to comply with this rule demonstrates their true motivation -

to get the money and run – rather than to protect the interest of their clients.

6. Supreme Court Rule 3.130-3.3(a) provides in pertinent part:

“[a] lawyer shall not knowingly: (1) make a false statement of material fact or

law to a tribunal; (2) Fail to disclose a material fact to the tribunal when

disclosure is necessary to avoid a fraud being perpetrated upon the tribunal…”

22

The Respondent Chesley violated this ethical rule by his participation in the

“meeting” with Judge Bamberger in the jury room of the Boone Circuit Courthouse in

2002. He participated in the argument that the Grinnell case provided legal authority

justifying attorney’s fees totaling 49 % of the total recovery of $200 million. Chesley

knew at this time that his clients all had contractual agreements for attorney’s fees much

less than this amount. He was aware that there was no notice given and that the

presentation was being made to the judge behind closed doors and off the record. He

made no effort to disclose to the Court that the attorneys had contingency fee contracts.

Chesley also provided a written memorandum arguing the application of the cy

pres doctrine to create a charitable fund for what the attorneys described for the Judge as

“extra” settlement funds. This doctrine clearly had no proper legal application to the

aggregate settlement in the Guard action.

Furthermore, in the May 9, 2001, hearing he argued to Judge Bamberger that no

notice was needed to the class members of the agreement to settle the case and decertify

the class. This decision had significant legal ramifications for both the 431 who settled

and for the 70 who did not. He also argued for dismissal of the action without notice to

any members of the class. Chesley was presented to the Court as the “expert” in these

class action matters. He mislead the Court regarding notice while knowing full-well that

his clients had neither been informed of the settlement nor had given their consent.

7. Supreme Court Rule 3.150-8.1 (a) provides in pertinent part:

“…a lawyer…in connection with a disciplinary matter, shall not: knowingly

make a false statement of material fact.”

Respondent Chesley has violated this ethical provision in several instances. In

making his responses to questions asked him during the investigation into his conduct in

23

the Guard litigation by the Inquiry Commission of the Kentucky Bar, Respondent’s

answers were incomplete, misleading and/or false. He answered Bar questions in letters

dated May 9,2006, and August 8, 2006 (KBA Exhibits 266 and 270). In answering a

question regarding his communications with other Guard attorneys or Judge Bamberger

regarding the appropriateness of the use of the

cy pres doctrine, Chesley gave a seriously distorted reply. He made no mention of his

off-the-record meeting with Judge Bamberger in February 2002 wherein he presented

legal authority supporting the appropriateness of a cy pres fund. His answer to the next

question, Number 15, is false and misleading wherein he denies any communications of

any nature with Judge Bamberger regarding the establishment of a charity or nonprofit

entity to disburse any funds from the Guard settlement. Again no mention is made of his

participation in the 2002 courthouse “meeting”. His answer to Question 16 is untruthful.

Chesley was well aware that there would be a second distribution prior to his receipt of

the $4 million check. He himself had called David Helmers asking him to assist in the

second distribution. An employee of his law office delivered a letter to Helmers to have

the clients sign in the course of this distribution. His answers to Question 17 and 18 are

not truthful. He in fact did communicate with counsel regarding the second distribution

of funds and met with Judge Bamberger in this secret 2002 meeting to discuss the second

distribution. Experienced counsel in his office participated in drafting the deceptive letter

to be given to the Guard clients upon receipt of a second distribution. These answers

were egregious misrepresentations, if not outright lies, to the Inquiry Commission.

8. Supreme Court Rule 3.150-8.3(c)(now 8.4) provides in pertinent part: that it

24

is misconduct for a lawyer to “[ejngage in conduct involving dishonesty, fraud, deceit or

misrepresentation."

Clearly from the evidence, Respondent Chesley believed that he would be able to

"take his money and run" after the settlement and avoid any responsibility in the

distribution of the settlement to the clients. When he became aware of the misdeeds of

Cunningham, Gallion and Mills, his responsive actions all became part of an attempt to

conceal and cover up their misdeeds. Chesley must have been fully aware of the fraud

perpetrated by his accepting fees far in excess of what he was entitled to under his

contractual arrangement. He was fully aware that no accounting had been made to the

clients or to the Court. Rather than taking actions to correct these misdeeds, to inform his

clients and the Court, and to disgorge ill gotten gain, Chesley acted with dishonesty,

deceit and misrepresentation in assisting his co-counsel in their efforts to conceal what

had transpired. His entire course of conduct was one of self-interest and self-preservation

of both himself and his co-counsel. His actions set out above evidence a complete lack of

concern for his clients and the proper and just application of the law.

9. Supreme Court Rule 3.150-5.1 (c)( 1) provides in pertinent part:

"[a] lawyer shall be responsible for another lawyer’s violation of the Rules of

Professional Conduct only if: The lawyer orders or, with knowledge of

specific conduct, ratifies the conduct involved…”

Respondent Chesley has violated this ethical provision in numerous respects.

Chesley had to have learned that the settlement fund had not been properly administered

and distributed to the clients when he learned after Mills’ confrontation with Cunningham

that a second distribution would be required. That evening he along with Gallion and

Cunningham met with Judge Bamberger in their off-the-record “meeting”. Chesley’s

25

actions in attending that meeting and all actions he took subsequently were designed to

assist his co-counsel in a “cover-up” of their thievery. It is clear from the evidence that

from this point on Chesley became “counsel in chief. He attended meetings to settle

David Stuart’s suit against his former partner Mills and made a significant contribution to

that settlement in order to avoid depositions and publicity. Counsel were instructed to

obtain his approval before sending documents to the Inquiry Commission and he

specifically approved a document sent by Whitney Wallingford to the KBA which was

later determined to contain false and misleading information. He assisted Judge

Bamberger in his presentation to the Judicial Conduct Commission. He accepted an

additional $4 million fee after his “meeting” with Judge Bamberger to argue for an order

allowing the second distribution and approval of attorneys’ fees up to 49 %. From

February of 2002 on the evidence clearly demonstrates that the Respondent Chesley was

involved in, and at many points primarily orchestrating, the attempts of his co-counsel to

conceal their fraud.

V. RECOMMENDED SANCTIONS

SCR 3.380 provides the following degrees of discipline upon findings of ethical

violations defined in the Supreme Court Rules:

“Upon findings of a violation of these rules, discipline may be administered by

way of private reprimand, public reprimand, suspension from practice for a

definite time with or without conditions as the Court may impose, or permanent

disbarment.”

Respondent Chesley took more than $7 million in fees beyond his contractual

agreement with his co-counsel. These fees came not from the portions allotted to cocounsel,

but from the Guard clients themselves. He took these fees with no notice to the

26

Guard clients and with no disclosure or accounting in any court proceeding or court

order. Indeed, $4 million of these fees, his “bonus”, came only after his clandestine

“meeting” with Judge Bamberger wherein he participated in urging the Court’s blanket

approval of attorneys’ fees totaling 49 % of the $200 million settlement funds. Chesley’s

greed may not be as eye-popping as that of his co-counsel, Gallion and Cunningham, but

it is no less egregious.

It is difficult to discern exactly when Chesley must have become aware of the

criminal enterprise undertaken by Gallion and Cunningham, but it is clear from the

evidence that well before he received his $4 million “bonus”, he was fully aware that a

major portion of the funds had not been properly distributed to the clients. He willingly

and actively participated in the February 6, 2002, “meeting” with Judge Bamberger in

order to get the Court’s stamp of approval upon this criminal enterprise. He subsequently

received all orders signed by Judge Bamberger containing many statements which

Chesley knew to be false and inaccurate. Never in any instance did Chesley, the

experienced class action “expert”, take action properly to inform the Court or his Guard

clients that something was amiss. Every action taken by Chesley after this meeting with

Judge Bamberger was calculated to assist in the cover-up of these misdeeds by Gallion,

Cunningham and Mills. His callous subordination of the interests of his clients to his

own greed is both shocking and reprehensible. His actions justify a permanent

disbarment from the Kentucky Bar Association.

Bar Counsel have argued aggravating circumstances in this case. Other Kentucky

disciplinary cases have called for consideration of aggregating factors in determining

discipline. The ABA standards for imposing lawyer sanctions provides a guide as a

27

model system to assist in the determination of proper sanctions. These ABA standards

have been cited favorably by the Kentucky Supreme Court. [See Anderson v. KBA,

262 SW 3rd 636 (Ky. 2008)]. The relevant aggravating circumstances are as follows:

“9.2 Aggravation

9.21 Definition. Aggravation or aggravating circumstances are any

considerations, or factors that may justify an increase in the degree of

discipline to be imposed.

9.22 Factors which may be considered in aggravation.

Aggravating factors include:

(a) prior disciplinary offenses;

(b) dishonest or selfish motive;

(c) a pattern of misconduct;

(d) multiple offenses;

(e) bad faith obstruction of the disciplinary proceeding by

intentionally failing to comply with rules or orders of the

disciplinary agency;

(f) submission of false evidence, false statements, or other

deceptive practices during the disciplinary process;

(g) refusal to acknowledge wrongful nature of conduct;

(h) vulnerability of victim;

(i) substantial experience in the practice of law;

(j) indifference to making restitution.”

With the exception of factors (a) and (e), all these factors apply emphatically to

the Respondent.

Counsel for Chesley argue that mitigating factors exist in his favor. Indeed, he

has never been disciplined by any bar association in a long and distinguished career. But

his character witnesses and his prior unblemished record are insufficient to mitigate

Chesley’s egregious conduct in this case.

28

It is furthermore appropriate that Chesley disgorge the $7,555,000.00 excess fees

which he received in this case. This sum should be provided as restitution to his clients

either through the auspices of the Abbott case, should those clients prevail, or some other

means designed by the Court.

This the 22nd day of February, 2011.

HON. WILLIAM L. GRAHAM

TRIAL COMMISSIONER

Certificate of Service

I certify that the original of this Report of Trial Commissioner was filed with the

Disciplinary clerk of the Kentucky Bar Association, 514 West Main Street, Frankfort,

Kentucky 40601-1883 this 22nd day of February, 2011.

HON. WILLIAM L. GRAHAM

TRIAL COMMISSIONER

29

Comment sent to LawReader re: Graham Findings.

 Dear Sir I can’t help butting in – FYI– in reading Wm Graham’s report, e.g.,  p. 27— He doesn’t know that Bill Gallion on 2/28/02 outlined the entire settlement to Linda Gosnell. This was her testimony in the trial before Danny Reeves. Bill Gallion wasn’t hiding anything. Also they made a full accounting of Settlement funds to the Bar in 4/02. Is it proper to blame attorneys for lack of oversight by the court. Bar and govt keep saying the Judge didn’t know this , didn’t know that.. Does he have an obligation to ask, to be informed !
 
How grossly unfair and ridiculous is it to accuse attorneys for not telling the Judge there were contingency fee contracts. In the first trial on cross examination Judge Bamberger concerning such contracts explained his lack of knowledge on the fact that in class actions there are no contracts… he forgot  the clients were not before him pursuant to  Notice ordered by the court but rather pursuant to television advertisements. Mr. Almand’s questioning of Judge Bamberger in this matter is highly instructive.  
 
Needless to say we think Mr. Graham got it wrong. It was not the Aggregate Settlement that he outlined. It was not a settlement solely for 431 people. AHP was financially benefited in getting the Duff Class decertified and they paid a great deal of money to make it go away. Hon. Mike Dowling 

 

Job Opening for Executive Secretary of Judicial Conduct Commission

Sunday, February 27th, 2011

POSITION DESCRIPTION

For

Executive Secretary

Judicial Conduct Commission

General Description.  The Judicial Conduct Commission announces the search for an Executive Secretary.   The Judicial Conduct Commission is a state agency authorized under the Kentucky Constitution to take disciplinary action against judges of the Kentucky Court of Justice.  The Commission  investigates and hears complaints of judicial misconduct or disability and, when appropriate, imposes sanctions ranging from private admonition to removal from office. Additional information regarding the Judicial Conduct Commission may be found at www.courts.ky.gov/jcc/ .

 

Position Description and Salary.   

Location: Frankfort, Kentucky, subject to review.  Compensation: Commensurate with qualifications and experience.

State Benefits

  • Generous vacation and sick time; 12 state-paid holidays
  • State-paid life insurance ($20,000 value); State-paid health insurance or state contribution toward health plan; Optional flexible spending accounts for medical and day-care expenses
  • State retirement plan; Retirement investment opportunities

 

Major Job Responsibilities.  Under guidance and direction of the Commission, the Executive Secretary:

a. Processes all telephonic, electronic and mail correspondence to and from the Commission

b. Reviews complaints, investigative reports, and court records and prepares written summaries for the Commission

c. Attends all Commission meetings and prepares agendas and minutes

d. Works closely on a daily basis with the Commission chair, investigator and counsel

e. Serves as Commission liaison with all Kentucky courts, the KBA, the Administrative Office of the Courts, governmental agencies, and commissions in other states

f. Organizes, indexes and maintains custody of all Commission records

g. Supervises the administrative assistant

h. Develop outreach and community programs to increase the public’s awareness of the purpose and functions of the Commission.

i. Prepares and updates an informational brochure and other appropriate communications materials for the public, lawyers, judges and court personnel.

j. Prepares and presents programs and materials on activities of the Commission to educate the legal community, judiciary and the public on judicial conduct and ethics.

General Qualifications.  Applicant must be member of the Kentucky Bar in good standing with eight (8) years legal experience and extensive administrative knowledge. Must have excellent technological and computer skills, as well as strong analytical and writing skills; and must be able to handle sensitive matters discreetly, diplomatically and confidentially.

Information and How to Apply.  Resumes will be accepted until 5:00 p.m. Eastern Daylight Time on March 25, 2011.  Selected candidates will be interviewed by the full Commission. Resumes and cover letters may be sent as an attachment to electronic mail to the Commission’s Administrative Assistant, Leo Vera, at  leo.vera@insightbb.com, and should be in Microsoft Word format.

ATTORNEY ERIC DETERS CONTINUES HIS FIGHT WITH KBA – ASSERTS HIS INNOCENSE OF ETHICS CHARGES – ASKS TRIAL COMMISSONER, “HAVE YOU NO HONOR?”

Sunday, February 27th, 2011

Feb. 27, 2010              By Stan Billingsley, Senior Editor LawReader.com

Attorney Eric Deters has filed a pleading with the KBA inquiry commission seeking an amendment of the findings of Trial Commissioner Frank Doheny, Jr.   He alleges in his motion filed with the Inquiry Commission, that Commissioner Doheny made numerous factual errors in his Findings recommending suspension of Deter’s law license for 181 days.  His motion seeks correction of the claimed errors.

Deters has previously filed pleadings which say that during the KBA investigation that the prosecutor offered a suspension for 30 days in exchange for a plea by Deters.  Deters says he rejected that and the KBA then recommended a 60 day suspension.  He says that Commissioner Doheny, who Deters sought to have recused from hearing his case, then asked for the 181 day suspension.  This raises the question that Doheny and the KBA is retaliating against Deters for refusing all plea offers.  We note that the recommendation of the KBA investigators was only one third as severe as the recommendation of the Trial Commissioner.

The Findings by Doheny appeared to be full of adjectives that are not usually found in findings of fact by judges.  Deters says he is innocent of all six charges.  

A reading of the Trial Commissioner’s impassioned Findings against Deters suggests that he is as passionate in defending his conclusions as Deters is in defending himself.

Deters sought the recusal of Doheny when it was revealed during the hearing that Doheny’s law partner was representing the party who filed a complaint against Deters regarding a fee.  The pleadings say that Deters charged a client $1500 in a foreclosure action and that he quit the case and Doheny’s law firm charged the same client $25,000 to take on the same case. Deters said that he asked the Bar Association to enter into the fee arbitration process available for fee disputes but the Bar refused to arbitrate the issue.  He says he then offered to return the entire $1500 fee but this was refused by the Bar.   

LawReader has not been able to review all of the six charges against Deters, but the pleadings seem to indicate that most of them arise out of his dispute with other lawyers fighting over clients, and for comments he made about a trial judge.  (Another case in pending in Federal Court in which the attorney, John M. Berry, Jr. of New Castle, Ky. was charged with a violation of SCR 3.130 (the same offense charged against Deters)  for writing a letter to the Legislative Ethics Commission.  Berry’s letter opined that an ethics decision by the Legislative Ethics Commission was incorrect.  Berry’s letter made no threats, was not intemperate, and merely argued a point of law. The Bar investigated the Berry letter for almost two years before finding no probable cause for a violation.  The matter would have died there, but the Bar, while finding no probable cause, issued a Warning Letter to Berry.  Warning letters are not appealable.  Berry and the ACLU have sued the KBA over their attempted chilling of his free speech rights. In essence the KBA told Berry, “you did nothing wrong, but don’t do it again.”  The Warning Letter was placed in Berry’s personnel file maintained by the KBA.)

Recusal procedures require that a recusal right can be waived, but if so, the parties must have an opportunity to meet outside the presence of the Judge or Commissioner and must indicate their waiver of the recusal grounds in a signed written document.   Deters may have waived his right to seek recusal by not objecting in a timely manner, but we have not found any pleading by the KBA which specifically states that the recusal was waived.   A strong argument exists that the only way to waive recusal grounds are by a written agreement of the objecting party.  Deters argument denies any formal waiver.

In the pleading filed by Deters on Feb. 24th, and we quote from his language, he alleges:

1.  The Trial Commissioner incorrectly found that Federal Judge Danny Reeves summarily dismissed Deters Section 1983 lawsuit against the KBA.

“(Doheny) did not check his facts, lashed out at me, made a false statement, spit out words to injure me and this a part of the pattern of misconduct by the Trial Commissioner. Is the Trial Commissioner repentant?  (These were his words in his Report fired at me.)”

2.  My lawsuit (in Federal Court) was not “completely unwarranted”……The Trial Commissioner got it wrong. Based on the Fieger decision in the Sixth Circuit Ct. of Appeals I can challenge in Federal Court the entire recusal procedure.”

3. “…the Trial Commissioner states I made false statements. I will challenge the Trial Commissioner again.  Name one false statement I made about Judge Bates on the radio or I filed in an affidavit?”

4. “There is not one single “unwarranted” statement made by me.”

5. There is not a “pattern of misconduct” by me. There is a pattern of defending myself against baseless charges. Since when does a lawyer, of all people, not be allowed to advocate and defend himself.”

6. “I completely denied I had a contingency fee agreement with the (client). The Trial Commissioner stated I did not deny this fact.”

7.  ” I worked at my office not at home on the (third party) matter as claimed by the Trial Commissioner in his report.”

8. “There was a written fee agreement in the form of a letter and there was more work than filing an Answer in the (client) matter.”

9. “The Trial Commissioner claimed falsely I devoted almost no time contradicting the (client) charges. I detailed my refutation over 22 pages on page l7 and-39 of my Brief. Read the Brief. I methodically destroyed the case against me.”

10) “The Trial Commissioner is wrong about my being allowed to call a person who is not my client. You are not allowed to solicit. I can call someone to give them updates and to check who their lawyer is so we can work together. That’s all I did.   The Trial Commissioner failed to check his law.”

11) “….after performing over $50,000 of free legal work for my community in a successful political battle, I am being recommended for suspension for naming, after reasonable inquiry and rational effort, the wrong agent for service of process. In litigation, across the state of Kentucky, every day, lawyers with no bad intention, name a Defendant or Agent of Service by mistake or to play it safe by naming all potential Defendants. Is Bar Counsel gong to prosecute this every time it happens?”

12. “I did not dismiss the jail case in “less than a week.  It went on for months. The Trial Commissioner did not check his facts.”

13. “I not only refuted, I refuted with crisp specific facts from the record, the allegations against me regarding Judge Bates on pages 3-17 of my Brief. Read the Brief.  I destroyed the case against me.”

“The Trial Commissioner does what he falsely accused me of doing. I challenge him again. Refute my statements here! One through thirteen. Refute them!  I provide the exclamation point because I am angry. Does the Bar Discipline anger? I’ve learned that apparently even justified anger at injustice increases your punishment. At least it does form Mr. Doheny.”

“Do you have no honor Mr. Doheny? I’ve been a lawyer for 25 years fighting for clients every day and you want to suspend that license based upon your false findings. Do you have no honor?”

“I shall take my battle to the Board of Governors, the Kentucky Supreme Court, Federal Courts and the fourth branch of government, the press.  I shall shout out from the mountain tops the injustice you want inflicted upon me. It’s not a lash out, it’s a reckoning. I believe if you sir had to choose ruling against the Bar Association and Jesus Christ himself, you would choose the Bar Association.”

                                                             CONCLUSION

We understand that the recommendations of the Trial Commissioner will next be heard by the Board of Governors.  Even if the Board finds Deters innocent of a charge, the KBA may appeal any dismissal to the Kentucky Supreme Court.

It takes a 3/4 votes of the Board of Governors to convict an attorney of an ethics violation.

Nick M. Nighswander of Florence, Ky. hit a home run in a case of first impression to the Ct.. He appealed and got a ruling that an “intentional cause of damage” exclusion clause in an UM motorists policy did not apply to damage caused by third party.

Sunday, February 20th, 2011

Feb. 20, 2011

 The Hon. Nicholas  (Nick)  M. Nighswander  of Florence, Ky. hit a home run when he appealed a ruling of the Kenton Circuit Court regarding interpretation of an intentional cause of damage exclusion in an UM motorists policy.

For full text of case click case number 2009-CA-002033   Stamper v. Hyden

Circuit Judge Bartlett was found to have incorrectly instructed the jury on this issue.  The Ct. of Appeals held that the intentional act exclusion clause, applied to intentional acts causing damage by the insured but did not apply (as in the Stamper case on appeal) to intentional acts of a third party against the property of the insured.

The Trial Judge had agreed with the interpretation argued by the insurer, and the Court of Appeals said this case presented a case of first impression.

Nighswander, a former professional football player in the NFL, tenaciously refused to lose and turned this around on the appeal.  (Great work Nick!!!)

UM insurance policy term “accident” should be determine from view point of the insured not the insurer.  Intenational act of third party towards insured does not relieve insurer of duty under policy.

Stamper contends the trial court erred as a matter of law by instructing the jury to determine whether damages were the result of an accident, and she alternatively contends that a verdict of zero damages as to Hyden was inadequate under the evidence.

Standard Fire asserts that, because the collision resulted from Hyden’s intentional criminal conduct, it was not an “accident” covered by Stamper’s UM policy. What Standard Fire overlooks, however, is that the Fryman Court, addressing a life insurance policy, concluded that “a death is accidental absent a showing that the death was a result of plan, design or intent on the part of the decedent.” Id

After careful review of the relevant caselaw, we agree that the jury was erroneously instructed, which rendered the verdict unreliable.

Stamper contends the trial court erred as a matter of law by instructing the jury to determine whether damages were the result of an accident, and she alternatively contends that a verdict of zero damages as to Hyden was inadequate under the evidence.

After careful review of the relevant caselaw, we agree that the jury was erroneously instructed, which rendered the verdict unreliable.

We find Standard Fire’s argument unpersuasive, and we cannot conclude from the record that the verdict was not influenced by the erroneous instruction.

Under the circumstances presented here, “[r]ather than speculating whether the jury understood the issues despite the instructions, we must presume that a verdict was influenced by an improper instruction.” Ford Motor Co. v. Fulkerson, 812 S.W.2d 119, 124 (Ky. 1991). As the erroneous instructions potentially confused or

misled the jury by limiting Stamper’s recovery to damages that were caused by an accident, we conclude Stamper is entitled to a new trial.3

For the reasons stated herein, we vacate the judgment of the Kenton Circuit Court and remand this case for further proceedings consistent with this opinion.

ALL CONCUR.

BRIEFS FOR APPELLANT:

Nicholas M. Nighswander

Florence, Kentucky

U.S. SUPREME COURT HAS OVERRULED THE 6TH CIRCUIT COURT OF APPEALS ON LAST 15 APPEALS STRAIGHT

Sunday, February 20th, 2011

 Feb. 20, 2011

 Supreme Court has reversed every decision since 2008, including five death penalty cases

The U.S. 6th Circuit Court of Appeals in Cincinnati is one of the most powerful courts in the nation, but these days it’s suffering through a major slump.

The court owns the longest losing streak in the country over the past two years at the U.S. Supreme Court, which reviews decisions and corrects mistakes made by the nation’s top appeals courts.

The Supreme Court has examined 15 rulings from the 6th Circuit since 2008 and has thrown out every one of them.

In each case – from death penalty appeals and tax disputes to disagreements over election law – the Supreme Court found critical errors that tainted the 6th Circuit’s decision.

“It’s a bit surprising to see 15 reversals in a row,” said Michael Solimine, a University of Cincinnati law professor who studies the federal courts.

Some 6th Circuit judges are surprised, too. But they say they’re doing their best and are trying to take the rejection in stride.

“Getting reversed by the Supreme Court, some people these days think, is a badge of honor,” said Gilbert Merritt, a semi-retired senior judge and one of the 6th Circuit’s most liberal members. “It depends on your point of view.”

The 6th Circuit’s performance matters because the court handles about 2,500 federal appeals a year from Ohio, Kentucky, Tennessee and Michigan – the vast majority of which never make it to the Supreme Court.

The consequences of getting those decisions wrong can be severe and, in some cases, can literally mean the difference between life and death.

Three of the 15 overturned cases involve convicted killers who were spared execution by the 6th Circuit only to have the Supreme Court send them back to Death Row.

Two others were denied by the 6th Circuit but later won reprieves from the Supreme Court.

The 6th Circuit’s other overturned cases include a dispute over voter registration laws, an employer retaliation claim and a disagreement about how natural gas companies are taxed.

All of those cases were subject to Supreme Court review because the 6th Circuit, as one of the nation’s 12 regional appeals courts, is one notch below the Supreme Court in the judicial pecking order.

“It’s their place in the system,” said Arthur Hellman, a University of Pittsburgh law professor who studies the appeals courts. “It wouldn’t do them much good to get upset or rail against the Supreme Court.”

The 6th Circuit’s liberal judges were more likely than conservatives to write opinions later reversed by the Supreme Court, but almost all of the appeals court’s 15 active judges were on the wrong side of at least one overturned decision.

Court watchers say that suggests the 6th Circuit’s losing streak isn’t the result of a deep ideological split with the Supreme Court.

Instead, they say, the court just keeps getting the law wrong, especially in cases of prisoners challenging their convictions and sentences. Those cases accounted for eight of the Supreme Court’s 15 reversals.

“It clearly sends a message to the 6th Circuit that we are watching you,” Hellman said.

He said the 6th Circuit’s 0 for 15 run could be a symptom of more significant flaws in the court’s decision-making process if the reversals continue.

But he warned against reading too much into the streak just yet.

“A unanimous decision by the Supreme Court doesn’t necessarily correlate with the circuit court being out to lunch,” Hellman said. “It doesn’t necessarily reflect on the ability or competence of the judges.”

A poor showing

In some ways, the odds are stacked against the 6th Circuit from the outset.

That’s because the Supreme Court only reviews the cases it deems worthy, usually less than 100 a year out of some 30,000 appeals court decisions nationwide. Sometimes the goal is to resolve conflicting rulings in the lower courts and sometimes it’s to answer big constitutional questions.

Either way, the chances for a reversal are good because the Supreme Court justices wouldn’t take those cases if they thought the appeals court resolved all the issues the first time around.

“It’s not a random sample of cases that they hear,” Solimine said. “They decide what they want to decide.”

And about 70 percent of the time, they decide the lower court got it wrong and reverse the decision.

But even by that measure, the 6th Circuit’s batting average is poor.

An Enquirer analysis found that the other 11 regional appeals courts each had at least one decision upheld or partially upheld by the Supreme Court in the past two years.

California’s 9th Circuit, the nation’s largest and most liberal, led the way with 31 reversals and has butted heads for years with the increasingly conservative Supreme Court. But even the 9th Circuit was upheld seven times and had four split decisions.

The 6th Circuit, which had the second most reversals, hasn’t won a case since 2007.

The 6th Circuit’s chief judge, Alice Batchelder, did not respond to an interview request.

But Boyce Martin, a former chief judge who still sits on the court, said he’s not concerned because he sees no pattern in the cases the Supreme Court overturns.

Unlike the 9th Circuit, the 6th Circuit is not engaged in a philosophical duel with the Supreme Court. The 6th Circuit has, in fact, become far more conservative in recent years following the arrival of eight judges appointed by President George W. Bush.

“I don’t think you can read anything into it,” said Martin, who joined the court under President Carter in 1979. “There’s no pattern whatsoever. If you look at those cases, they’re splattered from here to yon.”

Jonathan Adler, a Case Western Reserve University law professor, said the relationships between judges on the 6th Circuit might have something to do with their bad track record during the past two years.

The judges bickered publicly a few years ago over the death penalty, among other things, and Adler said lingering hard feelings could contribute to mistakes today.

He said that’s because judges rely on each other to talk out tough issues and to catch potential errors before they write their opinions. If 6th Circuit judges don’t do that, they may be prone to more mistakes.

“The 6th Circuit went through a period where the judges really didn’t play well together,” Adler said. “I think the temporary breakdown in collegiality and trust hampered the ability of the court to keep itself in line with Supreme Court precedent.”

Room for debate

Merritt chalks up the streak of reversals to a more practical problem: Sometimes judges just disagree when they try to divine the meaning of thousands of government regulations and laws.

“Congress has passed a lot of laws in my 35 years on the bench, and a lot of those laws aren’t clear,” Merritt said. “It’s an issue that’s debatable among judges.”

Perhaps the best example of that debate is the case of Gary Cone, a convicted killer in Tennessee whose case has bounced between the 6th Circuit and the Supreme Court three times in the past decade.

The first two times, a three-judge panel that included Merritt and two Republican-appointed judges threw out Cone’s death sentence because of mistakes made during his trial.

The Supreme Court reversed the 6th Circuit and reinstated Cone’s death sentence both times.

Cone returned to the 6th Circuit for a third try in 2008 and this time the Republican judges outvoted Merritt 2-1 to uphold Cone’s death sentence, just as the Supreme Court had done twice before.

So what did the Supreme Court do when it got a third crack at the case? It reversed the 6th Circuit yet again, declaring Cone’s death sentence should be overturned after all.

Merritt said the Cone case shows how difficult and confusing decisions can be for any judge, whether they sit on the 6th Circuit or the Supreme Court.

The difference is the Supreme Court always gets the last word.

But Merritt said that doesn’t mean the Supreme Court is always right – or that the 6th Circuit is wrong every time it gets reversed.

“The Supreme Court is only final because it is final. It’s not final because it has an excessive degree of wisdom over everyone else in society,” Merritt said. “Just because the 6th Circuit gets reversed, it doesn’t mean the 6th Circuit has lost its mind.”

 

6th Circuit’s losing streak

The U.S. Supreme Court reversed 6th Circuit decisions in the following 15 cases during its 2008, 2009 and 2010 terms.*

Crawford v. Metropolitan Government of Nashville (Tenn.): A school district employee filed a civil rights lawsuit, claiming she was sexually harassed before she was fired. The 6th Circuit ruled against her because she failed to make the accusation until internal investigators questioned her.

Cone v. Bell (Tenn.): A death row inmate asked for a new trial, but the 6th Circuit concluded the claims he raised were not subject to federal court review.

Harbison v. Bell (Tenn.): The 6th Circuit said a federally-appointed lawyer could not represent a death row inmate in state clemency proceedings.

Arthur Andersen v. Carlisle: The 6th Circuit refused to hear this tax-related dispute after concluding it did not have the authority to do so.

Bobby v. Bies (Ohio): A convicted killer claimed he could not be executed because the Supreme Court outlawed the execution of the mentally retarded. Prosecutors wanted a full hearing to evaluate his mental state, but the 6th Circuit said no because he already had been found mentally retarded and a new hearing would amount to double jeopardy.

Smith v. Spisak (Ohio): The 6th Circuit overturned a death sentence after concluding the convicted killer’s lawyers performed poorly and the judge made mistakes during the trial.

Jerman v. Carlisle (Ohio): A debt collector may have broken the rules when demanding payment, but the 6th Circuit threw out a lawsuit against the firm after concluding it had simply made a mistake.

Berghuis v. Smith (Mich.): The 6th Circuit ruled that a man sentenced to life in prison for murder did not get a fair trial because the pool from which jurors were chosen had too few African-Americans.

Berghuis v. Thompkins (Mich.): A convicted killer serving a life sentence won an order for a new trial after the 6th Circuit concluded police questioned him even though he did not waive his right to remain silent.

Levin v. Commerce Energy (Ohio): The 6th Circuit found that a dispute among natural gas companies over how Ohio taxes them could be heard in federal court, rather than state court.

Renico v. Lett (Mich.): The 6th Circuit threw out a murder conviction after deciding the accused man should not have faced a second trial after his first one ended in a mistrial.

Ortiz v. Jordan (Ohio): A woman sued prison officials and won a jury verdict after claiming she was sexually assaulted in prison. The 6th Circuit threw out the verdict after concluding the prison officials could not be individually sued under state law.

Thompson v. North American Stainless (Ky.): A man claimed his employer fired him in retaliation for a harassment complaint his fiancee filed against the company. The 6th Circuit threw out his suit, saying only the actual victim of the harassment could claim retaliation.

Bobby v. Van Hook (Ohio): The 6th Circuit threw out the death sentence of a convicted killer after deciding he did not receive effective assistance from his lawyers.

Brunner v. Ohio Republican Party (Ohio): The 6th Circuit ordered Secretary of State Jennifer Brunner to provide county elections boards with lists of new voter registrants whose data doesn’t match driver’s license and Social Security data.

CA Judge Kelly Thompson Strongly Dissents. The Combs v. National City Court of Appeals decision from Jefferson County which allows banks to pay themselves Trustee Fees Retroactively

Thursday, February 17th, 2011

 Feb. 17, 2011

 This case sought a court ruling to allow banks and trustees to determine how to calculate compensation for trustees.

 The  decision allows banks and trustees to go back 40 to 50 years and seek fees for “extra services” which until recently a statute prohibited.   

 The Court of Appeals on Feb. 11th, 2011 issued a declaratory judgment which opens the door for trustees to bill estates additional fees retroactively.   A statute until recently limited the fees trustees could charge.  This decision opens the door for much higher fees to be charged.  The decision was ordered to be published.  Judge Thompson dissents and suggests its application should be limited only to the parties involved and that it should not be applied retroactively.

 Trustees who are usually banking institutions are also often the executor and they are allowed to draw a fee in addition to the trustees fee.    

 Court of Appeals Judge Kelly Thompson of Bowling Green strongly dissented, and challenged the majority ruling of Judges Nickell and  Clayton.

 For full text of case click case number 2009-CA-002258

 JEFFERSON  – published decision of Ct. of Appeals released on Feb. 11, 2011

 ORDER MODIFYING OPINION:

 KATHERINE COMBS JARVIS AND HUGH J. CAPERTON

 VS.

 NATIONAL CITY AND PNC

BANK NATIONAL ASSOCIATION

*** 

 2009-CA-000709-MR

 The banks argue the repeal of the statute means they are now free to charge reasonable commissions on all testamentary trusts, just as they do on inter vivos trusts. Jarvis and Caperton, beneficiaries of trusts2 established years ago, argue the commission ceilings expressed in KRS 386.180 at the time the trusts were created remain in effect.

 Plaintiffs’ primary allegation is that the banks, as trustees, have been deprived of a “reasonable commission” for their services. Until recently, KRS 386.180 governed trustee commissions and provided that testamentary trustees were entitled to an annual commission of up to 6% of the income from the trust, plus 0.3% of the value of the trust principal. In lieu of the annual principal fee, the fiduciary had the option of taking a commission not to exceed 6% of the fair value of the principal distribution at the time of termination of the trust. Under KRS 386.180, a trustee was only entitled to additional compensation for the performance of unusual or extraordinary services.

 House Bill 615 effectively repealed KRS 386.180 on July 17, 2008. In the wake of that action, there have been no rulings to determine how to calculate compensation for trustees. This Opinion may be the first on the issue.

 A trustee’s fee for overseeing a non-testamentary, or inter vivos, trust has historically not been capped.

 Trustees of inter vivos trusts retain a “reasonable fee” for their services, and Plaintiffs assert they are entitled to same.

 Defendants assert there is no justiciable issue and that under quasi-contract principles, Plaintiffs are not relieved of the obligations they knowingly accepted simply because of the repeal. Defendants’ second argument regarding quasi-contract theory is more akin to an equitable estoppel claim in that they assert the Plaintiffs should not be allowed to represent that they will receive a certain amount of compensation and then later change their position to obtain a greater fee.

 Defendants further argue that various statutes (i.e., – KRS 395.105, 386.655, 395.326, 396.610, etc.) illustrate how the legislature intended to treat testamentary trusts different from inter vivos trusts. Last, Defendant asserts that all necessary parties have not been joined in this action.

 The plain language of the repeal indicates that the legislature intended to remove any form of statutorily imposed guidelines regulating the fee habits of trustees of testamentary trusts.

 Otherwise, the legislature would have drafted and enacted a new law establishing how the fees should be calculated.

 Wherefore, IT IS HEREBY ORDERED that the motion of Plaintiffs, National City and PNC Bank National Association, for summary judgment should be and hereby is granted. The Court hereby declares that for serving as trustees of testamentary trusts, Plaintiffs may hereinafter charge a reasonable fee, generally commensurate with the fee that would be charged for similar nontestamentary trusts, and in the limited instances of testamentary trusts that are or have been subject to a termination fee, the testamentary trustees’ determination of reasonable fees may also take into consideration the fees charged or deferred, prior to the repeal of KRS 386.180, so that the total fee they receive during the administration of a trust is reasonable

 THOMPSON, JUDGE, DISSENTING: Respectfully, I dissent and express several grounds for my disagreement.

 This action was commenced pursuant to KRS 418.040. Because an action for declaratory judgment did not exist at common law, it is permitted as a result of statutory law pursuant to which a declaration of rights can only be sought where an actual controversy exists. KRS 418.040.

 To justify an action for declaratory relief there must be a real or justiciable controversy involving specific rights of the parties. HealthAmerica Corp. of Kentucky v. Humana Health Plan, Inc., Ky., 697 S.W.2d 946, 948 (1985). 

A justiciable controversy does not include questions “which may never arise or which are merely advisory, or are academic, hypothetical, incidental or remote, or which will not be decisive of any present controversy.” Dravo v. Liberty Nat’l Bank & Trust Co., Ky., 267 S.W.2d 95, 97 (1954). “A mere difference of opinion is not an actual controversy ….” Jefferson County v. Chilton, 236 Ky. 614, 33 S.W.2d 601, 605 (1930) (citations omitted). Curry v. Coyne, 992 S.W.2d 858, 860 (Ky.App. 1998).

 The sparse record lacks evidence that an actual controversy exists between the parties. There is no description or record of the probate activity and, therefore, no claim or support for the fee that the banks intend to charge, whether the banks intend to request fees retroactively, or that fees are disputed.

 Further, there is no evidence of the agreement entered into by the banks and the beneficiaries in the probate court at the time the banks accepted administration of the trusts. Thus, it cannot be determined if an actual controversy exists as to the amount of fees claimed by the banks.

Although the banks alleged an actual controversy in their complaint, the banks did not state its nature with specificity. Without service of process upon them, the beneficiaries answered the complaint admitting that an actual controversy existed. No further evidence as to the controversy was submitted.

  The first motion for summary judgment was not supported by an affidavit stating facts establishing an actual controversy and the only affidavit in the record, filed by Cynthia Maddox, vice-president and director of PNC Wealth Management, reads as a memorandum of law rather than a sworn statement of facts establishing an actual controversy. Further, the wills attached to the affidavit were not verified by a stamp in the will book at the county clerk’s office or by probate court stamp.

 My examination of the record reveals there is no actual controversy between these parties and the request for declaratory judgment is one made only to obtain an advisory opinion regarding the repeal of KRS 386.180. Essentially, the action is the equivalent of a class action litigation resulting in the opportunity for every probate trustee to apply for retroactive fees for the administration of trusts within this state. 

Although counsel for each party has high legal principles, ethics and high legal competence, I am astounded that the majority reaches such a far reaching decision based on the facts and circumstances presented. The following question dominates my thinking: Are the beneficiaries adequate representatives of every trust beneficiary in Kentucky? I ask the question because there is no indication why the beneficiaries who live in two different states but are represented by the same attorney and who were not served with process agreed to litigate the controversy.

 Because of the circumstances under which this case is before the Court, I believe it should not serve as establishing the law applicable to all trustees’ fees.

 Even if my initial conclusion that there is no actual controversy between the parties is untenable, I disagree with the majority’s conclusion that the General Assembly intended the repeal of KRS 386.180 to be retroactive. It is a basic premise of statutory construction that it is the role of the courts to effectuate the legislative intent. White v. Commonwealth, 32 S.W.3d 83 (Ky.App. 2000).

Regarding the retroactive application of legislative action, KRS 446.080(3) states:

 “No statute shall be construed to be retroactive, unless expressly so declared.”

 House Bill 615, which repealed KRS 386.180, was passed on April 15, 2008, the year the General Assembly “stopped the clock at midnight” so that a budget could be passed and no mention was made that the repeal applied retroactively during the hearing before the House or Senate Judiciary Committees.

 The silent legislative record is particularly significant because KRS 386.180 was not merely remedial in nature but it imposed substantive rights and duties upon the trustees and beneficiaries.

 Throughout the lifetimes of the three trusts involved in this litigation, the trustees’ compensation was governed by KRS 386.180. Under the statute, once the trustees made an election, the election became irrevocable. First Security National Bank v. des Cognets, 563 S.W.2d 476 (Ky.App. 1978). Yet, the majority allows the banks to recover fees for decades prior to the repeal of KRS 386.180, a direct interference with the vested rights of the beneficiaries to bind the banks to the compensation agreed to by their acceptance of their positions as trustees.

 For the reasons stated, I dissent.

LAWREADER SYNOPSIS

 

The Court hereby declares that for serving as trustees of testamentary trusts, Plaintiffs may hereinafter charge a reasonable fee, generally commensurate with the fee that would be charged for similar nontestamentary trusts, and in the limited instances of testamentary trusts that are or have been subject to a termination fee, the testamentary trustees’ determination of reasonable fees may also take into consideration the fees charged or deferred, prior to the repeal of KRS 386.180, so that the total fee they receive during the administration of a trust is reasonable.

OPINION AFFIRMING

** ** ** ** **

BEFORE: CLAYTON, NICKELL AND THOMPSON, JUDGES.

NICKELL, JUDGE: Katherine Combs Jarvis and Hugh J. Caperton appeal the award of summary judgment to National City and PNC Bank National Association.

The narrow question before the Court is whether the repeal of KRS1 386.180 in 2008, eliminating limits on the compensation charged by testamentary trustees, is effective with respect to trusts which predate the repealed statute.

The banks argue the repeal of the statute means they are now free to charge reasonable commissions on all testamentary trusts, just as they do on inter vivos trusts. Jarvis and Caperton, beneficiaries of trusts  established years ago, argue the commission ceilings expressed in KRS 386.180 at the time the trusts were created remain in effect.

In a well-reasoned and thorough opinion and order, which we adopt as our own and set forth in full, the trial court granted summary judgment to the banks. We affirm.

The Court hereby declares that for serving as trustees of testamentary trusts, Plaintiffs may hereinafter charge a reasonable fee, generally commensurate with the fee that would be charged for similar nontestamentary trusts, and in the limited instances of testamentary trusts that are or have been subject to a termination fee, the testamentary trustees’ determination of reasonable fees may also take into consideration the fees charged or deferred, prior to the repeal of KRS 386.180, so that the total fee they receive during the administration of a trust is reasonable.

The Opinion and Order of the Jefferson Circuit Court, entered on November 6, 2009, is AFFIRMED.

CLAYTON, JUDGE, CONCURS.

Eric Deters suspension urged – Trial commissioner Ignores KBA recommendation and seeks 181-day halt to law practice

Thursday, February 17th, 2011

A Kentucky Bar Association  trial commissioner has recommended that lawyer and WLW-AM (700) radio personality Eric Deters be suspended from the practice of law in Kentucky for 181 days.  The KBA prosecutors had reccommended only a 60 day suspension.  Previously the KBA had offered Deters a 30 day suspension if he admitted the allegations of ethics violations.  He refused to admit guilt and the KBA doubled their request.

Nevertheless the Trial Commissioner who issued the formal recommendation of the KBA, obviously angered at Deters attempts to have him recused, is seeking a l81 day suspension.

Trial Commissioner Frank P. Doheny, a partner in Dinsmore and Shohl law firm in Louisville  wrote in a 21-page report that Deters “engaged in a pattern of conduct that simply stated is ‘sue first, ask questions later’ and ‘say anything I want, because I’m a lawyer and no one is gong to hold me accountable.’ ” Deters said he will fight the recommendation in Doheny’s report, filed Tuesday at the Kentucky Bar Association Office of the Disciplinary Clerk in Frankfort.

“My battle with the Kentucky Bar Association is far from over,” Deters said in a statement released Wednesday. “Frank Doheny, my hearing officer, was supposed to serve as an unbiased one. He is not a judge in ‘real life.’ ” Deters claims Doheny was biased because his law partner was hired by a former client of Deters.  This is the same client  who has filed the complaint against Deters with the bar association.

Deters says that one of the charges involved a case where a client came to his office and paid him $1500 to represent the defendant in a foreclosure action.   Later the client fired Deters and hired a lawyer from the Cincinnati office of Dinsmore and Shohl.   Deters alleges that the client who filed a complaint against him over his fee of $1500 was charged $25,000 by Dinsmore and Shohl.  Yet Deters claims that the issue is over the size of his fee. He claims a bias by the KBA in favor of fees charged by large law firms.

It is not clear from the record if the Dinsmore and Shohl attorney representing the client who fired Deters and then took over representation of the client in the same case, was involved in advising the client to file the ethics complaint against Deters.

While the trial commissioner hearing Deters case admits that his law partner represents the client who filed a complaint against Deters regarding the same case, he refused to recuse himself from hearing Deters case.  Doheny made no defense of the large fee charged by his law partner which was 16.6 times larger than what Deters charged.

 The Code of Judicial Conduct which applies to Trial Commissioners, requires all judicial officers to remove themselves from a case if the appearance of impropriety exists.  A financial interest, “however small” is cited in the Judicial Conduct Code as a basis for recusal. 

 Deters then filed a motion with the Supreme Court seeking an order from the Chief Justice recusing the trial commissioner.

Deters said in court pleadings that the Clerk of the Supreme Court returned his recusal motion and that the Chief Justice refused to even consider it.  He cited a statute that requires the Chief Justice to “immediately consider the facts of a recusal motion”.  

 LawReader has found no rule or statute that gives the Supreme Court Clerk the discretion to refuse to present such a motion to the Chief Justice.   If the Chief Justice didn’t want to grant Deters motion all he had to do was issue a one word order saying “denied”. Recusal is completely at his discretion.  

As a result of the Chief Justice refusing to even hear his recusal motion, Deters sought an injunction in Federal Court against Doheny hearing his case. 

Federal Judge Danny Reeves gave Deters a tongue lashing in court and denied him the requested relief.  He ruled that Deters had not exhausted his state remedies and his motion was interlocutory.  He also chided Deters for joining several KBA officials in their personal capacity in addition to their official capacity. Deters filed his petition for injunctive relief on a Monday and dismissed it a day or two after the denial of his motion.

Judge Reeves personally issued a show cause notice to Deters and is considering a Rule 11 violation.  Federal Civil Rules have a safe harbor provision which protect a lawyer from a Rule 11 sanction if the offending pleading is withdrawn before the opposing party files a petition for Rule 11 sanctions.  However, that exemption does not apply to sua sponte motions by the Judge.  

A reading of the adjective filled formal recommendation by Trial Commissioner Doheny  suggests his serious anger with Deters. 

Doheny’s  recommendation now goes to the Board of Governors and after their ruling either party can ask for review by the Supreme Court.

The KBA is presenting six charges against Deters. The charges involve several disputed cases over which lawyer represented a client, whether or not Deters obtained a written fee contract with two clients, and statements that Deters made out of court about his perceived bias of a Circuit Court Judge from Grant County.

In one fee dispute involved Deters offered to enter fee arbitration with the KBA over the fee he charged and the KBA denied this offer.  He then offered to return the entire fee but the KBA refused his offer and continued to seek a sanction against him.

Deters has employed former gubernatorial candidate Larry Forgy of Lexington to represent him before the Board of Governors.

Washington D.C. Stops Use of BA Machine -Hundreds May Have Been Wrongly Convicted of DUI

Wednesday, February 16th, 2011

This story includes videos which can be found at:

http://www.myfoxdc.com/dpp/news/local/dc-breathalyzer-calibration-questioned-121410

  1. Click to Watch Video
  2. Click to Watch Video

 

Regular Photo Size

DC Breathalyzer Calibration Questioned

Former supervisor’s memo questions procedure

BY PAUL WAGNER/myfoxdc

WASHINGTON – A man hired to supervise the Breathalyzer unit of the D.C. Police Department is blowing the whistle on what he says are a decade of questionable test results.

Writing in a memo to the D.C. Attorney General he said the officers running the program rarely, if ever, performed accuracy tests on the machines used to measure the blood-alcohol content of drivers suspected of D-W-I.

Two and a half months after taking over the Breath Alcohol Testing Program, Ilmar Paegle, a retired U.S. Park Police officer, wrote a detailed four page memo in which he claims the protocol to ensure the machines were properly calibrated has not been followed since at least 2000. That’s a claim the D.C. Attorney General Office calls just an “opinion.”

But Paegle lays out his case in a memo now in the court file of a man convicted of D-W-I. That man wants a new trial.

In the memo addressed to Assistant Attorney General Kimberly Brown, Paegle wrote,
“From my inspection of the instrument files (the machines) have never been checked for accuracy even though an accuracy test is the only legal requirement a breath testing instrument must meet in the District of Columbia.”

Paegle continued, “The calibration has to be verified by accuracy tests, and these legally mandated tests of (the machines) apparently have never been done.”

David Benowitz represents Sultan Epaye, the man who wants a new trial.

“The ramifications are enormous,” said Benowitz in an interview Tuesday outside D.C. Superior Court. “It goes back for years, there are plenty of people who served jail time based on what may very well be false tests or inaccurate tests, the civil liability could be huge, it just has a huge impact on the integrity of the entire criminal justice system.”

Included in the court case jacket are internal D.C. Police documents showing no accuracy tests were performed on the machines after they were calibrated. Those records go back to at least 2006.

But Sarah Branch, the Prosecutor in the case, takes issue with Paegle’s claims, writing in a motion for dismissal of conviction, “Mr. Paegle’s opinion is based on a review of documents that were created and kept by his predecessor, Officer Kelvin King, the former Chemical Testing Program Manager for MPD. Therefore, Mr. Paegle’s opinion consists of nothing more than conjecture and assumptions.”

“We strenuously disagree with that characterization,” said Benowitz, “It’s clear what Mr. Paegle’s is saying is based on fact.”

In the memo, Paegle also criticizes D.C. Police for the lack of oversight and supervision.

Back in February the Attorney General admitted his office was looking into dozens, if not hundreds of cases, after learning from Paegle the machines were improperly calibrated in the fall of 2008 and were not tested for accuracy.

What Paegle is saying today raises questions about test results as far back as 2000 or longer.

Paegle declined to comment, as did D.C. Police Chief Cathy Lanier.

Attorney General Peter Nickles referred us to the motion filed in court.

PRISON BOUND KAREN SYPHER BUYS FANCY SHOES AT DILLARDS

Wednesday, February 16th, 2011

KAREN SYPHER INVESTS IN FANCY SHOES TWO DAYS BEFORE SENTENCING TO FEDERAL PRISON

LawReader Exclusive News Flash:   Wed. Feb. 16, 2011

On Wednesday (Feb. l6th)   LawReader on the scene reporter Becky Kinman , spotted  future federal prison inmate Karen Sypher in Dillard’s shoe department in Louisville.  Strangely Ms. Sypher was purchasing five pairs of fancy new shoes.  

It would seem to us that she should be selling her fancy shoes or trading them for some sneakers or sandals.  We don’t know of any prison that allows spiked heels for inmates.

Sypher was convicted of extortion of UofL Basketball coach Rick Pitino, is scheduled to be sentenced by a Federal judge on Friday Feb. 18th.

Criminal-defense experts say she could be imprisoned for as little as five years or as many as 10, depending on how much U.S. District Judge Charles R. Simpson III determines she was trying to extract from the University of Louisville coach.

ANALYSIS OF THE FEN PEHN DECISION – DID THE COURT ERR ON THE STANDING ISSUE REGARDING THE SEIZURE OF $20 MILLION DOLLARS FROM A NON-PROFIT CORPORATION?

Tuesday, February 8th, 2011

By Stan Billingsley                           Feb. 8, 2011

    The Kentucky Court of Appeals issued a decision in the Fen Phen case last week.   The majority of the decision concerned  the trial judges grant of a summary judgment.   That ruling appears to this author to be absolutely correct considering the reasoning of the Court of Appeals and the law regarding summary judgment standards.

    However, one issue raises some troubling questions in the Court of Appeals decision.  This deals with the seizure of the trust assets of the charitable trust Kentucky Fund for Healthy Living (KFHL).   Judge Wehr sized the assets of the trust, and Melbourne Mills sought in his appeal to raise the issue of this seizure.  Apparently it was Judge Wehr’s intention to have the $20 million dollars of KFHL paid to the Fen Phen plaintiffs.

 The Ct. of Appeals decision held that “genuine issues of material fact” remained in dispute and a summary judgment was improper. 

 The appellate court held that the following issues remained in dispute and should be determined by a jury.

 1. Whether the entire settlement, minus fees and expenses, was to be split between the 431 settling claimants;

 2. Whether the settling complainants were fairly and adequately compensated;

 3. Whether KFHL was funded with money that should have been distributed to the settling claimants or was funded with excess funds for which the plaintiff’s consent to its ultimate use was not required;

(Note:  This finding by the Ct. of Appeals appears to preserve the issue to the fact finder as to whether or not the funds were properly paid into the charitable trust.  But on the standing issue takes away the right for this issue to be heard.)

 4. Whether Gallion, Mills and Cunningham and Chesley were obligated to indemnify AHP (the manufacturer of the diet drug Fen Phen)  for additional claimants who might come forward after the settlement had been dispersed.

      Two remaining issues involved the issues that Boone County was not the proper venue for these claims, and that the appeal of the Fund for Healthy Living was improper.

 The venue ruling of Judge Wehr, the Senior Status judge who granted the original summary judgment, was upheld. 

    The last issue is very interesting from a legal standpoint.  KFHL (the charitable trust created with $20 million dollars of “excess” settlement funds i.e. cy pres funds) was a trust created under the cy pres doctrine recognized in Kentucky and in Federal courts.

     It is not uncommon for class actions to have “left over” funds after all plaintiffs claims have been evaluated and settled.  Such “left over” funds may be placed in a charitable trust, to theoretically benefits the members of the public who may have been damaged by the wrongdoers acts, but who did not join in the actual lawsuit.   It is said that 50,000 Kentuckians used the diet drug Fen Phen but only 431 joined in the lawsuit.   The purpose of KFHL was to was finance various “health” related issues in Kentucky which had the purpose and intent to compensate the “victims” of the diet drug who had not joined the class action.

     There are no allegations that there were any misdealing with these funds after they were paid into the KFHL. One report we have heard is that under the management of the trustees, the principal of the fund actually grew, even though they made several grants to Kentucky institutions.

    The bottom line on this issue is that the public has an interest in preserving the $20 million dollars in assets seized by Judge Wehr.  If these funds are restored to the KFHL, they will not go to the clients of Angela Ford and they will not go to Gallion, Cunningham or Mills.  They will be for the benefit of all Kentuckians.   The Court of Appeals decision did not provide a suggestion on who did have standing to represent the public on this issue.  They held that Mills did not have standing, but they didn’t say who, under the circumstances, would have standing to file an appeal for a charitable trust. 

    Judge Wehr issued an order that substantially affected the rights of KFHL to defend itself in the lawsuit filed by the plaintiffs in the Boone County suit against Gallion, Cunningham and Mills.   KFHL was joined as a defendant in the Boone County lawsuit, and was represented by Bob Sanders of Kenton County.  Sanders had no connection to the Fen Phen attorneys.

    We have not seen the court order issued by Judge Wehr, although we have made a search of the Boone Circuit Clerk’s office (the file was in Frankfort at the Court of Appeals) and any final decision is conditioned on our understanding of what that order said.  Nevertheless  it is reported to LawReader that Judge Wehr’s  order held that no funds in the possession of the KFHL could be used to pay attorney fees in their defense of the Boone Circuit Court action (or an appeal).  The trust did not place itself in this lawsuit, it was named as a party defendant..

    After the charitable trust was forbidden to pay their attorney, Sanders withdrew from the action and did not file an appeal in their behalf. Sanders withdrawal was proper.  No one could expect him to devote years of litigation with no chance he would ever be paid for his services.  This fact situation raises the issue that the KFHL was prevented from filing an appeal by Judge Wehr’s ruling.  We suggest that under Kentucky’s “case by case” standard for reviewing issues of standing, that this ruling by Judge Wehr which prohibited an appeal by KHFL should have been considered by the Court of Appeals and may present a question for the Supreme Court to consider.

    Defendant Melbourne Mills, attempted to file an appeal in behalf of KFHL. He claimed standing as a “member of the Board” of KFHL and as a “citizen”.  

    Another issue is unclear.  KRS Chapter 273 provides procedures for dissolution of non-profit corporations.  It is not known by this author if Judge Wehr properly followed the requirements of Chapter 273.

   Mills argued in his brief,

 ”Judge Wehr, without authority to do so, effectively “dissolved” KFHL by seizing all of its assets and imposing a constructive trust on those funds.”

   The Court of Appeals held,

  ” We agree that creation of a cy pres trust is a valid option under the appropriate circumstances. However, Mills has failed to grasp that he has no standing to appeal on behalf of a corporate entity. Without citation to authority, Mills argues “that as a member of the governing board of the trust and a citizen of the Commonwealth of Kentucky . . . he is in the best position to pursue this matter on behalf of the cy pres trust.” We disagree.”

     Kentucky law provides standing for the Attorney General to intervene in actions regarding charitable trusts.  Two different Attorney Generals served during the litigation regarding the KFHL, but neither of them entered this law suit or defended the KFHL.

    The result is that a properly created charitable trust was forcible brought into a lawsuit, was denied the right to expend funds to hire an attorney, and its officers were found to have no standing to assert their defense.  

   Something about this is just unsettling.  It would seem to this author that the order of Judge Wehr denying KFHL the right to hire an attorney to defend itself should be found to have tolled the appeal time and that a new appeal time should now be allowed since the Court has reversed all of the grounds Judge Wehr relied upon to justify the seizure of the fund’s assets and to deny it the right to hire an attorney to advance an appeal. And in particular, the Court of Appeals held that the fact finder should determine if the assets paid into the KFHL were improperly taken from the Fen Phen plaintiffs.

 KRS Chapter 273 clearly authorizes a circuit judge to allow attorney fees to a non-profit corporation in dissolution proceedings.  Judge Wehr did not exercise that discretion.

   Further, we find some merit in Mill’s claim that in his status as a citizen he had standing to defend the assets of the charitable trust on appeal.  The public is the beneficiary of the KFHL.  Should not a member of the public have standing?

  At the very least, this issue cries out for review by the Ky. Supreme Court.

  Angela Ford, the attorney for the Fen Phen plaintiffs, has already announced that she will file an appeal of the Court of Appeals ruling, so this issue, if it is appealed, would not  add to the delay of this case.

 Perhaps the denial of standing for KFHL to present a defense still has some life in it. 

 STANDING TO APPEAL.

 We suggest that the issue of standing to maintain an appeal is broadly interpreted in U.S. law.

 The Ky. Court of Appeals denied standing for Mills to assert his appeal as a member of the Board of KFHL and as a “citizen”.  The Court justified their denial of standing to Mills by saying, no one has submitted citations on this issue.

 We note that as a Board member, Mills loss of salary as a board member is an issue which appears in some decisions to provide a basis for him to assert standing as an aggrieved party.

 We would suggest that standing must be decided on a case by case basis, and there are numerous issues which the Court of Appeals did not consider.

 “Standing is established by the facts on a case by case basis. Appellants must have a judicially recognizable interest that is neither remote nor speculative.” City of Louisville v. Stock Yards Bank and Trust Co., Ky., 843 S.W.2d 327, 328-329 (1992)

 The Court of Appeals had neglected to consider the special standing granted to Melbourne Mills by KRS 273.357:

 (KRS  273.390 Title of law.

KRS 273.161 to 273.390 shall be known and may be cited as the “Kentucky Nonprofit Corporation Acts.”)

  KRS 273.357 Survival of remedy after dissolution.

The dissolution of a corporation either (1) by the filing of articles of dissolution with the Secretary of State, or (2) by a decree of court when the court has not liquidated the assets and affairs of the corporation as provided in KRS 273.161 to 273.390 shall not take away or impair any remedy available to or against the corporation, its directors, OFFICERS, OR MEMBERS, for any right or claim existing, or any liability incurred, prior to the dissolution if action or other proceeding thereon is commenced within two (2) years after the date of such dissolution. Any such action or proceeding by or against the corporation may be prosecuted or defended by the corporation in its corporate name. The members, directors, and officers may take corporate OR OTHER ACTION appropriate to protect the remedy, right, or claim.

Effective: July 15, 1998

History: Amended 1998 Ky. Acts ch. 341, sec. 17, effective July 15, 1998. — Amended 1988 Ky. Acts ch. 23, sec. 209, effective January 1, 1989. — Created 1968 Ky. Acts ch. 165, sec. 61.

 Another statute may apply to the procedure for seizing the assets of KFHL by Judge Wehr.  Until his order is available this question is not resolved.

 KRS  273.333 Procedure in liquidation of corporation by court.

(1) In proceedings to liquidate the assets and affairs of a corporation the court shall have the power to issue injunctions, to appoint a receiver or receivers pendente lite, with such powers and duties as the court, from time to time, may direct, and to take such other proceedings as may be requisite to preserve the corporate assets wherever situated, and to carry on the affairs of the corporation until a full hearing can be had.

(2) After a hearing had upon such notice as the court may direct to be given to all parties to the proceedings and to any other parties in interest designated by the court, the court may appoint a liquidating receiver or receivers with authority to collect the assets of the corporation. Such liquidating receiver or receivers shall have authority, subject to the order of the court, to sell, convey and dispose of all or any part of the assets of the corporation wherever situated, either at public or private sale. The order appointing such liquidating receiver or receivers shall state their powers and duties. Such powers and duties may be increased or diminished at any time during the proceedings.

(3) The assets of the corporation or the proceeds resulting from a sale, conveyance, or other disposition thereof shall be applied and distributed as follows:

(a) All costs and expenses of the court proceedings and all liabilities and obligations of the corporation shall be paid, satisfied and discharged, or adequate provisions shall be made therefor;  

  (Note:  This would appear to say that the non-profit has the right to incur expenses which may include costs of its legal defense against dissolution.)

 (b) Assets held by the corporation upon condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution or liquidation, shall be returned, transferred or conveyed in accordance with such requirements;

(c) Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution or liquidation, shall be transferred or conveyed to one (1) or more domestic or foreign corporations, societies or organizations engaged in activities substantially similar to those of the dissolving or liquidating corporation as the court may direct;

 (Note: This appears to prohibit distribution of the charitable trust funds to the Fen Phen plaintiffs.)

 (d) Other assets, if any, shall be distributed in accordance with the provisions of the articles of incorporation or by the bylaws to the extent that the articles of incorporation or bylaws determine the distributive right of members, or any class or classes of members, or provide for distribution to others;

(e) Any remaining assets may be distributed to such persons, societies, organizations or domestic or foreign corporations, whether for profit or not for profit, specified in the plan of distribution adopted as provided in KRS 273.161 to 273.390, or where no plan of distribution has been adopted, as the court may direct.

(4) The court shall have power to allow, from time to time, as expenses of the liquidation, compensation to the receiver or receivers and to attorneys in the proceeding, and to direct the payment thereof out of the assets of the corporation or the proceeds of any sale or disposition of such assets.  

  (Note: Judge Wehr did not allow payment of the KFHL attorneys fees.)

 (5) A receiver of a corporation appointed under the provisions of this section shall have authority to sue and defend in all courts in his own name as receiver of such corporation. The court appointing such receiver shall have exclusive jurisdiction of the corporation and its property, wherever situated.

History: Created 1968 Ky. Acts ch. 165, sec.

 We respectfully  provide  citations on the issue of standing found by a  LawReader search.

 Bell Atlantic Corp. v. Bolger, 2 F.3d 1304 (C.A.3 (Pa.), 1993)

        Generally, “only parties to a lawsuit, or those that properly become parties, may appeal an adverse judgment.” Marino v. Ortiz, 484 U.S. 301, 304, 108 S.Ct. 586, 587, 98 L.Ed.2d 629 (1988) (per curiam); Fed.R.App.P. 3(c) (“The notice of appeal shall specify the party or parties taking the appeal”). But it is not settled whether an objecting member of the class or derivative litigation who is not a named party may appeal the court’s approval of the compromise. According to two leading treatises, “[a] member of the class who appears in response to the court’s notice, given pursuant to the Rule [23.1], and objects to the dismissal or compromise has a right to appeal from an adverse final judgment although he did not become a formal party of record.” 3B James W. Moore, Moore’s Federal Practice, p 23.1.24 (objector’s right to appeal derivative suit settlement); p 23.80 (objector’s right to appeal class action settlement) (1993); 7C Charles A. Wright, et al., Federal Practice & Procedure, Sec. 1839, at 182 (1986) (“[a]n objector to the settlement may appeal the court’s approval of the compromise”); see also Webcor Elecs. v. Whiting, 101 F.R.D. 461, 465 n. 11 (D.Del.1984) (“The law is now settled that objectors may appeal a court’s decision approving a settlement”).

…        The Ninth and Seventh Circuits follow a different approach. Without much elaboration, they have consistently allowed unnamed, non-intervening class members standing to appeal approval of settlement agreements. For example, in Armstrong v. Board of School Directors, 616 F.2d 305, 327-28 (7th Cir.1980), the court permitted an objecting unnamed class member to appeal from a class action judgment. Accord Patterson v. Stovall, 528 F.2d 108, 109 n. 1 (7th Cir.1976). The Ninth Circuit in Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1176 (9th Cir.1977), stated that unnamed class members appealing from the district court’s approval of a class action settlement had legal rights affected by the settlement and thus had standing to sue. Accord In re Cement Antitrust Litig., 688 F.2d 1297, 1309 (9th Cir.1982), aff’d, 459 U.S. 1191, 103 S.Ct. 1173, 75 L.Ed.2d 425 (1983); Dosier v. Miami Valley Broadcasting Corp., 656 F.2d 1295, 1299 (9th Cir.1981) (dissatisfied class member could have challenged settlement by direct appeal). See also Cohen v. Young, 127 F.2d 721, 724 (6th Cir.1942) (although settlement objector did not appeal order denying motion to intervene, objector was entitled to appeal order approving settlement because “[a]ppellant appeared in court in answer to the court’s notice to show cause why the settlement should not be approved”).

…        Given the agency, collective action, and information problems inherent in settlements of derivative litigation, and the broad view of objector standing embodied in Ace, we conclude Lazar had standing to appeal the district court order approving the settlement. Assuring fair and adequate settlements outweighs concerns that non-intervening objectors will render the representative litigation “unwieldy.” It is sufficient that Lazar attended the settlement hearing and voiced before the district court the same objections he now raises before us on appeal.

Capital Bluecross v. Pa Ins. Dept., 937 A.2d 552 (Pa. Commw. Ct., 2007)

 3. Substantial, Direct and Immediate Interest

        Based on the averments in Dr. Sklaroff’s petition to intervene, Commissioner Koken determined Dr. Sklaroff purchases Blue Shield coverage for himself, his family and his employees. Commissioner Koken noted the allegation that the Highmark approval would allow Highmark “to dictate prices, hurt competition, decrease quality of care, terminate physician contracts, dictate unfavorable contract terms, lessen physician governance and destroy the social mission of [Blue Shield].” C.R. Ex. 73 (January 1999 Koken Decision) at 31; Cap. R. at 305.

        Commissioner Koken also noted Dr. Sklaroff was an elected corporate member of Blue Shield. Dr. Sklaroff alleged the Highmark consolidation would divest him of his elected position and deprive him and other physician members of their ability to participate in Blue Shield/Highmark governance. Id. Commissioner Koken further observed Dr. Sklaroff, a Blue Shield provider, also asserts he participated in Blue Shield’s social mission to provide medical care to low income persons at affordable rates. He also had a provider contract with one of the subsidiaries. Id.

        Highmark does not contest Dr. Sklaroff’s status as a Blue Shield subscriber/consumer, provider and former corporate member. Dr. Sklaroff alleges a number of harms to his interests resulting from the Highmark formation. In view of Dr. Sklaroff’s status, we conclude Dr. Sklaroff established a substantial, direct and immediate interest in the 2006 Koken Order. S. Whitehall Twp. Police Serv.; Wm. Penn Parking Garage, Inc. As a result, Dr. Sklaroff adequately established he was aggrieved by the 2006 Koken Order and thus has standing under 2 Pa. C.S. § 702 to appeal that decision to this Court. Id.

        Accordingly, Highmark’s application to quash is denied.

 Fourroux v. City of Shepherdsville, KY, No. 2003-CA-001016-MR (Ky.App. 10/15/2004)

To sustain a cause of action a party must have standing As stated in City of Ashland v. Ashland F.O.P. No. 3, Inc., Ky., 888 S.W.2d 667, 668 (1994):

[23]    In order to have  standing in a lawsuit “a party must have a judicially recognizable interest in the subject matter of the suit.” The interest of a plaintiff must be a present or substantial interest as distinguished from a mere expectancy. The issue of standing must be decided on the facts of each case. Simply because a plaintiff may be a citizen and a taxpayer is not in and of itself sufficient basis to assert standing.

Standing is established by the facts on a case by case basis. Appellants must have a judicially recognizable interest that is neither remote nor speculative. City of Louisville v. Stock Yards Bank and Trust Co., Ky., 843 S.W.2d 327, 328-329 (1992)

 Charitable Trust Doctrine

An Article on the Charitable Trust Doctrine raises a question overlooked by the Ky. Court of Appeals:

Argument:  Once the KFHL was incorporated as a charitable trust, the Boone Circuit court had no jurisdiction to seize the money for distribution to the Fen Phen plaintiffs.

  Under the Charitable Trust Doctrine,  “once a charitable dollar, always a charitable dollar.”  South Dakota Supreme Court – Banner Health System v. Lawrence E. Long, 663 N.W.2d 242 (2003) (PDF).

Until a court has ruled that the assets placed in KFHL were improperly diverted from the Fen Phen plaintiffs, the Charitable Trust Doctrine prevents expenditure of these funds for any purpose other than a charitable purpose. 

What is the Charitable Trust Doctrine?

Despite its name, the charitable trust doctrine applies to certain nonprofit corporations as well as trusts. Under the doctrine, all the assets of a nonprofit corporation exist within a charitable trust and these assets must be used only for the charitable purposes articulated in the nonprofit’s articles of incorporation. The charitable trust doctrine requires that a corporation’s assets, including donations, gifts, and all revenues generated by the organization, be used to fulfill its charitable activities. These restrictions continue even if the corporation later changes its purposes, dissolves and distributes its assets, or transfers its assets to another organization.

The charitable assets must continue to be devoted to the original charitable purposes. A nonprofit corporation can change its purposes, but the change does not extinguish the charitable obligations. A simple, shorthand way to understand the concept is: “once a charitable dollar, always a charitable dollar.”

In almost every state, the charitable trust doctrine is well established by either statute (law passed by the legislature) or common law (law developed by courts). Some states have specific statutes governing charitable trusts.

 KENTUCKY LAW REQUIRES ASSETS OF CHARITABLE CORPORATION TO BE DISTRIBUTED FOR CHARITABLE PURPOSE

 KRS 273.303 Distribution of assets.

The assets of a corporation in the process of dissolution shall be applied and distributed as follows:

(1) All liabilities and obligations of the corporation shall be paid and discharged, or adequate provisions shall be made therefor;

(2) Assets held by the corporation upon condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution, shall be returned, transferred or conveyed in accordance with such requirements;

(3) Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution, shall be transferred or conveyed to one or more domestic or foreign nonprofit corporations, societies, or organizations engaged in activities substantially similar to those of the dissolving corporation, pursuant to a plan of distribution adopted as provided in KRS 273.161 to 273.390;

(4) Other assets, if any, shall be distributed in accordance with the provisions of the articles of incorporation or the bylaws to the extent that the articles of incorporation or bylaws determine the distributive rights of members, or any class or classes of members, or provide for distribution to others;

(5) Any remaining assets may be distributed to such nonprofit societies, organizations or domestic or foreign corporations, as may be specified in a plan of distribution adopted as provided in KRS 273.161 to 273.390.

History: Amended 1974 Ky. Acts ch. 156, sec. 1. — Created 1968 Ky. Acts ch. 165, sec. 45

 Quote from the Court of Appeals Fen Phen ruling of Feb. 4, 2011.

 “Mills’s Standing to Defend KFHL

 Mills additionally engages in a discussion regarding the appropriateness of the creation of KFHL as a cy pres trust utilizing the “excess funds” from the original settlement amount. He argues KFHL was properly created as a legitimate act of the discretion of the Boone Circuit Court in Guard.

 Thus, he contends Judge Wehr, without authority to do so, effectively “dissolved” KFHL by seizing all of its assets and imposing a constructive trust on those funds.

 We agree that creation of a cy pres trust is a valid option under the appropriate circumstances. However, Mills has failed to grasp that he has no standing to appeal on behalf of a corporate entity. Without citation to authority, Mills argues “that as a member of the governing board of the trust and a citizen of the Commonwealth of Kentucky . . . he is in the best position to pursue this matter on behalf of the cy pres trust.” We disagree.

 KFHL is a separate corporate entity which was a party to the Abbott

action. KFHL participated in the instant litigation and had the ability to appeal from an adverse ruling, but it did not do so. A notice of appeal must be filed within thirty days of the notice of service of the adverse judgment. CR 73.02(1)(a). Under CR 73.02(2), the time for filing a notice of appeal is

considered mandatory and subject to strict compliance. Fox v. House, 912 S.W.2d 450, 451 (Ky. App. 1995). The failure to timely file a notice of appeal deprives appellate courts of jurisdiction. Burchell v. Burchell, 684 S.W.2d 296, 299 (Ky.App. 1984).

 Such a defect is fatal and cannot be cured. Fox, 912 S.W.2d at 451. Because KFHL did not appeal from the adverse ruling seizing its

assets and placing same in a constructive trust, it is not a party to this appeal and we are without jurisdiction to consider the argument Mills attempts to present on its behalf. Mills is properly a party to this appeal, but he cannot “bootstrap” an argument in support of KFHL onto his appeal as he has no standing to prosecute an appeal on behalf of this corporate entity. Mills cites us to no authority supportive of his contention to the contrary and we are convinced none exists.

 Thus, no further discussion of the issue is warranted, and that portion of the order of March 8, 2006, seizing all KFHL assets and imposing a  constructive trust thereon shall stand.”

Fla. Supreme Court won’t review DUI machine Source Code Ruling – Subpoena for Intoxilyzer Source Code Upheld

Tuesday, February 8th, 2011

By DUANE MARSTELLER – dmarsteller@bradenton.com

MANATEE — The state’s highest court has opted not to enter the legal fray over an alcohol-breath test machine’s computer source code.

The Florida Supreme Court declined to review an appeals court decision that a Manatee County Circuit judge properly allowed defense attorneys to subpoena the Intoxilyzer 8000’s manufacturer for the code. The high court didn’t give a reason for its Jan. 26 denial, but said it would not reconsider the decision.

Defense attorneys praised the court’s action Monday, saying it puts further pressure on CMI Inc. to turn over the code after years of refusing to do so. Prosecutors and law-enforcement agencies say nothing has changed as a result of the decision, and they will continue to use the machine to arrest and prosecute intoxicated drivers.

A Coral Gables attorney for CMI, based in Owensboro, Ky., did not immediately respond to a telephone call and e-mail seeking comment.

It’s the first time the high court has weighed in on the years-long legal battle over the code, which stems from an Ellenton woman’s 2008 DUI arrest. Janet Landrum, then 43, was charged with her 10th DUI after blowing a .112 and a .108, well above the .08 legal level, according to the arrest report.

Her attorney, Mark Lipinski, sought the code in hopes of getting the breath test results thrown out.

He and other defense lawyers in Florida contend the code will show machines currently being used are different from the one that was approved for use in the state.

Rejecting CMI’s argu- ment that the code was a protected trade secret, Circuit Court Judge Diana Moreland allowed Lipinski to issue a subpoena.

CMI then appealed, but the Second District Court of Appeal upheld the subpoena. CMI then appealed to the Supreme Court.

“They made the right decision,” Lipinski said of the high court’s action. “This has been lingering around in the appellate courts for too long. I’m glad the (Supreme) Court said enough’s enough.”

The case now is back in Manatee County Circuit Court, and the next move is up to CMI, Lipinski said. But he said he doubts CMI will hand over the code because of the latest ruling.

A prosecutor said she also doesn’t expect the company to change its stance. That means prosecutors will continue to offer evidence and testimony during DUI trials that establish the machines’ accuracy and reliability, said Erica Arend, the Sarasota County misdemeanor division chief for the State Attorney’s Office.

“It doesn’t change anything for us,” she said.

Nor does it for the Florida Department of Law Enforcement, which certifies the machines and the officers who use them. “We think the instruments are operating correctly and effectively in the state of Florida,” spokeswoman Heather Smith said.

Duane Marsteller, Herald staff writer, can be reached at 745-7080, ext. 2630.

Read more: http://www.bradenton.com/2011/02/08/2938461/dui-battle-is-back.html#ixzz1DNYwJmWy

APPORTIONMENT AGAINST “EMPTY CHAIR” DEFENDANT by Hon. Dave Kramer

Monday, February 7th, 2011

APPORTIONMENT AGAINST “EMPTY CHAIR” DEFENDANT

By  Hon. David Kramer | dkramer@dbllaw.com

In cases in which an apportionment is permitted against a former party, e.g., one that was never named as a party but that paid a settlement to the plaintiff, or one that was sued but later settled with the plaintiff, the former defendant is sometimes referred to as an “empty chair,” a metaphorical reference to the party’s absence from trial. See, e.g., Certainteed Corp. v. Dexter, — S.W.3d — , 2010 WL 5135324 (Ky. 2011) (final Jan. 6, 2011).]  In such cases, if the remaining trial defendant wishes to have the empty chair named in the apportionment instruction that is submitted to the jury, the trial court must essentially make a determination whether there was evidence of the empty chair’s liability introduced at trial that would be sufficient to overcome a directed verdict motion in favor of the empty chair. Id.  Thus, the remaining defendant may not simply deflect blame from itself during trial and then submit an apportionment instruction that includes the empty chair, even one that paid a substantial settlement to the plaintiff.  Only if a sufficient showing of liability on the part of the empty chair is made that would justify submitting the issue of its liability to the jury may the empty chair be included in the apportionment instruction. Often, where a defendant has paid a settlement in a civil action involving the fault of more than one party, the remaining defendant(s) can utilize at trial the plaintiff’s own evidence and expert testimony that was produced during discovery against the empty chair defendant. This tactic can be particularly necessary where the remaining defendant itself did not produce evidence or expert testimony implicating the empty chair during discovery, as in the case where the defendants were maintaining a joint defense or were otherwise avoiding “finger-pointing,” i.e., blaming each other for the plaintiff’s damages.

 The foregoing post includes commentary reprinted from the forthcoming 2011 supplement to Rules of Civil Procedure Annotated, 6th ed. (Vols. 6 & 7, Kentucky Practice Series), by David V. Kramer and Todd V. McMurtry, with permission of the authors and publisher. Copyright (c) 2011 Thomson Reuters. For more information about this publication please visit http://west.thomson.com/productdetail/130503/11774808/productdetail.aspx.

FORMER CHIEF JUSTICE JOSEPH LAMBERT FEEDBACK: CURIOUS, UNFAIR CRITICISM BY PAPER

Monday, February 7th, 2011

By Joseph E. Lambert

At issue | Jan. 25 Herald-Leader editorial, “No leave for Lambert; Chief Justice Minton made the right call”

Whenever I am attacked by the Herald-Leader, I am reassured that I have not strayed too far from the right course. Never have I known a person or firm so consistently wrong about almost everything.

I am unsure why the Herald-Leader dislikes me, but I have always suspected it was because I wrote an opinion for the Supreme Court in a high-profile defamation case against the paper. The court decided the libel claim should go to trial. I do not know what happened after it went back to the trial court.

In any event, let me set the record straight. In my 10 years as chief justice, I established family courts in Kentucky, and those courts now serve 75 percent of our population. At my request, the General Assembly authorized construction of 50 or more judicial centers, almost all of which are located in rural counties that often get little attention from state government. Those court facilities provided thousands of jobs for Kentuckians who needed work, and they were built with money to be repaid over 25 years borrowed at historically low interest rates.

I was also instrumental in establishment of the senior judge program, which has resulted in far greater efficiency than ever before in Kentucky courts. Hardly ever is a court day lost because the judge is unavailable.

When judges are ill or must attend to family matters, as in the federal system, a senior judge is available to fill that seat for the day or week of the regular judge’s absence. Jurors, witnesses, and others don’t have their time wasted.

I also established nearly statewide drug courts, whereby non-violent offenders are given treatment and are closely supervised by judges and caseworkers. Drug courts have been about the only significant progress made in recent years in combating the scourge of drug abuse.

I am unsure why the Herald-Leader has failed to note the progress in Kentucky courts from 1998 to 2008, and I actually care very little, except for the misinformation inflicted on the public by the newspaper. Nevertheless, when I read a Herald-Leader editorial attacking me for contemplating a run for elective office, I consider it a badge of honor.

Standards of Civility For The Legal Profession – Cirt. Judge Martin J. Sheehan Adopts These Rules for His Court.

Sunday, February 6th, 2011

  Kenton Circuit Judge J. Martin  Sheehan was interviewed for an article about his court procedures by  attorney Todd V. McMurtry for the Northern Ky. Bar Associations magazine, Lex Loci.  

 Judge Sheehan made reference to the Rules of Civility adopted by the New York Bar Association which he applies in his courtroom.  LawReader believes that these rules would be useful in Kentucky.

 New York StateSTANDARDS of CIVILITY

 Preamble

 The New York State Standards of Civility for the legal profession set forth principles of behavior to which the bar, the bench and court employees should aspire. They are not intended as rules to be enforced by sanction or disciplinary action, nor are they intended to supplement or modify the Rules Governing Judicial

Conduct, the Code of Professional Responsibility and its Disciplinary Rules, or any other applicable rule or requirement governing conduct. Instead they are a set of guidelines intended to encourage

lawyers, judges and court personnel to observe principles of civility and decorum, and to confirm the legal profession’s rightful status as an honorable and respected profession where courtesy and civility are observed as a matter of course.

 The Standards are divided into four parts: lawyers’ duties to other lawyers, litigants and witnesses; lawyers’ duties to the court and court personnel; judges’ duties to lawyers, parties and witnesses; and court personnel’s duties to lawyers and litigants.

 As lawyers, judges and court employees, we are all essential participants in the judicial process. That process cannot work effectively to serve the public unless we first treat each other with courtesy, respect and civility.

 Lawyers’ Duties to Other Lawyers, Litigants and Witnesses

 I. Lawyers should be courteous and civil in all professional dealings with other persons.

 A. Lawyers should act in a civil manner regardless of the ill feelings that their clients may have toward others.

B. Lawyers can disagree without being disagreeable. Effective representation does not require antagonistic or acrimonious behavior. Whether orally or in writing, lawyers should avoid vulgar

language, disparaging personal remarks or acrimony toward other counsel, parties or witnesses.

C. Lawyers should require that persons under their supervision conduct themselves with courtesy and civility.

 II. When consistent with their clients’ interests, lawyers should cooperate with opposing counsel in an effort to avoid litigation and to resolve litigation that has already commenced.

 A. Lawyers should avoid unnecessary motion practice or other judicial intervention by negotiating and agreeing with other counsel whenever it is practicable to do so.

B. Lawyers should allow themselves sufficient time to resolve any dispute or disagreement by communicating with one another and imposing reasonable and meaningful deadlines in light of the nature and status of the case.

 III. A lawyer should respect the schedule and commitments of opposing counsel, consistent with protection of the client’s interests.

 A. In the absence of a court order, a lawyer should agree to reasonable requests for extensions of time or for waiver of procedural formalities when the legitimate interests of the client will not

be adversely affected.

B. Upon request coupled with the simple representation by counsel that more time is required, the first request for an extension to respond to pleadings ordinarily should be granted as a matter of courtesy.

C. A lawyer should not attach unfair or extraneous conditions to extensions of time. A lawyer is entitled to impose conditions appropriate to preserve rights that an extension might otherwise jeopardize, and may request, but should not unreasonably insist on, reciprocal scheduling concessions.

D. A lawyer should endeavor to consult with other counsel regarding scheduling matters in a good faith effort to avoid scheduling conflicts. A lawyer should likewise cooperate with opposing counsel when scheduling changes are requested, provided the interests of his or her client will not be jeopardized.

E. A lawyer should notify other counsel and, if appropriate, the court or other persons at the earliest possible time when hearings, depositions, meetings or conferences are to be canceled or postponed.

 IV. A lawyer should promptly return telephone calls and answer correspondence reasonably requiring a response.

 V. The timing and manner of service of papers should not be designed to cause disadvantage to the party receiving the papers.

 A. Papers should not be served in a manner designed to take advantage of an opponent’s known absence from the office.

B. Papers should not be served at a time or in a manner designed to inconvenience an adversary.

C. Unless specifically authorized by law or rule, a lawyer should not submit papers to the court without serving copies of all such papers upon opposing counsel in such a manner that opposing counsel will receive them before or contemporaneously with the submission to the court.

 VI. A lawyer should not use any aspect of the litigation process, including discovery and motion practice, as a means of harassment or for the purpose of unnecessarily prolonging litigation or increasing litigation expenses.

 A. A lawyer should avoid discovery that is not necessary to obtain facts or perpetuate testimony or that is designed to place an undue burden or expense on a party.

B. A lawyer should respond to discovery requests reasonably and not strain to interpret the request so as to avoid disclosure of relevant and non-privileged information.

 VII. In depositions and other proceedings, and in negotiations, lawyers should conduct themselves with dignity and refrain from engaging in acts of rudeness and disrespect.

 A. Lawyers should not engage in any conduct during a deposition that would not be appropriate in the presence of a judge.

B. Lawyers should advise their clients and witnesses of the proper conduct expected of them in court, at depositions and at conferences, and, to the best of their ability, prevent clients and witnesses from causing disorder or disruption.

C. A lawyer should not obstruct questioning during a deposition or object to deposition questions unless necessary.

D. Lawyers should ask only those questions they reasonably believe are necessary for the prosecution or defense of an action. Lawyers should refrain from asking repetitive or argumentative questions and from making self-serving statements.

 VIII. A lawyer should adhere to all express promises and agreements with other counsel, whether oral or in writing, and to agreements implied by the circumstances or by local customs.

 IX. Lawyers should not mislead other persons involved in the litigation process.

 A. A lawyer should not falsely hold out the possibility of settlement as a means for adjourning discovery or delaying trial.

B. A lawyer should not ascribe a position to another counsel that counsel has not taken or otherwise seek to create an unjustified inference based on counsel’s statements or conduct.

C. In preparing written versions of agreements and court orders, a lawyer should attempt to correctly reflect the agreement of the parties or the direction of the court.

 All  Lawyers should be mindful of the need to protect the standing of the legal profession in the eyes of the public. Accordingly, lawyers should bring the New York State Standards of Civility to the attention of other lawyers when appropriate.

 Lawyers’ Duties to the Court and Court Personnel

 I. A lawyer is both an officer of the court and an advocate. As such, the lawyer should always strive to uphold the honor and dignity of the profession, avoid disorder and disruption in the courtroom, and maintain a respectful attitude toward the court.

 A. Lawyers should speak and write civilly and respectfully in all communications with the court and court personnel.

B. Lawyers should use their best efforts to dissuade clients and witnesses from causing disorder or disruption in the courtroom.

C. Lawyers should not engage in conduct intended primarily to harass or humiliate witnesses.

D. Lawyers should be punctual and prepared for all court appearances; if delayed, the lawyer should notify the court and counsel whenever possible.

 II. Court personnel are an integral part of the justice system and should be treated with courtesy and respect at all times.

 Judges’ Duties to Lawyers, Parties and Witnesses

 I. A judge should be patient, courteous and civil to lawyers, parties and witnesses.

A. A judge should maintain control over the proceedings and insure that they are conducted in a civil manner.

B. Judges should not employ hostile, demeaning or humiliating words in opinions or in written or oral communications with lawyers, parties or witnesses

C. Judges should, to the extent consistent with the efficient conduct of litigation and other demands on the court, be considerate of the schedules of lawyers, parties and witnesses  when scheduling hearings, meetings or conferences.

D. Judges should be punctual in convening all trials, hearings, meetings and conferences; if delayed, they should notify counsel when possible.

E. Judges should make all reasonable efforts to decide promptly all matters presented to them for decision.

F. Judges should use their best efforts to insure that court personnel under their direction act civilly toward lawyers, parties and witnesses.

 Duties of Court Personnel to the Court, Lawyers and Litigants

 I. Court personnel should be courteous, patient and respectful while providing prompt, efficient and helpful service to all persons having business with the courts.

 A. Court employees should respond promptly and helpfully to requests for assistance or information.

B. Court employees should respect the judge’s directions concerning the procedures and atmosphere that the judge wishes to maintain in his or her courtroom

FEN PHEN DECISION HANDED DOWN BY CT. OF APPEALS- SUMMARY JUDGMENT ON MAIN PORTION OF THE APPEAL REVERSED –

Friday, February 4th, 2011

FEN PHEN DECISION HANDED DOWN BY CT. OF APPEALS-   SUMMARY JUDGMENT ON MAIN PORTION OF THE APPEAL REVERSED –

 VENUE UPHELD –  FUND FOR HEALTHY LIVING RULING UPHELD- CASE REMANDED FOR TRIAL –  ALL CIRCUIT COURT ORDERS SUBSEQUENT TO THE SUMMARY JUDGMENT REVERSED.

 On Friday Feb. 4th. The Court of Appeals held that the:  “… portion of the order of the Boone Circuit Court entered on March 8, 2006, awarding partial summary judgment in favor of Abbott (the plaintiffs) on its breach of fiduciary duty claim, is reversed and this matter is remanded for further proceedings consistent with this Opinion. Subsequent orders stemming from the improvident grant of partial summary judgment are necessarily vacated. ”

The court upheld a ruling of  Special Circuit Judge William Wehr that his ruling denying a change of venue to Fayette County . 

The Court of Appeals refused to entertain an appeal by a director of the  Fund For Healthy Living LLC.  The ruling upheld Judge Wehr’s ruling seizing some $20,000,000 from the charitable LLC.  

Wehr had previously entered an order denying the right of the trust to pay its attorney to prosecute an appeal. When that ruling was issued, the attorney for the charitable trust understandable withdrew from further representation of the trust.

The import of the case appears to be that the summary judgment granted by Judge Wehr is set aside, as a material facts were still at issue.

One signifcant finding of the court is a ruling that the $200 million dollar settlement was not just for the benefit of the 431 plaintiffs, but was partially to settle other claims that had not been filed by Gallion, Cunningham and Mills.   This was a major contention by Gallion, Cunningham and Mills, and therefore the amount of money that should be awarded to the 431 plaintiffs is still undecided.

No supercedas bond on the court rulings was filed by the defendants, and this author does not know how much money was taken into possession by the plaintiffs.  Final distribution of funds awarded as a result of Judge Wehr’s summary judgment are now in limbo until the case is tried and any future appeals are completed. 

LawReader reported last month that the U.S. Attorney’s office had intervened in the judicial sale of William Gallions house in a judicial sale.  The purchaser of the home was Angela Ford the attorney for many of the class plaintiffs who turned on Gallion, Cunningham and Mills.

The U.S. Attorney argued in the court which had ordered the judicial sale, that the funds with which Angela Ford intended to purchase the home was being held not only for her clients but for other clients she did not represent.  The local circuit court set aside the judicial sale.

   The Court of Appeals gave great weight to an affidavit of Hon. Kenneth R. Feinberg, a “class action expert” and concluded the settlement entered in the Guard action was “reasonable” and the “side letter” agreement supported the conclusion that the $200,000,000.00 paid by AHP was not intended to compensate only the 431 plaintiffs, but was also intended “to provide for other payments, including potential claims or (sic) other Phen-Fen (sic) users, subrogation claim holders, and other unforeseen claims.”  This affidavit apparently convinced the Appeals Court that the summary judgment was improper, and the issues should be heard by a jury.

The side letter agreement was said by Gallion, Cunningham and Mills, to justify not dispersing all settlement funds to the original plaintiffs, as the settlement required the attorneys to have a continuing liability if any additional claims were filed.

Feinberg testified in his affidavit, “There was nothing out of the ordinary in the Boone Circuit Court approving the use of approximately twenty million dollars from Guard for cy pres purposes or in approving the formation of a charitable foundation, the Kentucky Fund for Healthy Living, Inc. (Kentucky Fund), to administer the cy pres funds. …In my opinion, the case was handled properly and ethically.”

This ruling can only be considered as a major setback to the Fen Phen plaintiffs, who now must present their claims at trial, as the case was remanded by the Court of Appeals.

The Court of Appeals upheld Judge Wehr’s ruling that Boone County was a proper forum to the plaintiffs complaint and that it was timely filed. 

The right of the Fen Phen plaintiffs to obtain possession of any funds held by their attorney pending this appeal is further confused by the criminal rulings in U.S. District Court which ordered substantial restitution by Gallion and Cunningham.  Melbourne Mills was acquitted at the federal criminal trial.

Without a final court ruling from the Kentucky Circuit Court, and in light of the Federal criminal court ordering restitution, the contingent fee agreement of Angela Ford appears to be at issue.

Without a circuit court decision in her client’s favor, is she entitled to her contingent fee?  If the payments by Cunningham and Gallion are paid as a result of the Federal restitution order does Ford qualify for her contingent fee from her clients. 

At this point the only funds obtained by Angela Ford for her clients appears to be the funds that were held by the Fund for Healthy Living, LLC.  This issue could mean a substantial windfall for Ford’s clients if she is denied her contingent fee.   The issue of whether or not the Fund for Healthy Living was entitled to participate in the appeal to the Court of Appeals may be appealed to the Ky. Supreme Court.

Another issue that has not been decided, is what per centage is to be paid to each of the Fen Phen plaintiffs out of any funds finally released by a court having jurisdiction.    Federal precedent seems to suggest that a method of disbursement similar to the one originally used should be followed.   Each claim of the 431 plaintiffs should be evaluated so that plaintiffs who suffered substantial injuries from the diet drug should receive more than those plaintiffs who received no injuries from the drug.  We are not aware of any ruling that has settled this issue.

It has taken over five years for the litigation to get this far, and years of additional litigation appear to be in the cards.

FEN PHEN DECISION SYNOPSIS BY LAWREADER

 

( Editor: The Court of Appeals has issued a 36 page decision in the Fen Phen appeal.   The court partially upheld the Boone Circuit Court and partially reversed and partially remanded.  

NICKELL (PRESIDING JUDGE) STUMBO (CONCURS) AND WINE (CONCURS)

 SYNOPSIS

The arguments presented on appeal by GMC are as follows: (1) Was the independent action filed by Abbott an impermissible collateral attack on orders entered by Bamberger in the Guard action? 2) Did the trial court err in denying GMC’s motion for summary judgment? 3) Did the trial court err in granting partial summary judgment to Abbott in light of disputed material facts?

The arguments presented by Abbott on cross-appeal are as follows:

(1) Did the trial court err in denying Abbott’s motion to transfer venue from Boone County back to Fayette County for purposes of trial? (2) Did the trial court err in denying Abbott a partial summary judgment regarding Chesley? (3) Should the trial court have found Mills lacked standing to appeal dismissal of KFHL’s counterclaim and imposition of a constructive trust on its funds? (4) Whether the trial court erred in awarding Mills unsubstantiated expenses?

Upon discovering that GMC (Gallion, Mills, Cunningham) had made unauthorized use and disbursements of settlement funds, it was too late for Abbott to appeal those orders, or seek to have them altered, amended or vacated. We will not allow GMC to benefit from its own dilatory and allegedly fraudulent tactics.

We can infer, then, that Abbott was “lulled, gulled, or seduced” into inactivity during the course of the Guard litigation and was unable to discover GMC and Chesley’s misdeeds until after time had passed to file an appeal. Grubb v. Wurtland Water Dist., 384 S.W.2d 321, 323 (Ky. 1964). Although Abbott received a settlement from the manufacturer and distributors of Fen-Phen, in a sense it was still defeated because it did not receive as great a settlement as it might have received had GMC and Chesley only paid itself the amounts for which it had contracted.

As noted in Judge Wehr’s orders, GMC knew and controlled the details of the settlement. Because it did not apprise its clients of those details, the clients fully relied upon GMC to protect their interests. GMC did not. Abbott had no reason to question Bamberger’s orders or ask that they be rescinded—indeed, Bamberger’s orders establish GMC’s conflict of interest and pursuit of its own self-interest over that of its clients. For the foregoing reasons, we are convinced an independent action was properly filed to review GMC’s alleged misconduct.

GMC’s next argument is that the trial court erred in awarding partial summary judgment to Abbott when genuine issues of material fact were in dispute.

We agree and for that reason reverse and remand for proceedings consistent with this opinion.

In response to Abbott’s motion for partial summary judgment, the seventeen-page affidavit of Hon. Kenneth R. Feinberg, a practicing attorney and an expert in mass tort litigation, was submitted. Feinberg’s affidavit concluded the settlement entered in the Guard action was “reasonable” and the “side letter” agreement supported the conclusion that the $200,000,000.00 paid by AHP was not intended to compensate only the 431 plaintiffs, but was also intended “to provide for other payments, including potential claims or (sic) other Phen-Fen (sic) users, subrogation claim holders, and other unforeseen claims.”

(Feinberg affidavit) “There was nothing out of the ordinary in the Boone Circuit Court approving the use of approximately twenty million dollars from Guard for cy pres purposes or in approving the formation of a charitable foundation, the Kentucky Fund for Healthy Living, Inc. (Kentucky Fund), to administer the cy pres funds. …In my opinion, the case was handled properly and ethically. I have seen nothing that credibly suggests any misconduct by the attorneys or any inappropriate action by the judge who presided over the case. It appears that the instant action against the plaintiffs’ attorneys in Guard is based on nothing more than misinformation or lack of understanding of the procedures involved in class action or common fund or aggregate mass tort settlement.”

Feinberg’s affidavit was sufficient to create genuine issues of material fact.

The foregoing questions of fact justified going forward with trial. Steelvest, 807 S.W.2d at 480- 82; See also, Chalothorn v. Meade, 15 S.W.3d 391 (Ky. App. 1999).

 

Therefore, reversal is necessary. ….we have determined partial summary judgment was improvidently granted to Abbott,…

FUND FOR HEALTHY LIVING

…Mills additionally engages in a discussion regarding the appropriateness of the creation of KFHL as a cy pres trust utilizing the “excess funds” from the original settlement amount. He argues KFHL was properly created as a legitimate act of the discretion of the Boone Circuit Court in Guard.

Thus, he contends Judge Wehr, without authority to do so, effectively “dissolved” KFHL by seizing all of its assets and imposing a constructive trust on those funds.

We agree that creation of a cy pres trust is a valid option under the appropriate circumstances. However, Mills has failed to grasp that he has no standing to appeal on behalf of a corporate entity.

KFHL is a separate corporate entity which was a party to the Abbott action. KFHL participated in the instant litigation and had the ability to appeal from an adverse ruling, but it did not do so.

Thus, no further discussion of the issue is warranted, and that portion of the order of March 8, 2006, seizing all KFHL assets and imposing a constructive trust thereon shall stand.

(VENUE IN BOONE COUNTY)   Upon reviewing the various written pleadings and oral arguments of the parties, Judge Wehr ultimately determined a transfer of venue was unwarranted. After a careful review of the record before us, we discern no abuse

of discretion in Judge Wehr’s determination.

(CHESLEY)     contrary to Abbott’s assertions, there were issues of disputed facts remaining in relation to Abbott’s claims against Chesley, and discovery was still ongoing. Further, there has been no entry of a final judgment on any of Abbott’s claims against Chesley.

Therefore, the exception has no application in the case sub judice and we are thus without jurisdiction to consider this claim of error. Abbott’s contention that judicial economy would be served by addressing this issue may be laudable, but it is without justification under the well-settled law of this Commonwealth.

CONCLUSION

…That portion of the order of the Boone Circuit Court entered on March 8, 2006, awarding partial summary judgment in favor of Abbott on its breach of fiduciary duty claim, is reversed and this matter is remanded for further proceedings consistent with this Opinion. Subsequent orders stemming from the improvident grant of partial summary judgment are necessarily vacated.

Thus, the order of April 4, 2007, insofar as it partially granted compensatory damages to Abbott, is hereby vacated; and that portion of the order of August 1, 2007, awarding Abbott baseline compensatory damages in the amount of $42 million dollars and declaring GMC to be joint and severally liable is also vacated.

All other orders, or portions thereof, not specifically referenced are affirmed.

ALL CONCUR.

 

BRIEFS AND ORAL ARGUMENT

FOR APPELLANTS,SHIRLEY A.

CUNNINGHAM, ET AL.:

MARY E. MEADE-MCKENZIE

BRIEFS FOR APPELLANT,

MELBOURNE MILLS, JR.:

CALVIN R. FULKERSON

J. CHRISTIAN LEWIS

JAMES A. SHUFFETT

AT ORAL ARGUMENT:

JAMES M. SHUFFETT

CONSOLIDATED BRIEFS AND

ORAL ARGUMENT FOR

APPELLANTS, CHARLOTTE

BAKER, ET AL. AND

APPELLEES/CROSSAPPELLANTS,

MILDRED

ABBOTT, ET AL.:

ANGELA M. FORD

BRIEF AND ORAL ARGUMENT

FOR CROSS-APPELLEE STANLEY

M. CHESLEY:

C. ALEX ROSE

JAMES M. GARY

AT ORAL ARGUMENT:

JAMES M. GARY

Conservative Group Takes Up Chief Justice Roberts Hint and Challenges Voter Rights Act.

Thursday, February 3rd, 2011

Feb. 3, 2011

Conservative activists are trying to overturn the landmark Voting Rights Act, beginning with arguments they made this week in a federal court in Washington, D.C.

 They say the reasoning behind the 1965 law is outdated.

 The law requires states and cities to seek Justice Department approval for changes they make to their voting procedures.

 Congress designed the law to prevent local authorities from shutting minorities out of their right to vote.

 Some jurisdictions in Southern states used to redistrict to ensure African Americans could not dominate the vote in any voting district. Others required literacy tests that disproportionately excluded African Americans.

 The lawsuit that prompted the hearing Wednesday was filed by officials from Shelby County, Ala.

 Their attorneys presented their arguments in U.S. District Court, only a half-mile from the U.S. Supreme Court.

 Any efforts to overturn the Voting Rights Act is nearly certain to end up back in the Supreme Court before all the appeals are completed, according to legal analysts.

The dispute centers on Section 5 of the Voting Rights Act, which requires federal “pre-clearance” to redistrict voting districts or make other changes to election laws in nine Southern states and parts of seven others.

 The Supreme Court has consistently upheld the law since 1965.

 However, Chief Justice John G. Roberts hinted in 2009 that the law might be ripe for a different ruling.

 “Things have changed in the South,” Roberts wrote for the majority in a decision that upheld the law but signaled that portions of it were outdated.

 Attorneys for Shelby County echoed similar reasoning in their court filings when they said the law should change with the times.

 “There can be no question that the [Voting Rights Act] ushered in long-overdue changes in electoral opportunities for minorities throughout the Deep South,” the attorneys wrote in their lawsuit.

 However, “it is no longer constitutionally justifiable for Congress to arbitrarily impose on Shelby County and other covered jurisdictions disfavored treatment . . . without a legislative record showing that [they] are still engaged in the type of ‘unremitting and ingenious defiance of the Constitution’ that justified enactment of the [Voting Rights Act] in 1965.”

 The Justice Department, joined by the NAACP, responded by saying 420 proposed changes to local election laws in the Deep South since 1982 appeared to be “intentionally discriminatory.”

 The changes were blocked under the Justice Department’s pre-clearance authority.

“Congress’ considered judgment that racial and language minorities remained politically vulnerable . . . is not only amply supported by the legislative history but is entitled to deference by the courts,” the Justice Department attorneys wrote in arguing the case should be dismissed.

GROWING RIFT BETWEEN NEW YORK JUDICIAL ETHICS COMMISSION AND LAWYERS GROUP – SECRET BOARD “UNFAIR TO JUDGES”

Thursday, February 3rd, 2011

GROWING RIFT BETWEEN NEW YORK JUDICIAL ETHICS COMMISSION AND LAWYERS GROUP  – SECRET BOARD “UNFAIR TO JUDGES”

” judges criticize the commission as an arrogant agency willing to destroy careers on flimsy evidence”

Excerpted from article By WILLIAM GLABERSON Published: February 2, 2011

Thomas A. Klonick, chairman of the New York State Commission on Judicial Conduct, criticized as “unfortunate and kind of distressing” the way a Manhattan lawyers’ group concluded that the panel was unfair to judges.

Another said “good boy” when a man who wanted to file a lawsuit made an insulting comment about Jews.

A third repeatedly jailed people without any trial and talked at length from the bench about how the decoration on a woman’s T-shirt made him think of a male sex organ. “I’m bringing down the house,” said the judge, Gilbert L. Abramson of Family Court in Saratoga County, evidently delighted with his own humor.

Those are a few of the cases that were handled over the last year by a secretive state agency, the New York State Commission on Judicial Conduct, that is at the center of a new dispute about the state’s judicial-discipline system. Last week, the 77,000-member New York State Bar Association called for major changes in the commission’s structure and operations after a Manhattan lawyers’ group criticized the panel as unfair to judges.

The state bar association’s position is expected to set off a campaign in Albany to change the system in ways that could make it more difficult to remove judges, for example by allowing them to question investigators’ witnesses before a hearing. The proposal would also break the commission into two separate agencies, one to prosecute judges and another to rule on the charges. It is also likely to prompt the first detailed review in decades of the way the state handles the roughly 1,800 complaints made against judges every year.

The complaints filed with the 11-member commission vary from nuisance accusations by people who lost cases to sobering claims about judges’ fixing cases and ignoring constitutional rights, the agency’s reports show. Because of the power wielded by the state’s 3,500 full- and part-time judges, any system of policing them would be delicate.

Last year’s cases provide a sample of the kinds of decisions that are now drawing statewide attention. The commission, which operates behind closed doors, removed only one judge in 2010, Judge Abramson of the Saratoga Family Court, who, according to the commission, made comments about the woman’s T-shirt that “were ribald and replete with sexual innuendo.”

Two judges resigned while under investigation, including the town court justice in western New York who said “good boy” after the derogatory comment about Jews and another town court judge who the commission found had failed to sentence more than 100 convicted people.

Twelve judges were censured or admonished last year, including one who delayed resolving cases for up to five years, another who refused to handle cases until he received a pay increase, and one who threatened a man with jail for being rude to the judge’s wife. A Kingston City Court judge, James P. Gilpatric, was admonished after he did not even respond to letters from his administrative judge concerning long delays in deciding cases.

Privately, judges criticize the commission as an arrogant agency willing to destroy careers on flimsy evidence. But cases from last year show that other critics, including some of the commission’s own members, say the agency is far too lenient toward judges.

The judge who asked for special consideration when he was caught driving drunk, Gerard E. Maney, the supervising Family Court judge in Albany, was censured. But one of the commission members, Joseph W. Belluck, a Manhattan lawyer, wrote that it was “mind-boggling” that the judge would be left on the bench after making “a calculated effort” to ensure that the law “would not be applied to him personally.”

In another case last year, Richard D. Emery, another commission member, wrote that it was “inexplicable” that the commission had left in office a nonlawyer town justice in Clinton County, in northern New York, who, the commission found, had fixed a ticket for a son of his boss in another job, and handled cases involving his own nephews.

In its decision in October leaving the justice, Jeffrey L. Menard, in office, the commission said that in a closed-door hearing, Justice Menard had said he probably should have sent the ticket of one of the nephews to another judge but it “wasn’t worth the hassle.”

By leaving the justice in office, Mr. Emery wrote, the commission “leaves the public at risk.”

In an interview this week, the chairman of the commission, Thomas A. Klonick, criticized as “unfortunate and kind of distressing” the way the Manhattan lawyers’ group, the New York County Lawyers’ Association, had reached its conclusions that the system was unfair to judges. “I believe they don’t understand the process of how the commission works,” said Mr. Klonick, a lawyer and part-time town judge in Perinton, N.Y., near Rochester.

The president of the Manhattan lawyers’ association, James B. Kobak Jr., said his group had consulted people widely, but “beyond that I really don’t care to respond.”

But the comments of Mr. Klonick, a Republican appointed to the commission by the state’s chief judge, showed that the effort to change the state’s judicial-discipline system is likely to meet resistance as the debate begins in Albany.

Versus Law Offers Court-Ready and Appeals Briefs

Wednesday, February 2nd, 2011

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In selected cases, LRC offers an appellate brief service that comes with a 100% money-back guarantee that you will win your case. With LRC’s Guaranteed Appellate Brief Service, the lawyer preparing an appeal simply provides one of LRC’s appellate specialists with the relevant facts and procedural posture of the case. LRC then performs a no-cost evaluation and presents a fixed-price estimate to prepare the appellate brief. Cases qualify for the guarantee as long as the merits of the appeal are compelling, the success probabilities are sufficiently high, and the preliminary research is sufficiently supportive.

Contact Versus Law at:   Contact Us to discuss your court-ready briefs.

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KBA ANNOUCES CLE PROGRAMS FOR 2011

Wednesday, February 2nd, 2011


The 2011 dates for the KBA’s Kentucky Law Update (KLU) were recently approved by the Supreme Court of Kentucky. They include: September 1-2, Covington, Northern Kentucky Convention Center; September 8-9, Bowling Green, Holiday Inn & Sloan Convention Center; September 20-21, Owensboro, RiverPark Center; September 27-28, Ashland, Bellefonte Pavilion Theatre; October 4-5, Gilbertsville, Kentucky Dam Village State Resort Park; October 18-19, Prestonsburg, Jenny Wiley State Resort Park; October 25-26, Lexington, Lexington Convention Center; November 2-3, London, London Community Center; November 30-December 1, Louisville, Kentucky International Convention Center.

Registration for the 2011 KLU will begin in May; additional information will be posted on the website under CLE – Kentucky Law Update.

Upcoming February Teleseminars — Every month the Kentucky Bar Association brings you a new series of Live Teleseminars, straight to your office or home phone, providing:

  • Quality – targeted learning, national speakers, practice-oriented
  • Convenience – CLE in your office or at home, no travel, no time away
  • Reliability – as nearby and accessible as your telephone, no hassle, only a toll-free number away

To see a complete program listing visit http://ky.webcredenza.com.

For questions, please contact Kim Tregilgas at kim@webcredenza.com or (720) 879-4142.

KBA Online Seminars – 24/7 CLE!

The KBA Online Catalog allows you to take CLE whenever and wherever you have access to the internet. Seminars featuring our highest rated speakers are delivered right to your desktop in streaming audio and video formats.

The catalog also features CLE programs you can download directly to your iPod/mp3 player, for playback when you want, where you want and how you want.

Click here for the latest program additions and ordering information.

Note: Online video and downloaded audio seminars are technological programs, of which you are allowed up to 6.0 CLE credits per educational year.

For questions or additional information, contact Ben Swartz at (502) 564-3795 ext. 270 or bswartz@kybar.org.

WATCHDOG GROUP SAYS SUPREME COURT JUSTICE CLARENCE THOMAS APPEARS TO HAVE ‘KNOWINGLY AND WILLFULLY’ VIOLATED RULE OF LAW FOR TWENTY YEARS BY FALSIFYING DISCLOSURE FORMS

Wednesday, February 2nd, 2011

Group Charges That Justice Thomas Receiving Special Treatment

 WASHINGTON, Feb. 1, 2011 /PRNewswire-USNewswire/ — The words “EQUAL JUSTICE UNDER LAW” are famously chiseled above the main portico of the U.S. Supreme Court building in Washington D.C. But it appears that Justice Clarence Thomas is instead receiving special treatment under the law, says the watchdog group, www.ProtectOurElections.org.

Evidence is mounting that Justice Thomas violated federal law from 1989 through the present by failing to report his wife’s annual salary by checking “NONE” on the box for “Non-Investment Income” on judicial AO 10 Financial Disclosure Reports. Seven of those forms can be found at http://protectourelections.org/index.php?q=node/105.

According to the “self-initiated amendment” letters signed by Thomas on Friday, January 21, 2011 and stamped as “RECEIVED” by the Judicial Conference of the U.S. Committee on Financial Disclosure on Saturday, January 22, 2011, the Justice failed to reveal sources of spousal income even on his original disclosure forms during his contentious 1991 confirmation hearings. ProtectOurElections.org received copies of those amendments and posted them on its website at

http://www.velvetrevolution.us/images/clarence_Thomas-FD_amendments.pdf.

One of the amendments hastily filed last week by Thomas states that he “inadvertently omitted” spousal income from as far back as 1989 “due to a misunderstanding of filing instructions.” Virginia Thomas’ income from The Heritage Foundation, a conservative think-tank, totaling $686,589 from 2003 to 2009 was omitted from the forms entirely, as was her Heritage Foundation employment from 1998 to 2003 and other sources of “non-investment income” from as early as 1989.

The forms that Justice Thomas signed warned him that a false statement could subject him to civil and criminal sanctions. “NOTE: ANY INDIVIDUAL WHO KNOWINGLY AND WILLFULLY FALSIFIES OR FAILS TO FILE THIS REPORT MAY BE SUBJECT TO CIVIL AND CRIMINAL SANCTIONS (5 U.S.C. app. section 104)” The statute referenced there, 5 U.S.C. app. section 104, defines the “civil and criminal sanctions” for “knowingly and willfully falsif[ying]” the report, as a fine “not to exceed $50,000″ and “imprison[ment] for not more than 1 year, or both” for each violation.

Moreover, under Title 18, United States Code, section 1001, it is a crime to:

  1. knowingly and willfully;
  2. make any materially false, fictitious or fraudulent statement or representation;
  3. in any matter within the jurisdiction of the executive, legislative or judicial branch of the United States. (emphasis added)

 

While 5 USC app section  104 makes this conduct a misdemeanor punishable for up to a year in prison, 18 USC section 1001 is a felony statute carrying at least five years in prison. In fact, Fraser Verrusio, former Policy Director for the U.S. House of Representatives Committee on Transportation and Infrastructure, is awaiting trial under section 1001 for not reporting income on his “United States House of Representatives Financial Disclosure Statement for Calendar Year 2003.” http://media.adn.com/smedia/2009/03/06/16/Verrusio_indictment.source.prod_affiliate.7.pdf

Moreover, in UNITED STATES v. WOODWARD, 469 U.S. 105 (1985), in a case decided by the Supreme Court, the defendant, after checking the “no” box on a U.S. Customs form, was punished for both the false statement (18 USC section 1001) violation and the misdemeanor charge of failing to report the currency itself — all as a result of checking the “no” box.

Common Cause President Bob Edgar characterized Thomas’ claim that there was a “misunderstanding of the filing instructions,” as stated on his “self-initiated amendments,” as “difficult to believe” and “implausible.” Kevin Zeese, attorney and spokesperson for ProtectOurElections.org, believes that Justice Thomas may have intentionally withheld the information in order to keep litigants from moving to disqualify him in cases where his wife’s employment could cause a conflict of interest or where she could benefit from a decision. “Justice Thomas cast a critical vote in the Citizens United case allowing conservative groups like the Heritage Foundation and Liberty Central to raise millions of dollars in secret funds to support and elect conservative politicians,” he said. “Had Justice Thomas disclosed that his wife worked for the Heritage Foundation, litigants may have had good cause to disqualify him from hearing that case. In fact, we are left to wonder if Justice Thomas knew that his wife was planning on leaving the Heritage Foundation to launch Liberty Central once Citizens United was decided. Clearly, she has benefitted personally from that decision.”

Upon seeing the January 22, 2011 file stamp on Justice Thomas’ amended forms, ProtectOurElections.org phoned officials at the Judicial Conference to determine if receiving such materials on Saturday is normal or if special accommodations were made for Justice Thomas. The receptionist who answered confirmed that the Financial Disclosure office, like most federal offices, is closed for public business on Saturday. No one else at the office would explain whether Justice Thomas received special treatment by being allowed to file his amendments when the office was closed. Reporter Brad Friedman from The Brad Blog also called the office and received the same information. http://www.bradblog.com/?p=8331

ProtectOurElections.org has called for a criminal investigation of this matter, an audit of all Supreme Court cases possibly affected by Justice Thomas’ non-disclosure, and for an ethics probe. http://protectourelections.org/index.php?q=node/109

SOURCE ProtectOurElections.org