Nationally known trial lawyer Stanley Chesley took the stand for the second day Thursday in the retrial of two Lexington-area lawyers accused of cheating their clients out of $94 million in a lawsuit settlement.
Chesley's testimony revisited a key dispute in the case: Whether a Boone County lawsuit against American Home Products was settled as a class-action or as a normal lawsuit. The procedures for settling a class-action suit are different. The most important difference for Shirley Cunningham Jr. and William Gallion is that the judge sets attorneys' fees in class-action suits.
Judges are not obligated to follow the pre-arranged fee agreements that lawyers have with clients, Chesley said.
"The ultimate decision is within the sound discretion of the judge," he said.
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The fee agreements that Cunningham, Gallion and Melbourne Mills Jr. — who was acquitted last year — had with 440 clients entitled them to about a third of the $200 million settlement. However, they received 49 percent, or $98 million.
Chesley's statement contradicted testimony from three lawyers who represented American Home Products. The Kentucky settlement was not made public — as is required for class-action cases — and the class was decertified after the settlement, the manufacturer's lawyers testified.
The federal government contends that Cunningham and Gallion — who are standing trial for charges of wire fraud and conspiracy — misled their clients and the trial judge in the case. But defense lawyers contend that the trial judge approved the attorney fees.
The defense has claimed that the lawyers were following the advice of Chesley, who is well known for his participation in several high-profile lawsuits.
Chesley testified Thursday that he was hired strictly to negotiate a settlement with American Home Products. He said he did not advise the lawyers how to distribute the settlement money, and that he had nothing to do with communicating with the clients.
But defense attorneys noted that Chesley had said in a deposition that he was the attorney representing the three lawyers.
Chesley received about $20.5 million for his work in the lawsuit. He has received immunity from the government in exchange for his testimony in this trial.
Defense lawyers asked Chesley whether he is going to return money to the clients.
He said that depends on the outcome of a pending lawsuit against him.
Defense lawyer O. Hale Almand, who represents Gallion, asked Chesley why he didn't return money when it became apparent that he received more money than called for in the three lawyers' fee agreements with the clients.
"This was an order by a judge," Chesley said of the fees. "I would have no reason to correct it."
Defense lawyers said they planned to call Chesley again when it's their to turn to make their case.