Analysis by LawReader Senior Editor Stan Billingsley July 2, 2008
The media, perhaps inspired by the campaign of Attorney Angela Ford who stands to profit greatly from the litigation against the three Fen Phen attorneys, has expressed shock and outrage at the attorneys fees awarded by Boone Circuit Judge Joseph Bamberger. However, the fee awarded by Judge Bamberger was less than the fee the Kentucky Court of Appeals (then the states highest court) allowed in a class action case which had 400 litigants. The Fen Phen case had 431 litigants. See – Shelton v. Simpson, 441 S.W.2d 421 (Ky., 1969) (details below).
The proof introduced at the Covington Criminal trial of Mills, Cunningham and Gallion revealed that the attorneys presented Judge Bamberger with signed statements from all of the 431 Fen Phen claimants in which they said they had been informed of the settlement amount and process, were advised of the attorney’s fees sought, and were satisfied with their settlement. Only after this was submitted to the trial judge did he make a decision and issue an order granting the three attorneys their fees.
The media and Angela Ford have slimed Judge Bamberger with accusations concerning his fee order and they have never to our knowledge reported that the 431 claimants signed their names to the settlement agreements, and if they had not done so, or if they had changed their minds and in timely manner informed the court, his decision might have been far different. Only after Angela Ford filled the press with reports that they could get even more money did the claimants shout foul.
At that time that Judge Bamberger was making his fee award decision, the KBA is reported to have been aware of complaints made to them about the three attorneys, but the KBA did not share that information with the Court. The judge testified at the Federal trial that a heads up would have altered his decision.
We admittedly are confused by the various reports of how much the Fen Phen attorneys were paid. It is no surprise that the jury hearing the criminal case acquitted Melbourne Mills and is close to being hung over the guilt of Cunningham and Gallion are having difficulty in buying the Government criminal case.
We would suggest that those who have already convicted all three attorneys should consider the evidence. The court records of the original settlement proceedings clearly show the settlement contains language indicating that the original attorneys were indeed liable for any future claims filed by any other Fen Phen litigants in Kentucky (in addition to the 431 claimants). While the press and the government overlook the actual wording of the settlement, this is something the jury may not be overlooking.
We note that the media has largely ignored testimony in the pending case that the Fen Phen attorneys who appeared before Judge Bamberger lied to him and withheld information from him from their clients and from each other about all the details of the fee agreements with their clients. The media and Ms. Ford have found Judge Bamberger an easy target for his conduct in awarding a fee of 49% (???) but have ignored the fact that many litigants in Kentucky are paying 40% to 50% contingent fees in other cases.
It is entirely legal for a class action Judge to award an attorneys fee. The precedent is clear in Kentucky law and throughout the U.S. that fee awards in many cases can go as high as 50%. Such a fee is not by itself evidence of illegality. If the Kentucky Bar Association is going to sanction anyone over a 50% attorneys fee, then they better hire a large courtroom somewhere because the claimants seeking refunds from their attorneys will have to form a line from the Lexington Financial Center to the Jefferson Hall of Justice.
Our study of the press’s trial reports and court record based on pleadings filed by Angela Ford, indicate that the three attorneys received the following attorney fees. Melbourne Mills received $24 million (he was acquitted in the criminal trial) , Shirley Cunningham received $20 million, and William Gallion received $24 million. This totals $68 million. The total class action settlement was $200 million.
So the attorney fees actually received by the three attorney totaled 34% of the total settlement. Mills received 35% of the fees awarded to attorneys as did Gallion, and Cunningham received 30%. We frankly don’t understand how everyone assumes that Judge Bamberger awarded a 49% fee. What he actually did was to award a fee which together with court costs and consultant’s fees totaled about 49%. That is quite different than saying he awarded a 49% attorneys fee.
We have reviewed the court records in the civil case, and we found that only several million dollars was apparently paid in excess of the average of the fee contracts the attorneys had with their clients. That itself is the correct basis for criminal conduct and bar sanctions, but the scale of the “theft” is far smaller than the media and their darling Ms. Ford have suggested. The real issue is whether the trial attorneys were correct in paying the consulting attorneys off the top or should they have been paid by the attorneys. That issue is discussed in the 64 pages of jury instructions given to the Covington jury, and the instructions seem to suggest to the jury that this is an ethical issue and not necessarily a criminal violation.
Ms. Ford has spoken to the media for several years on every occasion, even during the time she was subject to a gag order by the Boone Circuit Court, and suggested to the world that the attorneys received some $90 million in attorney fees. Which is it $68 million as proven by the Federal prosecutors in the Fen Phen criminal case? Or is it the $90 to $98 million Ms. Ford has declared?
Ms. Ford also never discloses that clients are expected to pay court costs. The trial attorneys brought in other attorneys whose efforts increased the initial offer of $50 million for a settlement up to the $200 million dollars actually paid by the diet drug manufacturer. Ms. Ford also claims that the indicted attorneys should “disgorge” all of their fees, not just the excess fees she claims. We have never found a disgorgement case which says the entire fee earned by an attorney should be subject to disgorgment. The cases are uniform that only the excess or illegally obtained funds, in excess of the correct fee, should be disgorged.
Those other “experts” together with trial consultants were paid about $27 million. We haven’t seen the actual figures on other court costs, but you don’t try a $200 million dollar class action case with over 400 plaintiffs and not incur substantial court costs.
Also there is $20 million plus being held by the court in funds which were placed in a cy pres trust for the benefit of the public, and did not go to the attorneys as claimed by Ms. Ford. That charitable trust was found by the IRS to be managed according to law, and has grown by several million dollars, and is now somewhere between $23 million and $27 million dollars. That presumably will be awarded by the Circuit Court to the 431 original plaintiffs. (How this will be split up presents a daunting task for Special Judge Roger Crittenden who is now handling the Boone County lawsuit filed by Ms. Ford to recover additional fees for the original 431 Fen Phen litigants. Most of the 431 litigants were unable to prove any harmful effects from use of the diet drug. Others were indeed significantly damaged by the drug. Should they all share equally when the $20 million held in the charitable trust funds is divvied out by Judge Crittenden?)
Oh and don’t forget, that Ms. Ford most likely has a contingent fee contract, and she is seeking the return of all fees paid to the original attorneys, so she is likely going to receive 33%, 40% or perhaps 50% of the monies recovered. She actually stands to end up with more in attorney fees than any of the individual attorneys received. Could her eyes be glazed over by the same lust for big bucks which she easily claims is evil for everyone else?
Fees charged by attorneys used to be regulated by a fee scheduled published by the Ky. Bar Association. However in the l970’s consumer advocates sued bar associations all over the country for “price fixing” and as a result Bar monitored fees were found to be illegal.
It is not uncommon for many personal injury cases (and also other types of cases) to have fee contracts where they received 33% on settlement, 40% after trial or 50% after appeal. It is left up to the parties to negotiate these contingent fee contracts. The Bar can settle some fee disputes. Supreme Court rules require attorneys to have written contracts regarding their fees, but this rule is sometimes overlooked. In very difficult cases the contingent fee sometimes starts at 50%.
Perhaps the jury confronted with the effort by the Government prosecutors in trying to explain their case against the Fen Phen lawyers needed the full 64 pages of jury instructions to try to explain away the real numbers in this case.
What did the Court of Appeals say in 1969 about a 50% attorneys fee in a class action case?
In the Ky. case cited above the attorney asked for a 50% attorneys fee for his efforts in a class action case in behalf of 400 clients. The Court of Appeals in Shelton v. Simpson, 441 S.W.2d 421 (Ky., 1969), held:
“Jerry W. Nall, is an attorney at law and successfully represented the members of the Crab Orchard district in a class action….. His services effected a recovery for all members of the district…
(Nall’s clients)… agreed to pay him as an attorney’s fee for his services an amount equal to 50 percent of recovery. The trial court ignored this contract and attempted to allow Nall a fee equal to 25 percent of the amount of recovery, both as to those persons who signed the contingent fee contract with him and those who did not.
We reversed the trial court’s adjudication and directed that the contingent fee contract be enforced according to its terms against those clients who signed it; but as to those parties who did not enter into the contract, we held they were liable for their proportionate part of a reasonable fee by reason of the benefit which they secured from Mr. Nall’s successful representation. In our opinion on the second appeal we directed as follows:
‘We hold that those parties who did not enter into contract as to fee are, nevertheless, liable for a reasonable fee.
The question, What is a reasonable fee? being one that must first be determined by the trial court, the case is remanded with directions to fix a reasonable fee and direct that such noncontracting parties bear their proportionate part thereof.’
… The issue then is: Did Judge Simpson have merely a ministerial duty to perform or did he have a discretionary duty to perform?
In addition, the liability of noncontracting parties here is fixed by KRS 412.070. That statute vests the responsibility to determine reasonable compensation for the successful attorney in the trial court. This construction of the statute was approved Smith v. Graham, 274 Ky. 144, 118 S.W.2d 194.
It is our conclusion that the amount of a reasonable attorney’s fee for which the noncontracting members of the class are liable must be determined by the exercise of discretion by the trial court. It would not be in the interest of the orderly administration of justice for us to attempt to usurp that prerogative.
No discretion is beyond abuse, and if the trial judge does not act promptly to exercise his discretion and make a determination, the remedy of mandamus will lie to compel action by him. If his discretion is abused, the erroneous determination resulting therefrom is correctable by appeal.”
See a Comprehensive study of fees awarded in Class Action cases: