Kentucky Bar Ass'n v. Chesley
2013 Ky. LEXIS 44
Ky.2013Background
- Respondent Stanley M. Chesley admitted to Kentucky bar in 1978 and practiced with co-counsel on fen-phen settlements.
- Board charged Chesley with eight counts of professional misconduct under SCR 3.130; Board sought permanent disbarment and restitution.
- Guard v. American Home Products involved 431 clients with contingency fees; class action decertification and lease of funds.
- Chesley negotiated a 49% (about $20M) share in a $200M settlement for Guard clients, without notifying clients of fee terms.
- Arrangements created a charitable trust and off-the-record fee distributions, leading to misappropriation concerns and alleged deception.
- After inquiry, the Trial Commissioner found multiple SCR violations and recommended permanent disbarment and restitution; Board adopted that recommendation; Court imposed permanent disbarment without restitution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reasonableness of Chesley’s fee | Chesley’s 20M+ share excessive; contingent fees control overall reasonableness | Contingent-fee contracts and class-action settlements justify high total fees | Fee unreasonable; disbarment warranted |
| Contingent fee disclosure and computation (1.5(c)) | No honest written statement of outcome and remittance to clients | Clients were not directly represented by Chesley | Violation; improper written statement and disclosure |
| Fee division among multiple firms (1.5(e)) | Clients not informed or given opportunity to object to fee-sharing | Fee sharing contemplated by agreement among co-counsel | Violation; improper notice and consent to fee-splitting |
| Aggregate settlement and client consent (1.8(g)) | No consultation or consent from Guard clients regarding aggregate settlement | Settlement negotiated by lead counsel; Chesley participated as co-counsel | Violation; failure to obtain client consent |
| Candor to the tribunal and truthfulness (3.3(a), 8.1(a), 8.4(c)) | Respondent knowingly misrepresented and concealed pertinent facts | Advocacy of positions with some disagreement not dishonest | Violations proven; dishonesty and deception established |
Key Cases Cited
- Kentucky Bar Association v. Mills, 318 S.W.3d 89 (Ky.2010) (disbarment for financial misconduct in fen-phen actions)
- Cunningham v. Kentucky Bar Association, 266 S.W.3d 808 (Ky.2008) (disbarment for extensive ethical violations in similar matter)
- Gallion v. Kentucky Bar Association, 266 S.W.3d 802 (Ky.2008) (disbarment for misconduct in Guard case settlement)
- Helmers v. Kentucky Bar Association, 353 S.W.3d 599 (Ky.2011) (disbarment related to Guard case misconduct)
- Anderson v. Kentucky Bar Association, 262 S.W.3d 636 (Ky.2008) (ABA standards cited for sanction guidance)
- City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974) (Grinnell factors for attorney-fee awards in class actions)