Kentucky Bar v. Stanley Chesley, Chesley's Brief On Appeal & Motion To Abate, 4/25/11

SUPREME COURT OF KENTUCKY
KBA FILE 13785 *fy"**%

%
KENTUCKY BAR ASSOCIATION COMPLAINANT
v.
STANLEY M. CHESLEY RESPONDENT
BRIEF FOR STANLEY M. CHESLEY

ON APPEAL TO THE BOARD OF GOVERNORS
Sheryl G. Snyder
Frost Brown Todd LLC
400 W. Market St., 32nd Fl.
Louisville, KY 40202
Phone: 502-589-5400
Fax: 502-581-1087
Scott C. Cox Mark L. Miller

Cox & Mazzoli, PLLC 600 W. Main Street, Suite 300
600 West Main Street, Suite 300 Louisville, KY 40202
Louisville, KY 40202 Phone: 502-589-6190
Phone: 502-589-6190 Fax: 502-584-1744
Fax: 502-584-1744
James M. Gary Frank Benton, IV

Weber & Rose, P.S.C. Benton, Benton & Luedeke
417 W. Main Street, Suite 400 528 Overton Street
Louisville, KY 40202 P.O. Box 72218
Phone: 502-589-2200 Newport, KY 40172
Fax: 502-589-3400 Phone: 859-291-4054
Fax: 859-291-4050
Counsel for Respondent, Stanley M. Chesley

TABLE OF CONTENTS
Summary of Argument , 4
Statement of the Case 7
ARGUMENT 27
I. Bar Counsel failed to carry its burden of proving that Mr. Chesley possessed
the full knowledge of all facts material to the criminal and imethical actions
of the other attorneys, and knowingly assented to those acts, Mr. Chesley is
therefore not guilty of ratification 27
A. There is no credible evidence showing how Mr. Chesley's alleged

appearance before Judge Bamberger at the February 2002 meeting
constituted a knowing ratification of G-C-M's fraud or his
participation in a "cover up." : 30
B. Bar Counsel failed to carry the burden of proving that Mr. Chesley's
alleged participation in other events constitutes "after the fact"
ratification under the applicable standard 37
1. Bar Counsel failed to carry its burden of proving that

Mr. Chesley contributed to the David Stuart settlement
with actual knowledge of G-C-M's fraud 38

Mr. Chesley approved documents sent to him by
Whitney Wallingford with actual knowledge that the
documents were factually inaccurate, and as part of a
cover-up of G-C-M's theft 39

Mr. Chesley's attendance at Judge Bamberger's JCC
hearing was with actual knowledge of G-C-M's fraud 40
II. The Rules of Professional Conduct expressly allow a division of labor

among counsel, Mr. Chesley appropriately relied upon other lawyers
to communicate with the Gitard plaintiffs and therefore did not
violate Rules 1.5(c), 1.5(e), and 1.8(g) 42
i
SUPREME COURT OF KENTUCKY 2, "^7
KBA FILE 13785 tot,
KENTUCKY BAR ASSOCIATION

M
COMPLAINANT
v.

Sheryl G. Snyder
Frost Brown Todd IXC
400 W. Market St, 32 nd FL
Phone: 502-589-5400
Fax: 502-581-1087
Scott C. Cox Mark L. Miller

Cox & Mazzoli, PLLC 600 W. Main Street, Suite 300
600 West Main Street, Suite 300 Louisville, KY 40202
Louisville, KY 40202 Phone: 502-589-6190
Phone: 502-589-6190 Fax: 502-584-1744
Fax: 502-584-1744
James M. Gary Frank Benton, IV

Weber & Rose, P.S.C. Benton, Benton & Luedeke
417 W. Main Street, Suite 400 528 Overton Street
Louisville, KY 40202 P.O. Box 72218
Phone: 502-589-2200 Newport, KY 40172
Fax: 502-589-3400 Phone: 859-291-4054
Fax: 859-291-4050
Counsel for Respondent, Stanley M. Chesley

TABLE OF CONTENTS
Summary of Argument , 4
Statement of the Case 7
ARGUMENT 27
I. Bar Counsel failed to carry its burden of proving that Mr. Chesley possessed
the full knowledge of all facts material to the criminal and unethical actions
of the other attorneys, and knowingly assented to those acts. Mr. Chesley is
therefore not guilty of ratification 27
A. There is no credible evidence showing how Mr. Chesley's alleged

appearance before Judge Bamberger at the February 2002 meeting
constituted a knowing ratification of G-C-M's fraud or his
participation in a "cover up." 30
B. Bar Counsel failed to carry the burden of proving that Mr. Chesley's
alleged participation in other events constitutes "after the fact"
ratification under the applicable standard 37

Mr. Chesley contributed to the David Stuart settlement
with actual knowledge of G-C-M's fraud... 38

Mr. Chesley approved documents sent to him by
Whitney Wallingford with actual knowledge that the
documents were factually inaccurate, and as part of a
cover-up of G-C-M's theft 39

Mr. Chesley's attendance at Judge Bamberger's JCC
hearing was with actual knowledge of G-C-M's fraud 40
II. The Rules of Professional Conduct expressly allow a division of labor

among counsel, Mr. Chesley appropriately relied upon other lawyers
to communicate with the Guard plaintiffs and therefore did not
violate Rules 1.5(c), 1.5(e), and 1.8(g) 42
i
Ill Bar Counsel failed to carry its burden of proving that Mr. Chesley
made the alleged misrepresentations to tribunals with the requisite
knowing falsity so as to find him guilty of misconduct under
Rules 3.3(a), 8.1(a), and 8.3(c) 46
A. Rule 3.3(a) and the alleged misrepresentations made to

Judge Bamberger during the course of the Guard action 46
B. Rule 8.1(a) and the alleged misrepresentations made in
response to questions posed by the KBA 52
C. Mr. Chesley did not violate Rule 8.3(c) 56
IV. Mr. Chesley's fee - which was only 10% of the settlement
amount —was not unreasonable, and therefore did not violate Rule 1.5(a) 57
V. Mr. Chesley cannot be ordered to disgorge $7,555,000.00 in a lawyer
discipline case 63
VI. The mitigating factors applicable in this case do not warrant permanent disbarment 65
CONCLUSION 69
LOULibrary0U8087.0571145 1055378vl
11
SUPREME COURT OF KENTUCKY
KBA FILE 13785
KENTUCKY BAR ASSOCIATION COMPLAINANT
v.

May it please the Court:
Every Kentucky lawyer is ashamed of the fen-phen scandal. We want to rid our ranks of
the malefactors. And everyone assumes that Stan Chesley was the mastermind because - among
Gallion, Cunningham and Mills - Mr. Chesley was the smartest guy in the room. The problem
with that simplistic approach is: Mr. Chesley was not in the room.
It is undisputed that Mr. Chesley had absolutely no role in the initial allocation of
settlement funds to the fen-phen class members by which GaUion-Cunningham-Mills ("G-C-M")
stole over $100 million dollars. G-C-M negotiated individual settlements with their own clients,
and then kept the rest of the settlement fund for themselves. Bar Counsel's expert witness
unequivocally admitted the fact that Chesley did not participate in conceiving or implementing
the process for allocating the settlement funds that enabled G-C-M's theft.1
Likewise, Mr. Chesley played no role, at all, in creating or operating the infamous
Kentucky Fund for Healthy Living (the "Fund"), which paid G-C-M, Judge Bamberger and
Mark Modlin handsomely. Mr. Chesley never received a single penny from the Fund. Judge
Bamberger received a formal legal opinion from Pierce Hamblin (not Mr. Chesley) that
Bamberger had authority to create the Fund with settlement monies. Whitney Walhngford
1
Tr. II, Erichson, p. 1185. "Tr. I" refers to testimony from the hearing conducted on November 15-16, 2009; "Tr.
II" refers to the testimony from the hearing conducted on September 13-24,2010.
served as tax and corporate counsel to the Fund. Mr. Chesley had zero involvement with
organizing or operating the Fund.
Bar Counsel finally admitted the indisputable fact that Mr. Chesley played no role in the
theft of settlement funds,2 and amended the Charge to allege that Mr. Chesley "ratified" G-C-
M's misconduct, after the fact.3 In her Brief to the Trial Commissioner, Bar Counsel explicitly
stated that "[tjhis case is primarily about [Mr. Chesley's] conduct in ratifying and assisting, after
the fact, the initial theft of funds from the clients."4 But the Trial Commissioner's Report does
not even discuss Mr. Chesley's legal argument concerning the legal elements of a ratification
charge, much less make findings sufficient to satisfy those elements. Instead, he finds as a fact
that Mr. Chesley knowingly participated in G-C-M's cover-up of their theft. But why would Mr.
Chesley cover-up a crime he concededly did not commit?
The Trial Commissioner's keyfindingsof fact are remarkable for the total absence of any
citation to the record. The reason for that omission is easily understood. Bar Counsel's evidence
of Mr. Chesley's alleged participation in key cover-up events consists exclusively of the
testimony of a defrocked judge - Mr. Bamberger. For example, Bamberger's testimony is the
only evidence that Mr. Chesley was even present at the February 6, 2002 meeting at which Bar
Counsel posits that Gallion (and Modlin) induced Bamberger to sign an order approving G-C-
M's legal fees. More importantly, Bamberger's testimony is also the only evidence of what
allegedly transpired at that meeting.5
Yet, according to Bar Counsel's brief seeking disbarment of Bamberger, he is a liar who
signed orders tendered to him by Gallion and Modlin that he knew were false when he signed
2
Tr. H, Opening Statement, pp. 713-14.
3
Motion to Amend Charge.
4
Post-Hearing Brief of Complainant ( il Bar's Post-Hearing Brief), p. 1, attached hereto as Ex. B.
5
See Report of Trial Commissioner, attached hereto as Ex. A, p. 18 (Rule 1.5(a), p. 23 (Rule 3.3(a)), p. 24 (Rule
8.1(a), p. 25 (Rule 5.1(c)(1)).
2
them.6 Bamberger's entire defense was to blame Mr. Chesley. Barnberger claimed to be a
novice who relied completely upon the experienced Mr. Chesley - when, in fact, Barnberger had
long been in cahoots with Gallion's "trial consultant," Mark Modlin, and later became a salaried
director of the Healthy Living Fund created by Gallion and Modlin with the stolen settlement
money. When he testified before the Judicial Conduct Commission in 2005, Barnberger stated
there had been no motions filed or hearings held regarding the fees and expenses.7 With 5
intervening years to concoct, refine and embellish his story, he now clearly recalls that Mr.
Chesley is the villain. While deemed a liar in his own disbarment case, the Trial Commissioner
deems Barnberger a truth-teller in Mr. Chesley's case.
Counsel for Mr. Chesley vigorously argued Bamberger's lack of credibility at great
length in Respondent's brief.8 But the Trial Commissioner's Report does not even mention the
credibility issue, much less resolve it. The Report does not even deign to admit that the findings
rest on Bamberger's testimony. In fact, the Report does not even cite any evidence for such key
findings of fact as what was said by whom at the February 6, 2002 meeting of the conspirators
with Barnberger. The Report just states the finding in conclusory fashion, as if it were received
wisdom. Simply stated, that is a tenuous basis for a recommendation of the professional death
penalty.
This void in the Report must also be juxtaposed against its ad hominem attacks on Mr.
Chesley - such as the Trial Commissioner's presumption that Mr. Chesley is "reasonably
conversant with fifth grade arithmetic"9 - that are totally inconsistent with the professional
solemnity that should attend a lawyer discipline case seeking permanent disbarment. We may all
6
See Post-Hearing Brief of Complainant, KBA File 13985, Ky, BarAss'n v. Barnberger, p. 22.
7
KBA2853.
8
See Respondent Stanley M. Chesley's Post-Hearing Brief ("Respondent's Post-Hearing Brief'), pp. 3, 9-10, 34,
attached hereto as Ex. C.
9
Report of Trial Commissioner, p. 10.
3
be ashamed of the fen-phen scandal, but that does not justify a rush to judgment- to yank the
license of a lawyer with an unblemished record after 50 years in the practice of law.
In the words of Mr. Justice Oliver Wendell Holmes: "The theory of our system is that the
conclusions to be reached in a case will be induced only by evidence and argument in open court,
and not by any outside influence, whether of private talk or public print." Patterson v. State of
Colorado ex rel Attorney General, 205 U.S. 454, 462 (1907). If the Board of Governors honors
Justice Holmes' admonition and bases its decision upon the record in this case, it will not accept
the Trial Commissioner's recommendation of the professional death penalty for "a giant of the
mass tort bar"10: Hon. Stanley M. Chesley.
SUMMARY OF ARGUMENT
It is undisputed that Mr. Chesley had absolutely no involvement in the first phase of the
allocation of the settlement funds to the Guard plaintiffs during which G-C-M stole Si00
million. Bar Counsel therefore amended the Charge to allege ratification under Rule 5.1(c)(1),
which provides that a lawyer is responsible for the unethical actions of another lawyer if, but
only if, "the lawyer orders, or with knowledge of specific conduct, ratifies the conduct involved."
And, while the drafters of that Rule did not define "ratifies," the term they chose has a well
settled meaning in the law of agency. A person ratifies an act of another person if- with full
knowledge of all the material facts about the act being ratified — the person manifests assent to
the act being deemed his own. RESTATEMENT (THIRD) OF AGENCY §4.01,4.06 (2006).
The Trial Commissioner's Report never even discusses the well settled legal prerequisites
for a ratification. The Report merely incants in conclusory fashion that Mr. Chesley ratified the
theft by G-C-M. See Report of Trial Commissioner, p. 25. Clearly, that is an insufficient basis
for a recommendation of permanent disbarment.

10
Tr.n 5 Erichson,p. 1188.
4
Instead of applying the actual legal standard set forth in Rule 5.1(c)(1), the Report
engages in inappropriate hyperbole, concluding that "Chesley became 'counsel in chief" of G-
C-M's effort to "'cover-up' their thievery", "at many points primarily orchestrating" the cover-
up. Report of Trial Commissioner, p. 26. But the Report does not contain a single citation to the
transcript or to any exhibit to support those hyperbolic conclusions - because there is no
evidence of Mr. Chesley "orchestrating" G-C-M's cover-up.
The Trial Commissioner uncritically accepted Bar Counsel's contention that the cover-up
was launched on February 6, 2002, in a "clandestine" meeting allegedly attended by Judge
Bamberger, Gallion, Modlin and Chesley. But there is absolutely no evidence in the record that
Mr. Chesley knew by February 6, 2002 that G-C-M had stolen $100 million from their clients.
Astoundingly, the Report tacitly concedes that truth, and speculates that "Chesley had to have
learned that the settlement fund had not been properly administered and distributed to the clients
when he learned that . . . that a second distribution would be required." Report of Trial
Commissioner, p. 25 (emphasis added).
But the Trial Commissioner's speculation is completely refuted by the uncontradicted
testimony of preeminent experts in ethics in class action settlements - Arthur Miller, Geoffrey
Hazard, Ken Feinberg - that second distributions are commonplace in class settlements, and
therefore the second distribution in Guard would not be a red flag to Mr. Chesley.
Moreover, a Zelig-like appearance at this alleged meeting would be inconsequential -
unless one believes the self-preserving, well-rehearsed testimony of former Judge Bamberger.
No one else testified about what allegedly occurred at that meeting. Gallion asserted his
privilege against self-mcrimination. Modlin denied even being present at the meeting. Chesley
did not recall such a meeting. Consequently, the recommendation of permanent disbarment rests
5
upon the discredited cover story of a former judge who is himself being disbarred for signing
orders tendered to him by Gallion that he knew - at the time he signed them - contained false
factual recitations.11
The Report also recommends an unprecedented restitution award of $7,550,000.00. But
SCR 3.380 does not authorize restitution in a lawyer discipline case, much less restitution to a
class of almost 500 claimants. It authorizes only private and public reprimands, suspension and
disbarment.
Moreover, to permit restitution in a lawyer discipline case would deprive the lawyer of
his constitutional right to a jury trial. In re Ackerman, 330 N.E.2d 322, 323 (Ind. 1975). The
client's remedy should be civil litigation. Id.
In fact, there is civil litigation pending against Mr. Chesiey by the plaintiffs in the Guard
case. Significantly, the Court of Appeals recently affirmed the denial of summary judgment
against Mr. Chesiey in that case, demonstrating that there is at least a genuine issue of material
fact whether Mr. Chesiey owes any money to those claimants. Cunningham v. Abbott, 2011 WL
336459 (Ky. App. Feb. 4,2011).
The Trial Commissioner nevertheless recommends that Mr. Chesiey pay $7,550,000.00
"either through the auspices of the Abbott case, should the clients prevail, or some other means
designed by the [Supreme] Court." Report of Trial Commissioner, p. 29. The Board of
Governors should not endorse that cavalier disposition of such a significant question of law.
The recommendation of restitution is also wrong because the conclusion that Mr.
Chesley's fee was unethically excessive is wrong. Mr. Chesley's fee amounted only to 10% of
the total settlement amount. Lawyers in Kentucky routinely receive 30% to 40% of settlement
11
There are other alleged infractions of the Rules which are discussed in Arguments H and in, but which are not
included in this Summary of Argument because, absent ratification, they could not support a recommendation of
permanent disbarment.
6
proceeds in legal fees. The fact that G-C-M stole an excessive amount from the class does not
render Mr. Chesley's 10% fee unethically excessive under Rule 1.5(a).
Again, the Trial Commissioner did not even mention, much less decide, Mr. Chesley's
legal argument. Instead, again, he uncritically accepted Bar Counsel's argument that Mr.
Chesley was limited to his contractual percentage of G-C-M's contractual percentage in then-
individual client agreements. While that might be an argument the plaintiffs could make in the
Abbott case, this is a lawyer discipline case, not a breach of contract case. A 10% fee does not
contravene Rule 1.5(a).
In sum, the Trial Commissioner seems to have been unable to shed the prejudgment of
Mr. Chesley that is commonplace among members of the Bar, Consequently, the Trial
Commissioner rendered a Report that is devoid of any citation to the transcript or otherwise to
the record, and which uncritically endorsed Bar Counsel's Brief, often parroting large passages
almost word-for-word, despite the fact that Bar Counsel's Brief also failed to cite any evidence
for many of its overwrought contentions. The Board of Governors should exercise the
independence and discretion inherent in its de novo standard of review, decline to accept the
flawed Report, and make its ownfindingsof fact and conclusions of law.
STATEMENT OF THE CASE
The issues in this disciplinary proceeding all concern the degree to which Mr. Chesley
had knowledge of, or participated in, the scandal by which G-C-M stole $ 100 million of the $200
million fen-phen settlement. The fen-phen scandal had three major phases: (1) the initial
distribution of the funds during the summer and fall of 2001 via individual settlements with
clients conducted by G-C-M and their respective employees; (2) the establishment of the Fund in
July 2002, with the subsequent transfer of the remaining settlement funds to the Fund; and (3)
7
the attempt to cover up G-C-M's theft by making a second distribution of funds in 2002. Mr.
Chesley played no part in these major events which constitute the actual theft by G-C-M, yet the
Trial Commissioner accepted the KBA's unsupported assertions that Mr. Chesley was a driving
force behind the fen-phen scandal without considering the clear evidence to the contrary.
Mr. Chesley's involvement in the Kentucky fen-phen litigation began on July 30, 1999,
when he filed an action (limited to medical monitoring claims) known as Courtney in the Boone
Circuit Court on behalf of three plaintiffs who had taken fen-phen.12 Because a similar action -
the Guard action — had already been filed by Gallion on behalf of claimants who had opted out
of the national MDL action and had been certified as a class action in the same court, "the
Courtney and Guard actions were consolidated in December 1999.33 Consolidation of the
actions, however, did not create an attorney-client relationship between Mr. Chesley and the
clients of G-C-M.14
It was ultimately decided that Mr. Chesley's Courtney plaintiffs did not have enough
evidence of injury to justify their opting out of the national settlement, and they returned to the
federal MDL action where they participated in the national settlement.15 This left Mr. Chesley
with no clients in the consolidated action.
Mr. Chesley, who has been practicing law in Ohio and Kentucky for fifty years and is
nationally renowned in the resolution of class actions and mass torts,16 was then engaged by G-
C-M for the limited purpose of negotiating a settlement with American Home Products (AHP) on
12
Tr. H, Chesley, pp. 740-41; KBA 100.
13
KBA 105; Tr. H, Chesley, pp. 746^17.
14
Consolidation "does not merge the suits into a single cause . . . or males those who arc parties in one suit parties in
another." Johnson v. Manhattan Ry. Co., 289 U.S. 479, 496-97 (1933); see also Kraft, Inc. v. Local Union 337,
Teamsters, Chauffeurs, Helpers and Taxicab Drivers, 683 F.2d 131, 133 (6th Cir. 1982) (quoting Johnson, 289 U.S.
at 496-97).
15
KBA 105; Tr. II, Chesley, pp. 746-47.
16
Tr.II,Feinberg,p. 1092.
8
their behalf.17 He was specifically engaged to act only as "lead counsel in any negotiations."
Gallion remained lead counsel in the case, with Mills and Cunningham expressly assuming the
responsibility for communicating with the clients because they had the engagement agreements
with the clients. Gallion would try the case if it did not settle.18 Mr. Chesley never filed an entry
of appearance on behalf of the Guard plaintiffs.
The settlement negotiations in Guard took place against the backdrop of a broader,
nationwide effort by AHP to settle with the claimants who had opted out of the MDL class
settlement. An unusually large number of claimants had opted out of the national fen-phen
settlement, many of whom were individually represented by advertising lawyers like Mills and
Cunningham. AHP engaged Jack Vardaman of Williams & Connolly to negotiate directly with
each of those attorneys with viable state court claims to settle their respective groups of opt-out
plaintiffs for a single lump sum, which plaintiffs' counsel would undertake to distribute among
their clients.19 G-C-M's clients represented a certified class that included 431 of the
approximately 500 Kentucky plaintiffs who had opted out of the national MDL settlement.
Mr. Chesley engaged in a great deal of pre-mediation settlement discussions with
Vardaman in which the two reached a mutual understanding on a ballpark figure for settlement,
leading Vardaman to believe that the mediation would be over in 30 minutes. However, when
the mediation began, Gallion took a much different tack than Vardaman expected, and the
mediation ultimately stretched over two days.21 Near the end of the second day, Helene
Madonick, also settlement counsel for AHP, and Gallion met separately at the request of
17
Tr. n , Chesley, pp. 762-64.
13
KBA 147,148. The original agreement among the lawyers provided that G-C-M would pay Mr. Chesley 27% of
their fees if the case settled, and 15% if the matter proceeded to trial. KBA 147. Eventually, this agreement expired
and was replaced by a different agreement by which G-C-M contracted to pay Mr. Chesley 2 1 % of their fees if he
was successful in settling the case. KBA 148, attached hereto as Ex. D.
19
Vardaman Depo., pp. 13,17, 98.
20
Id. at 32, 36,103-04.
21
Id. at 36.
9
mediator Pierce Hamblin, and soon "announced" that they had arrived at a $200 million
settlement, which was exactly the number that Mr. Chesley and Vardaman had reached prior to
the two-day mediation.22
The responsibilities of counsel with respect to the settlement were formalized and set
forth in the Settlement Agreement.23 The Settlement Agreement specifically identified G-C-M
as the "Settling Attorneys" and required them to allocate tbe settlement amount among the
Settling Claimants, provide appropriate medical records to AHP, obtain releases and dismissals
from the Settling Claimants, and take all other necessary steps to effectuate the settlement.24 Mr.
Chesley was not identified as either a "Settling Attorney" or a signatory to the Settlement
Agreement - because he had not been engaged by any of the clients.25
A key component of Vardaman's national strategy for settling with groups of opt-out
plaintiffs was to insist upon total confidentiahty of the total amount of each such settlement.
AHP was concerned that disclosure of tbe size of the settlements could disrupt thefinalizingof
the national settlement, and that publicity could cause attorneys with the remaining inventories to
holdout for an even larger settlement.27 Accordingly, Vardaman insisted in Guard, as in all of
the settlements he negotiated, on confidentiality as a strict condition of settlement.28 Thus, a
condition precedent to the settlement was for the Guard class to be decertified, to eliminate the
need for public notice of the settlement.29
Vardaman Depo., p. 104; Madonick Depo., pp. 40-45

23
KBA 6, attached hereto as Ex. E.
24
KBA 6; Tr. II, Chesley, p. 972.
25
KBA 6; Vardaman Depo., p. 48.
26
Vardaman Depo., pp. 45-46.
21
Id.
2S
Id.
29
Bar Counsel expressly conceded that decertification without notice were "conditions precedent" that were insisted
upon by counsel for AHP, Bar's Post-Hearing Brief^ p. 16.
10
The Guard case had been certified as a class action, but no notice of class certification
had ever been sent to the Guard class members because of uncertainty about whether and how
such notice should be coordinated with notice to the national MDL class.
Shortly thereafter, on May 9, 2001, counsel for AHP, the Guard attorneys, and Mr.
Chesley appeared before Judge Bamberger to announce the settlement.31 Counsel for AHP, Mr.
Schaefer, explained to Judge Bamberger why it was appropriate to decertify the class, including
the fact that notice of the certification of the Guard class had never been sent to the class
members, and that each member of the Guard class had already received notice of the national
MDL class certification and had opted out of the national settlement.32 Judge Bamberger entered
the Order as drafted and tendered by AHP, vacating his previous order certifying the class and
dismissed the action with prejudice as to the Settling Claimants and without prejudice to the
claims of other unknown, unnamed class members.33 The negotiation and settlement task for
which Mr. Chesley had been engaged was now complete.
First phase of the fen-phen scandal: the "initial distribution".
Following approval of the aggregate settlement amount, the next step was for G-C-M to
work with their individual clients to determine the amount to be distributed to each plaintiff and
execute individual settlement amounts. This is known as the "initial distribution." It is during
this chapter of the saga that the initial theft was carried out by G-C-M and members of then-
respective staffs. It is undisputed that Mr. Chesley played no part in that chapter. He had no
individual clients with any claim to any portion of the Guard settlement fund. Mr. Chesley was
30
KBA 74; Vardaraan Depo., pp. 41-42.
31
KBA 120.
32
Id.
33
KBA 10.
11
never asked by G-C-M for any advice, and was never given any information, about the initial
distribution. His role was completed with consummation of the settlement negotiations.
The Settlement Agreement provided that AHP would release settlement funds on a
rolling basis as the Settling Attorneys provided AHP with executed releases from the claimants.
Gallion concocted a scheme that required his associate, David Helmers, together with Mills'
employee Rebecca Phipps and Cunningham's employee Sandy Rios, to meet with clients,
withhold from them the total value of the settlement, falsely tell them that the amount of their
settlement had been predetermined through negotiations with AHP, and to falsely tell those who
raised an objection that an attorney would go back to AHP to renegotiate.35 In fact, the extent to
which Gallion controlled this scheme is evidenced by the fact that Gallion and Cunningham even
kept Mills (who did not attend the mediation) out of the loop, lying to him about the amount of
the settlement and telling him it was only $150 million.36
Ms. Phipps testified that Gallion came to her after the settlement was reached and
instructed her to begin meeting with the individual claimants and "try to settle the cases as low as
we could."37 Helmers was to handle the more seriously injured plaintiffs.38 If a claimant
objected to the settlement amount they were offered, Phipps would meet with Helmers and
decide what to do. 39 Eventually, she and Rios were allowed to simply raise the offer to an
objecting claimant.
Once a threshold number of releases was obtained in this manner, Helmers hand-
delivered the releases to AHP, who then released funds to Cunningham's Bank One escrow
34
KBA 6.
35
Tr. H, Phipps, pp. 53-54; Tr. H, Helmers, p. 298.
36
Tr. II, Mills, pp. 130, 133-34, 164-65.
37
Tr. H, Phipps, pp. 53-55.
38
Id. at 55.
39
Id. at 56, 59-60.
40
Id.
12
account. AHP ultimately made five separate deposits into this escrow account, from which the
settlement funds were distributed to the claimants.42
The last payments to claimants in this "first distribution" were made in November 20G1.43
This concluded the first major phase of the fen-phen scandal.
It is undisputed that Mr. Chesley had absolutely no involvement in the scheme developed
by Gallion to meet with clients and obtain releases, a vital fact which received absolutely no
discussion by the Trial Commissioner in his Report.44 Ms. Phipps specifically testified that she
had not even met Mr. Chesley when Gallion instructed her on how to conduct the scheme.45
Similarly, Helmers testified that Mr. Chesley had no role in the allocation of money, meeting
with clients, or raising offers to objecting clients.46 Every single claimant who testified in this
proceeding stated that they were not even aware of Mr. Chesley's identity.47 Mr. Chesley had no
association with or control over the escrow account from which the distributions were made.
In contrast to the scheme concocted by Gallion, Mr. Chesley has administered class
action settlements in high stakes cases, such as Doe v. Roman Catholic Diocese ofCovington*9
in which Mr. Chesley and his firm were lead class counsel. The settlement in Doe, a sexual
abuse action against the Diocese, made approximately $90 million available to the class.50 Upon
41
Tr. H, Helmers, pp. 384-86.
42
KBA 123.
43
Id.
44
Tr. H, Hamm, pp. 203-206; Tr. II, Phipps, pp. 54, 59, 103-104, 112-114; Tr. II, Mills, pp. 161-62; Tr. II, Helmers,
pp. 382-384.
45
Tr. 0, Phipps, pp. 54.
46
Tr. H, Helmers, pp. 382-84.
47
Tr. I, Curtis, pp. 83-87; Henderson, pp. 129-32; McGirr, pp. 167-70; Carman-Staton, pp. 201-02; Faimin, pp. 242-
44; Centers, p. 279; Ford, pp. 308-09; Turner, pp. 345-46; Peace, pp. 389-92; Miller, pp. 433-34; Stephenson, pp.
471-72; Bowman, p. 517; Hoover, p. 546; Coots, pp. 586-88; Baldwin, p. 630; McMurtry, pp. 662-63.
48
Tr. I, Hamm, pp. 1006-1008; Tr. H, Helmers, pp. 387-88.
49
Boone Circuit Court, Civil Action No. 03-CI-00181.
so
Doe v. Roman Catholic Diocese of Covington, 2006 WL 250694, *4 (Ky. Cir. C t Jan. 31, 2006) (Order
Approving Settlement), attached hereto as Ex. F. Small percentages of the fund were initially set aside to pay both
the counseling fees for victims of the sexual abuse, including non-class members, and the claims of putative class
members who did not participate in the settlement Id. at *3. A percentage of the fund was also set aside for those
13
Mr. Chesley's motion, Senior Judge Potter appointed two Special Masters, a retired federal judge
and a nationally-known businessman, the Chairman of Scripps, Inc. Using an established four-
tier schedule that placed each class member into one of four categories based solely upon the
nature and severity of the abuse endured,51 the Masters allocated the fund among the class
members.52 If a class member wished to challenge their settlement amount under the schedule,
he or she was permitted to appeal to an Appeals Special Master, who was also a retired federal
judge.
The Diocese had limited settlement funds available, contributing $40 million in cash or
property to the fund while its insurance carrier contributed another $44 million.53 As such, if the
total amount payable under the schedule exceeded the amount available, all claims were to be
"ratcheted down" on a pro rata basis.54 If, however, there were funds remaining, the funds would
be returned to the Diocese or its insurance carrier.55
The Doe settlement shows that Mr. Chesley and his firm, with their wealth of class action
and mass tort experience, know how to properly conduct a class action settlement allocation
when it is their responsibility to do so. Mr. Chesley had no responsibility to conduct the Guard
settlement allocation because he was engaged only for the specific task of negotiating the
settlement.
Second phase of the fen-phen scandal: the creation of the Kentucky Fund.
The second major phase of the fen-phen scandal was the creation of the Kentucky
Healthy Living Fund, a non-profit corporation funded by $20,953,693.20 of the undistributed
with extraordinary injuries entitling them to additional compensation. Id. The remaining seventy-two percent of the
fund was distributed to class members.
51
Id.
52
Id.
53
Id.
5
*Id. at*4.
55
Id.
14
settlement funds under the auspices of a legal doctrine known as cy pres, which allows for
unclaimed funds held in trust to be put toward charitable purposes under certain conditions. The
Fund was created and operated by Gallion, Cunningham, Mills, Bamberger, and Bamberger's
close friend and investment partner, Mark Modlin, the "trial consultant" hired by Gallion. Mr,
Chesley had never met Modlin prior to the Guard case.
Unlike Gallion, Cunningham, Modlin and Bamberger, Mr. Chesley did not receive one
cent from the Fund. There is no evidence, at all, that Mr. Chesley had any involvement in the
creation of the Fund or obtaining Judge Bamberger's approval to transfer the remainder of the
settlement funds to that Fund. There is no evidence that Mr. Chesley had any knowledge of the
amount of money that Gallion and Cunningham were transferring to that Fund, with Judge
Bamberger's approval. However, without any citation to the record, Bar Counsel painted Mr.
Chesley as the mastermind behind the Funds' creation simply because one unreliable witness
(Bamberger) claimed that Mr. Chesley allegedly mentioned the concept of the cypres doctrine to
Judge Bamberger - and the Trial Commissioner accepted that allegation without question, and
also without any citation to the record. Moreover, even assuming arguendo that Mr. Chesley
mentioned the well accepted cy pres doctrine, that cannot make him responsible for the actions
of G-C-M - and their legal advisors, Pierce Hamblin and Whitney Wallingford - creating and
operating the Fund without any involvement of Mr. Chesley, at all.
The genesis of the Fund apparently dates to February 2002, when Melbourne Mills
learned that Gallion and Cunningham had lied to him about the total amount of the settlement.56
Mills confi'onted Gallion, who did not deny the lie, but assured Mills that there were remaining
funds to be used in a second distribution.57
56
Tr. II, Mills, pp. 133-34.
51
Id. at 173-75.
15
The Trial Commissioner takes it as fact, without citing to the record for support, that
after this confrontation. Mr. Chesley, Gallion, Cunningham, and Modlin "paid a visit to Judge
Bamberger in the jury room of the Boone Circuit Courthouse" on February 6, 2002, where the
CO
disposition of the undistributed funds was allegedly discussed.
Only one person provided any testimony regarding what was said at that meeting and the
role Mr. Chesley allegedly played. Gallion and Cunningham asserted their privilege and Modlin
denied even being at the meeting. So, the Trial Commissioner can only be relying on Judge
Bamberger's testimony in boldly finding "by a preponderance of evidence [Mr. Chesley] did
attend this meeting and played a leading role in the presentation made to Judge Bamberger on
that evening" by "argu[ing] the appropriateness of an application of the cy pres doctrine to
dispose of 'extra' funds remaining" and making "an argument for an order approving attorneys'
fees" and "cit[ing] factors from a case called Grinnell v. Detroit as governing the issue."59
Exalting Chesley from being present to playing the "leading role," and finding that Mr. Chesley
made "an argument" for approving G-C-M,'s legal fees - without admitting that he is relying
solely upon Judge Bamberger's questionable testimony, and completing failing to address Mr.
Chesley's extensive argument concerning Bamberger's lack of credibility - is a quantum leap in
logic on which to base a recommendation of permanent disbarment.
As Bamberger has developed his story over the years, he has alleged that on February 6,
2002, he attended a meeting with Gallion, Cunningham, and Modlin in the courthouse's jury
room at which they briefly discussed the cy pres doctrine and the Grinnell factors for awarding

Id. at 12 (emphasis added).
16
attorneys' fees. Judge Bamberger testified that Mr. Chesley attended this meeting as well, but
Mr. Chesley has no recollection of doing so and Modlin strongly denies being there at all.
While Mr. Chesley's alleged discussion of the application of the cy pres doctrine and the
Grinnell factors is the keystone of both the KBA's case against him and the Trial
Commissioner's findings, none of the assertions about his involvement at the alleged February 6
meeting are backed by believable evidence. Judge Bamberger, himself a subject of disciplinary
proceedings, has an obvious incentive to testify that his rulings as to the cy pres doctrine and
attorneys' fees were the results of an argument presented by one of the nation's most preeminent
mass tort lawyers. Mr. Gallion and Mr. Cunningham did not testify in this action due to their
ongoing criminal appeals. Mark Modlin denied being present at the February 6 meeting, and
]
admitted that his testimony was unreliable due to his pain medications.
Contrary to the Trial Commissioner's finding of fact that Mr. Chesley "played a leading
role" in advocating the application of the cy pres doctrine, Bamberger never testified that Mr.
Chesley spoke to him about the actual creation of a charitable trust with the remaining funds,
stating only that Mr. Chesley discussed the cy pres "principle in general."62 Indeed, the
Bamberger Order that the KBA claims was signed at the February 6 meeting - but which is dated
February 15, 2002 and filed on June 6, 2002 - says absolutely nothing about cy pres or the
creation of the Fund with excess settlement funds.63 The Trial Commissioner just lifted his
finding from Bar Counsel's brief without any citation to the record.
In fact, the Kentucky Fund was not created until July 31,2002, by an Order issued after a
June 27a 2002 hearing at which only Gallion, Cunningham, Modlin, and an investment adviser
60
Tr. II, Bamberger, pp. 454-55, attached hereto as Ex. G; Tr. II, Modlin, pp. 605-08; Tr. II, Chesley, p. 691.
61
Tr. II, Modlin, pp. 641-42.
62
Tr. II, Bamberger, p. 458.
63
See KBA 81, attached hereto as Ex. H.
17
named Tay Robinson appeared. It is undisputed that Mr. Chesley was not present at this
hearing.65 At the June 27 hearing, Gallion asked Bamberger for permission to use the residual
6
funds for cypres purposes.
According to Judge Bamberger, sometime after Mr. Chesley's alleged discussion of the
cy pres doctrine, Gallion suggested to him that they arrange for Pierce Hamblin (the mediator at
the Guard mediation) to provide a formal opinion letter setting forth the reasons why the cy pres
doctrine authorized Judge Bamberger to approve the creation and funding of the Fund. Mr.
Hamblin sent the memo to Judge Bamberger before the June 27 hearing, and at that hearing
Judge Bamberger discussed only Mr. Hamblin's legal research and opinion in announcing his
decision that the creation of a cy pres trust was the appropriate way to handle the remaining
funds.68
However, the Trial Commissioner never once mentioned the Hamblin memo. Instead, he
simply accepted Bar Counsel's argument that Mr. Chesley had to be the mastermind behind the
cypres fund.
The evidence demonstrates that the Kentucky Fund was created as a way for Gallion,
Cunningham, and Mills to continue taking the settlement funds for themselves while also taking
care of Bamberger and their cohort Modlin. Tellingly, the transcript of the June 27 hearing
reveals that Bamberger simply announced that Gallion, Cunningham, and Modlin would be the
trustees, without ever being asked during the hearing to appoint them as such.69 Mills was later
64
See KBA 245, attached hereto as Ex. I.
65
See Bar's Post-Hearing Brief, pp. 38-39.
66
KBA 245, p. 6.
67
Tr. n , Bamberger, p. 506.
6g
KBA 245, pp. 4-5. Specifically, Judge Bamberger stated at this bearing: "Ah, I read the research that Pierce
Hamelin [sic] ah, did and forwarded to the court relative to the cy pres trust, and I'm certainly comfortable that's an
appropriate handling of the res.. .residual funds."
69
Id
18
appointed a director at Gallion's request. Further, the Fund engaged attorney Whitney
Wallingford, who had previously served as counsel to Gallion, Cunningham, and Mills, to serve
as counsel to the Fund.71
A discussion of the creation of the Kentucky Fund also necessitates a look into the
appointment of Modlin, a trial consultant hired solely to assist with bringing the Guard matter to
trial, as President of the Fund. Modlin had longstanding close relationships with both Gallion
and Bamberger, but had never met or worked with Mr. Chesley prior to the Guard case.
Modlin had been working with Gallion on his cases with the University of Kentucky and
Chandler Medical Center for over twenty years.73 It was Gallion who brought Modlin into the
Guard case, promising him $2 million in fees if they achieved a good recovery.74
Modlin's close relationship with Bamberger stretched back to the 1980s. Bamberger
was instrumental in arranging care for Modlin after he was involved in a serious accident, and
the two remained friends through the fen-phen period.76 In fact, shortly after the Guard
settlement, Modlin and Bamberger became investment partners, purchasing property in Gallatin
County and a home in Florida.77
As a trial consultant for a case that was previously settled in May 2001, Modlin had little
reason to appear at a June 27, 2002 hearing where the Fund was to be established other than
perhaps as part of some type of agreement with Gallion and Bamberger.

Tr. I, Wallingford, p. 1064-65.
Tr.II, Modlin, p. 581.
Id. at 573.
Id. at 582. After settlement, Modlin was paid over $2 million. Id. at 588.
Id. at 569.
Id. at 570-71.
Id. at 623-24.
19
hi December 2003, Bamberger issued an order relinquishing continuing jurisdiction over
the Fund. He then retired from the bench and was appointed a director of the Fund. Each of
the directors received $5,000 per month as a salary with an additional $350 for expenses.79
Modlin, as the President, received an additional $1,500 per month in salary.80 Despite being
formed in 2002, the Fund didn't receive any money until 2003 and did not actually make its first
distribution until September 2004, when it began issuing grants (some of $100,000 or more) to
organizations such as Baptist Life Communities, the Ludlow Independent Schools and Fire
Department, the Crittenden County Board of Education, and various departments of the
University of Kentucky and University of Louisville.
There is no evidence that Mr. Chesley played even the smallest part in the Fund's
creation, and it is undisputed that he never received a cent from the Fund.
Third phase of the fen-phen scandal: the "second distribution".
The third major phase of G-C-M's theft focused on the use of a "second distribution" of
funds to individual plaintiffs as a way to cover-up the theft. According to Bar Counsel, this third
phase also had its alleged genesis in the February 6, 2002 meeting. According to the KBA, that
meeting with Judge Bamberger resulted in an Order, dated February 15, 2002 but not tiled until
June 6, 2002, approving the manner in which the settlement proceeds had been handled to date,
the attorneys' fees and expenses paid to date, and a second distribution to claimants.82 This
KBA 139. Interestingly, these minutes of the June 25, 2004 meeting of the Fund's Directors state that Whitney
Wallingford had researched the matter of Judge Bamberger's appointment and decided it would not be a conflict of
interest for him to be appointed to the Board.
79
T r . n , Modlin, p. 628.
80
Id.
81
Tr. I, Wallingford, pp. 1114-1121; KBA 140.
82
See KBA SI.
20
Order did not, however, approve any identified amount of attorneys' fees or expenses, nor did it
identify the amount of additional funds remaining for a second distribution.
Mr. Chesley has never denied that he knew the Settlement Agreement would probably
require the Settling Attorneys to hold back some hinds to ensure the settlement fund was not
exhausted before all the individual claims were settled, which logically could result in a second
distribution at some point in time. Prof. Hazard gave expert testimony that second distributions
are common in litigations like Guard, and the fact that a second distribution was a possibility
would not have been a "red flag" to Mr. Chesley or anyone in his firm.
There is no credible evidence Mr. Chesley knew anything about the amount of the
settlement that had been held back in the initial distribution, or about G-C-M's efforts to use the
second distribution to cover up their initial theft. While Helmers testified that Mr. Chesley
contacted him after this Order was issued, asking Helmers to assist in a second distribution, Mr.
Chesley denies doing so. While Bar Counsel offers Helmers' testimony in this proceeding as
truthful, in the proceeding in which Helmers is being disbarred Bar Counsel characterizes
Helmers as a liar trying to blame others for his own misconduct.85 Bar Counsel called Mr.
Helmers' testimony in his self-defense "well rehearsed and carefully crafted to repeatedly
provide the caveat that virtually all of the actions he took in this case were at the specific
direction of a senior attorney, usually Gallion or Chesley." He is the only witness who suggests
even peripheral involvement by Mr. Chesley in the second distribution. Like Bamberger,
Helmers has attempted to justify his action by claiming reliance on the Mr. Chesley, rather than
84
Tr. II, Hazard, pp. 1302-05; Stilz Depo., pp. 21-23.
85
See Bar's Brief, KBA File 9342, Ky. Bar Ass'n v, Helmers, pp. 42-44, 69. Bar Counsel called Mr. Helmers'
conduct "reflective of a defective conscience to an extreme rarely observed in attorney disciplinary cases."
21
taking responsibility for any of his own actions, and even Helmers did not testify that Mr.
Chesley was involved in implementing the second distribution.
The Trial Commissioner nevertheless states - again without any citation to the record -
that Helmers "received a letter from Respondent Chesley's office providing him with a
document to show to each client and have them sign" for implementation of the second
distribution. Report of Trial Commissioner, p. 13 (emphasis added). This is yet another
sentence in the Report lifted directly from Bar Counsel's brief. Bar Counsel's careful choice of
words - that the letter came from Mr. Chesley's office, not from Mr. Chesley personally - was
obviously intended to imply that the letter was drafted in Mr. Chesley's office and that Mr.
Chesley was aware of that fact. But both those inferences are false. In truth, an experienced
attorney in his office had honored Helmers' request that she review and comment upon the letter
drafted by Mr. Helmers, and she did not inform Mr. Chesley of those events.
The Trial Commissioner completely ignores the uncontradicted testimony of Fay Stilz,
the attorney in Mr. Chesley's office with 30 years experience, who testified that Helmers
contacted her and asked her to assist him with a letter to the claimants regarding a second
distribution because of her experience with class action litigation and settlement.87 Like the
other attorneys in the firm, Ms. Stilz had not worked on the Guard action, and knew only that
Mr. Chesley had been retained to negotiate a settlement with AHP on behalf of the other lawyers
and that he had received a substantial attorney's fee for his contribution.88
According to Ms. Stilz, Helmers provided her a letter to edit which mentioned a second
distribution and the creation of a charitable trust, neither of which raised any red flags to her
Bar's Brief, KBAFile 9342, Ky. BarAss'n v. Helmers, p. 44.

Stilz Depo., pp. 15-18,50.
Id. ai 24, 45, 52.
22
because both are common in class action litigation. She did not spend much time editing the
document nor did she make any final approval of the letter.90 Ms. Stilz did not inform Mr.
Chesley when Helmers contacted her and she edited the letter as a favor to Helmers without Mr.
Chesley's knowledge or direction.91
Further, Rebecca Phipps, Melbourne Mills' employee who worked on both distributions,
specifically stated that she has no recollection of speaking to Mr. Chesley about the second
distribution, and that her instructions on the second distribution came only from Helmers, Mills,
and Gallion.92 Thus, there is no evidence that Mr. Chesley was involved in any way in the third
andfinalphase of the theft.
The United States Attorney has agreed that Mr. Chesley played no part in the first, second,
or third phases of the fen-phen scandal.
In June 2007, Gallion, Cunningham, and Mills were indicted by a federal grand jury for
their roles in the fen-phen theft. Mr. Chesley, however, was never a target of the federal
investigation because the United States knew that he had no involvement in the theft. During the
course of Gallion and Cunningham's second criminal trial, United States District Court Judge
Danny C. Reeves explicitly stated that he believed the evidence shows that Mr. Chesley was
"duped" by Gallion and Cunningham. Specifically, Judge Reeves stated:
. . . In relation to Mr. Chesley's testimony, there's no indication - first of all, he

wasn't advised of how these clients or how much fees were actually being paid to
the clients, his agreement with the attorneys was to split and to obtain a
percentage of the total fees. There's no indication, at this point, that Mr. Chesley
was aware of what the defendants were up to in terms of taking fees in the case.93
89
/i.at2I-24.
90
Id. at 28, 89
91
Id. at 18.
92
Tr. n , Phipps, pp. 83-85.
93
Transcript in United States v. Gallion, No. 2:07-CR~Q039-DCR (Hon. Danny C. Reeves, DJ.) Relevant portions
of this transcript are filed in the record as Ex. A to Respondent's Second Renewed Motion lo Stay Proceedings.
23
Further, the United States Attorney has long-stated that Mr. Chesley played no part in G-
C-M's scheme, stating at the second trial that it had never identified Mr. Chesley as a co-
conspirator in response to Gallion's attempt to characterize Mr. Chesley as an unindicted co-
conspirator so that he could testify as to matters that could only be admitted pursuant to
exceptions to the hearsay rule.94 In its most recent Brief filed in Gallion's and Cunningham's
appeals of their criminal convictions to the Sixth Circuit, the United States affirmatively asserted
that Mr. Chesley did not participate in any of the activities for which Gallion and Cunningham
were convicted, stating:
. . . the evidence showed that he did not advise the defendants to engage in their
misconduct. Chesley did not advise Gallion and Cunningham regarding what to
tell their clients, nor did he tell them to withhold from their clients the amount of
settlement, the number of others taking from the settlement, and the 95 per cent
agreement provision. He did not advise them regarding how to determine the
individual settlement amounts, or to conceal the terms of the side letter. He did not
advise them regarding how to calculate the attorneys' fees or what type of accounts
to use in handling the funds, nor did he tell them they should take their
contingency fees off the total settlement amount and then go back to the court and
ask for more. He did not tell them they could put the money in out-of-state
accounts without their clients' consent. And he did not tell them they could use
the money in the escrow account to buy vehicles and pay their employees . . . ,95
The United States Attorney's affirmative assertions make it clear that Mr. Chesley did not
participate in any activities .for which he would have been criminally charged and did not do any
of the things for which Gallion and Cunningham were convicted.
Mr. Chesley's actual involvement post-settlement played no part in G-C-M's fraud.
Nothing Mr. Chesley did do post-settlement contributed to G-C-M's theft in any way. In
February 2003, Melbourne Mills was sued by his law partner David Stuart, who claimed he did
94
Id.
95
Brief of the Plaintiff-Appellee United States, p. 31,fu7, United States of America v. Shirley Cimningham, Jr. and
William Gallion, Nos. 09-5987, 09-5998, On Appeal from The United States District Court for the Eastern District
of Kentucky, D.C. No. 2:07-CR-0039-DCR (Hon. Danny C. Reeves, D.J.).
24
not receive his fair share of the firm's legal fees, including fees from the Guard settlement.
Mr. Chesley did contribute $250,000 to the settlement of that case in exchange for a release of
any claims against Mr. Chesley for recoupment of any portion of the Guard fees paid to him, as
did Gallion and Cunningham.97
Bar Counsel attempted in its Brief to make these transactions seem suspicious, stating
that Mr. Chesley arranged for Rebecca Phipps to "secretly" contact him during the Stuart
mediation if it looked like the parties were not going to settle.98 However, as set forth clearly in
Mr. Chesley's Brief to the Trial Commissioner, no one testified that Ms. Phipps' call was secret
nor did Bar Counsel provide any evidence that the communication was "secret." "
But, Mr. Chesley's contribution was not a "secret" to anyone involved in the settlement
negotiations. In fact, counsel for Mr. Mills knew prior to the mediation the amount which Mr.
Chesley was willing to contribute to the settlement in order to procure his complete release from
Stuart's claims to the legal fees in the Guard case.100
Yet, again, rather than considering all available evidence, the Trial Commissioner simply
accepted Bar Counsel's attempt to paint this contribution as evidence of Mr. Chesley's
involvement in a nefarious cover-up, without citing to any evidence for his findings.101 The far
more plausible explanation for Mr. Chesley's involvement, and the one actually supported by the
evidence, is that Mr. Chesley had a legitimate interest in buying peace against a possible action
by Mills' law partner to recover fees he claimed to be owed from the Guard case, and to avoid
96
Tx. II, Stuart, p. 431. The Trial Commissioner's report seems to insinuate that Stuart brought his suit against Mills
prior to the alleged February 2002 meeting, and that in the course of this suit Stuart mentioned to Mills the true
amount of the settlement (Report of Trial Commissioner, p. 11. Stuart testified that he did not bring suit until
February 2, 2003. Tr. II, Stuart, p. 428.
97
Tr. II, Chesley, pp. 839-40.
98
Bar's Post-Hearing Brief, p. 41.
99
Ms. Phipps merely testified that she decided against calling Mr. Chesley on her cell phone in the middle of the
mediation but instead "went out into the hallway and called him." Tr. n, Phipps, p. 77.
100
See Tr. II, Chesley, pp. 839-41.
101
25
getting dragged into "partner warfare." Indeed, there is no evidence that Mr. Chesley had any
knowledge of the other attorneys' fraud and theft at that time.
Over two years later, in May 2005, long after the second distribution had been made and
the Kentucky Fund created, the Judicial Conduct Commission began an investigation of Judge
Bamberger's relationship with Mark Modlin, including, but not limited to, the Guard case, hi
August 2005, Mr. Chesley agreed to meet with Bamberger and appear at his informal hearing
before the JCC. 103
However, Mr. Chesley did not attend the JCC meeting as counsel for Judge Bamberger,
as Bar Counsel has suggested in the past. He appeared only to provide factual background, and
was not sworn as a witness. There is no transcript of this hearing and Bar Counsel did not make
any attempt to question Bamberger as to what happened at the hearing. The only evidence of
what transpired at that hearing is Mr. Chesley's testimony in this proceeding. Accordingly, the
Trial Commissioner's statement — which is plainly lifted from the Bar Counsel's Brief— that Mr.
Chesley "apparently argued in support of Bainberger's application of the cy pres doctrine and
establishment of the Kentucky Fund for Healthy Living", is entirely unsupported by the
record.104
According to the only actual evidence of what transpired before the JCC, Mr. Chesley
stated the following: (1) it was inappropriate for the lawyers who were appointed directors of the
Fund to receive a fee; (2) it was inappropriate for Judge Bamberger to receive a fee for being a
102
103
M a t 922-27.
104
Report of Trial Commissioner, p. 16. Quite similarly, the Bar's Brief states: "He later attended that meeting
before the JCC and presented his argument in support of Bamberger that the application of the cypres doctrine and
the establishment of the Kentucky Fund for Healthy Living was appropriate." Bar's Post-Hearing Brief, p. 43. Bar
Counsel cited Mr. Chesley's testimony in support of this statement, yet his testimony actually says no such thing.
26
director of the Fund; and (3) when he appeared before the JCC, he did not know that the
directors of the Fund were receiving fees.105
Another year passed - making it five years after the settlement - before Mr. Chesley
learned that he was being investigated by the Inquiry Commission. A year-and-a-half later, the
KBA filed its original Charge against Mr. Chesley.
ARGUMENT106
I. Bar Counsel failed to carry its burden of proving that Mr. Chesley possessed the full
knowledge of all facts material to the criminal and unethical actions of the other
attorneys, and knowingly assented to those acts. Mr. Chesley is therefore not guilty
of ratification.
In her opening Brief, Bar Counsel claimed that this entire disciplinary action was
primarily about Mr. Chesley's ratification of G-C-M's initial theft after the fact. The Brief for
Mr. Chesley extensively argued the well settled elements that the law of agency requires for a
ratification. The Reply Brief for Bar Counsel did not reply, at all, to the ratification argument;
presumably because they knew their evidence did not satisfy the elements of ratification.
instead, their Reply stated only that they stood on their opening Brief as to ratification.108
In yet another example of the Trial Commissioner's unquestioning acceptance of Bar
Counsel's argument, the Trial Commissioner's Report contains only a one-sentence, conclusory
statement that Mr. Chesley is guilty of ratification.109 The Trial Commissioner did not even
discuss the well settled legal principle that ratification requires proof of overt action to
adopt the actions of another as one's own, done with full knowledge of the facts of those
105
Tr. H, Chesley, pp. 924-26.
106
The Trial Commissioner found no violation of Rule 1.7. Because this Charge was resolved in Mr. Chesley's
favor, it is not being challenged on appeal. The KBA did not file a cross-appeal regarding the Trial Commissioner's
findings with regard to Rule 1.7.
107
108
Post-Hearing Reply Brief of Complainant, p. 2.
109
27
actions.110 The Report once again merely parroted the conclusory statements in Bar Counsel's
brief.111 One can only wonder whether the Trial Commissioner even read Mr. Chesley's
argument on ratification - even though, according to the KBA, that is what this case is primarily
about.
Rule 5.1(c)(1) states that a lawyer shall be responsible for another lawyer's violation of
the Rules only if "the lawyer orders, or with knowledge of the specific conduct, ratifies the
conduct involved." (emphasis added). A violation of Rule 5.1(c)(1) thus requires proof that Mr.
Chesley took overt action to adopt the actions of Gallion, Cunningham, and Mills, as his own,
and that he did so with full knowledge of the facts. The KBA failed to prove either requirement,
and Bar Counsel carries the burden of proof.
Proof of Mr. Chesley's fall and complete knowledge of the other lawyers' wrongdoing is
an essential element under Rule 5.1(c)(1). The knowledge standard required for Rule 5.1(c)(1) is
"actual knowledge," as defined by Rule 1.0(f). Thus, Mr. Chesley can be found in violation of
this Rule only if there is proof that he had "actual knowledge of the specific conduct" of Gallion,
Cunningham, Mills, and Helmers and that he was adopting it as his own conduct. This is
consistent with the common law of agency, which holds that a principal is not bound by a
ratification unless it is made with full knowledge of all of the material facts about the act of the
agent.112
Rule 5.1(c)(1) also requires proof of an overt act demonstrating an intent to be bound by
the consequences of the other lawyer's act The term used in Rule 5.1(c)(1) - "ratifies" - is a
legal term of art with a well-settled meaning. Under long established principles of agency law,
110
See Report of Trial Commissioner, pp. 25-26.
111
Bar's Post-Hearing Brief; pp. 62-63.
112
See RESTATEMENT (THIRD) OF AGENCY § 4.06 (2006); see also generally Papa John's Int'l, Inc. v. McCoy, 244
S.W.3d44(Ky.2008).
28
"[ratification requires an objectively or externally observable indication that a person consents
that another's prior act shall affect the person's legal relations."113 A person ratifies an act by
manifesting assent that the act be considered his own.
Mr. Chesley neither knew of G-C-M's theft of settlement funds nor took any overt action
to ratify that theft as his own act. To the contrary, Mr. Chesley was one of many people misled
by the fraudulent machinations of Gallion and Cunningham. Mr. Chesley had no reason to
expect anything other than skilled work and fair dealing from an experienced and respected
lawyer such as Bill Gallion.
Rather than an actual finding of fact that Mr. Chesley ratified the acts of the other
attorneys under the proper legal standard of ratification, the Trial Commissioner found that Mr.
Chesley overtly assisted G-C-M in a "'cover-up' of their thievery."115 According to the Trial
Commissioner, Mr. Chesley's participation in the cover-up is evidenced by his alleged
attendance at and participation in the February 6, 2002 meeting, after which he became "counsel
in chief'116 and "[fjrom 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." These findings, however, are not accompanied by
any citation to the record in this case, and, in any event, do not support a finding of ratification
with full and complete knowledge of the other lawyers' wrongdoing.
RESTATEMENT (THIRD) OF AGENCY § 4.01, cmt. d (2006).

Id. at §4.01.
Id. at 25-26 (emphasis added).
Id. at 26.
29
A. There is no credible evidence showing how Mr. Chesley's alleged appearance
before Judge Bamberger at the February 2002 meeting constituted a
knowing ratification of G-C-M's fraud or his participation in a "cover up."
The Trial Commissioner's finding of ratification plainly hinges on Mr. Chesley's alleged
attendance at the February 6, 2002 meeting. However, there is simply no credible testimony
regarding what was said at the alleged February 6, 2002 meeting with Judge Bamberger, and
there is absolutely no evidence that Mr. Chesley had the requisite knowledge of all material facts
of G-M-C's theft at the time of the purported meeting. Bar Counsel simply failed to carry their
burden of proof.
First, there is no videotape or transcript of the alleged meeting. Indeed, there is no docket
entry or other record proving the event even occurred. Mr. Chesley does not recall attending the
alleged meeting.118 Mark Modlin expressly denied attending any such "meeting" with Judge
Bamberger outside the courtroom.119 Instead, Modlin insisted that he attended a hearing in open
court, some time before June 27,2002, where his only memory is of Mr. Chesley mentioning the
words "cy pres" and "Grinnell."120 Modlin's testimony conveniently corroborates his friend
Judge Bamberger's theme of placing the blame on Mr. Chesley for the creation of the Fund and
the approval of the attorneys' fees taken by G-C-M, while denying he was even present. The
attempted corroboration fails, however, because Modlin emphatically characterized the meeting
as a hearing in open court. However, courtroom hearings are recorded and there is no record of
any such hearing. And Bar Counsel's allegation is that the February 6, 2002 meeting did not
occur in the courtroom.
118
Tr.H, Chesley, p. 691.
119
Tr. H, Modlin, pp. 606-08.
120
Mr. Modlin also testified that Mr. Chesley asked him to come to that hearing with him, picked him up, and they
rode together with Mr. Chesley's driver. Tr. II, Modlin, pp. 609-610. Mr. Chesley has no recollection of ever doing
so. Tr. II, Chesley, p. 865. Later in his testimony, Mr. Modlin admitted that he could not say which hearing he rode
to with Mr. Chesley and did not know either the date or the circumstances. Tr. n , Modlin, p. 641.
30
Modlin later admitted that he did not remember the date of any hearing he had testified
to, nor did he remember what was said at any of the hearings, due to the pain medications he
takes daily as a result of a significant spinal cord injury he sustained over twenty years ago.
Accordingly, the KBA's only proof on this issue was the discredited testimony of Judge
Bamberger, and it was the only testimony on which the Trial Commissioner could have based his
findings. But as Judge Bamberger has run the gauntlet of the Judicial Conduct Commission and
his own disbarment proceeding, he has had ample time to develop a version of events that tries to
shift blame for his misconduct to others, especially Mr. Chesley. He told the Judicial Conduct
Commission that there had been no motions filed or hearings held regarding the fees and
expenses.122 His conflicting recollection years later of matters that were uneventful at the time,
shaped into a narrative intended to exonerate him, is simply not trustworthy.
Further, the emphasis the Trial Commissioner places on the February 6, 2002 meeting
requires proof not just that Mr. Chesley attended the meeting but, more importantly, proof as to
what Mr. Chesley allegedly said at the meeting. The Trial Commissioner's Report accepted
several incorrect premises presented by Bar Counsel in finding that Mr. Chesley's actions at the
February 2002 meeting constituted participation in the "cover up."123 First, the Trial
Commissioner found that Mr. Chesley "argued" to Judge Bamberger "that the Grinnell case
provided legal authority justifying attorney's fees totaling 49% of the total recovery of $200
million."124 Second, the Trial Commissioner found that Mr. Chesley provided Bamberger "a
written memorandum arguing the application of the cy pres doctrine to create a charitable
121
Tr. II, Modlin, p. 642. Due to his injures, Mr. Modlin has been taking medication for pain management for 23
years. Id. at 632. He explained that the medications have impacted his memory and that he has a difficult time
conceptualizing or remembering dates. Id. at 634-35.
122
KBA 2853.
123
This is also discussed in Section IV below, which discusses the Trial Commissioner's incorrect findings that Mr.
Chesley violated Rules 3.3(a) and 8.1(c) by making various alleged misrepresentations to Bamberger during the
course of the Guard action and to Bar Counsel in the course of her investigation.
i24
Report of Trial Commissioner, p. 23 (emphasis added).
31
fund." 125 Third, the Trial Commissioner found that Mr. Chesley "discussjed] the second
distribution" at this meeting.126 None of these findings is supported by any citation to the
record.
The only evidence in the record of what was said at the meeting comes from Judge
Bamberger. Even if he were a credible witness, the transcript of Bamberger's testimony in this
hearing does not support the Trial Commissioner's finding that Mr. Chesley argued that the
Grinnell factors justified "attorney's fees totaling 49% of the total recovery of $200 million."127
Again, the Report merely regurgitates Bar Counsel's Brief. The Trial Commissioner cites to
nothing in the record in support of this statement - because there is none. Not a single witness
testified that Mr. Chesley stood in firont of Judge Bamberger and said "Judge, you can authorize
attorney's fees of 49% of the total award in this case using Grinnell.''' Judge Bamberger
certainly did not testify that Mr. Chesley told him to authorize attorney's fees of 49%.
Bamberger's testimony describes only a purported conversation with Gallion about the fees.128
The Trial Commissioner did not cite anything in the record that tends to show, in any way, that
in February 2002 Mr. Chesley had any idea how much money G-C-M had withheld ostensibly as
attorneys' fees. Instead, he speculates that "Chesley had to have learned that the settlement fund
had not been properly administered and distributed to the clients . . . ." I29
Further, neither Bar Counsel nor the Trial Commissioner provided any authority to
support the argument that Mr. Chesley's alleged legal interpretation of the Grinnell factors was
so incorrect that it proves he played a part in the cover-up of G-C-M's fraud. In actuality, the
Id. (emphasis added).

Id. at 24.
Id. at 23.
32
Grinnell factors are still regularly employed by courts today. Mr. Ken Feinberg - who
administered the 9/11 fund and is administering the BP oil spill settlement - gave expert
testimony that decertification of the class does not affect the Court's supervisory control over the
aggregate settlement and the award of attorney's fees, and the Grinnell factors were appropriate
for consideration in the Guard litigation.131 Mr. Feinberg also testified that in a class action, and
in a decertified class action over which the court retains control, the court can trump private
attorney fee contracts in determining the aggregate benefit to all class members performed by
class counsel.132 The Grinnell factors are actually "a fairly decent blueprint to guide the court in
reviewing fees" and have been employed by the courts in each circuit in setting the applicable
attorney's fee, adjusted for emphasis on what factors each circuit deems important.133 This
expert testimony was not disputed by Bar Counsel's expert.
There is also no evidence that Mr. Chesley provided Judge Bamberger "a written
memorandum arguing the application of the cy pres doctrine to create a charitable fund."134
Judge Bamberger testified only that cypres was mentioned in passing.135 Moreover, discussing a
well recognized legal doctrine hardly constitutes a knowing ratification of G-C-M's theft. Bar
Counsel emphasized this alleged memorandum because it is the sole basis for their contention
that Mr. Chesley was responsible for the creation of the Fund. But, as set forth above, there is no
evidence that Mr. Chesley had any involvement in the Fund's creation or operation. The Trial
Cornrnissioner's uncritical acceptance of the argument in Bar Counsel's brief - without any
citation to the record - is unsettling.
130
See McReynolds v. Richards-Cantave, 5S8 F.3d 790, 804 (2d Cir. 2009); In re Lupron Mktg. & Sales Practices
Litig., 228 F.R.D. 75, 93-94 (D. Mass. 2005); In re Greenfield Online Sec. Litig., 2008 WL 4640680, *5 (D. Conn.
Oct 20, 2008).
131
Tr. n , Feinberg, p. 1082.
U2
Id. at 1081.
533
Id. at 1082.
134
135
33
First, Mr. Chesley has no recollection of providing a cy pres memorandum to Judge
Bamberger, or advocating that Judge Bamberger apply it in the Guard case. Instead, he recalls
providing Gallion a copy of an interoffice memorandum discussing the doctrine generally, citing
a separate, unrelated case in which remaining settlement funds were used to purchase a fire
engine.137 It is undisputed that Gallion actually arranged for Pierce Hamblin to provide a formal
opinion letter to Judge Bamberger on his authority to create The Kentucky Fund Healthy Living
pursuant to the cy pres doctrine.138 Bamberger relied on Mr. Hamblin, not Mr. Chesley,
when creating the Fund.139 It is undisputed that Mr. Chesley was not present on June 27,2002,
when Judge Bamberger approved transferring the remaining settlement funds to the Fund.
Second, even Judge Bamberger's testimony in this proceeding does not support the Trial
Commissioner's conclusion. According to Bamberger, Mr. Chesley handed him a memo that
"might have been on Mr. Chesley's letterhead."140 Bamberger recalls that Mr. Chesley spoke
about the cy pres "principle in general" and told him "some of the other cases that he was
involved in where there was excess money and it was used for charitable purposes."141 He
testified that Mr. Chesley handed him a copy of the Grinnell factors but never testified that Mr.
2
Chesley alone advocated their use, much less advocated approval of a 49% legal fee.
Bamberger later testified that he received the Grinnell factors from "Mr. Chesley or one of the
attorneys."14 And, he stated "ftjhey certainly were arguing that the Grinnell factors were
controlling or significant or ought to be tire criteria, and they made sense to me"144
136
Tr. II, Chesley, p. 691.
137
Id. at 694-98.
m
Tr. II, Bamberger, p. 506, attached as Ex. G.
139
KBA245.
140
Tr. H, Bamberger, p. 457.
141
Id. at 458.
142
See id. at 458-59, attached as Ex. G.
143
Id. at 504, attached as Ex. G.
144
Id. at 459.
34
Third, the evidence does not even support Bamberger's testimony or the Trial
Commissioner's "findings." The primary discussion of the cy pres doctrine and the
establishment of the Fund actually took place months later at the June 27, 2002 hearing, a fact
which the Trial Commissioner wholly ignored.145 At that hearing, Judge Bamberger expressly
stated that he had read Pierce Hamblin's research regarding cypres, leading him to believe it was
an appropriate way to handle residual funds.146 It is undisputed that Chesley was not at the
June 27 hearing.
Finally, the Trial Commissioner's unsupported finding that Mr. Chesley discussed the
second distribution at the February 2002 meeting is simply lifted from the Bar's Brief. The KBA
claimed, without a shred of evidentiary support, that Mr. Chesley asked Bamberger to approve a
second distribution in the February 2002 meeting, which is particularly distressing because not
even Bamberger nor Modlin testified that Mr. Chesley spoke to Bamberger about the second
distribution. The Trial Commissioner simply chose to ignore this fact, which was set forth in
Mr. Chesley's brief, and to just parrot Bar Counsel's Brief.147
Indeed, there is no evidence that Mr. Chesley participated in the second distribution in
any way, let alone in any manner that could constitute a ratification of G-C-M's theft. Mr.
Chesley did not "call[] David Helmers asking him to assist in the second distribution" as the
Trial Commissioner asserted.148 The only suggestion in the record that Mr. Chesley may have
had any commumcation with the Guard attorneys concerning the second distribution is Helmers'
assertion that Mr. Chesley asked Helmers to handle that distribution. The Trial Commissioner
See KBA 245.

Id.
Respondent's Post-Hearing Brief, p. 50.
35
must be relying on the Bar Counsel's interpretation of Helmers' testimony for this finding,
although he failed to cite to the record.
Helmers" testimony is simply not credible. Indeed, Bar Counsel attacked his credibility
in Helmers' own disbarment proceeding,149 calling his testimony in that case "well rehearsed and
carefully crafted to repeatedly provide the caveat that virtually all of the actions he took in this
case were at the specific direction of a senior attorney, usually Gallion or Chesley." Bar
Counsel went so far as to call Mr. Helmers' conduct "reflective of a defective conscience to an
extreme rarely observed in attorney disciplinary cases." Yet this is the man the Trial
Commissioner placed absolute reliance upon with regard to his claim that Mr. Chesley asked him
to oversee the second distribution.
Mr. Chesley himself testified that he did not direct Mr. Helmers on how to conduct the
second distribution.152 Other evidence (and the lack thereof) supports Mr. Chesley's version of
events, as opposed to the previously discredited Helmers.153 Mr. Chesley's associate Fay Stilz
testified that Hehners, not Mr, Chesley, asked her if she could help simplify a distribution letter
on which he was working for a second distribution in the fen-phen litigation.154 Given her
experience in numerous complex mass torts, she did not find it unusual that Mr. Helmers was
seeking her assistance.155 Ms. Stilz did not create the letter—she edited what she was provided
by Helmers into a general form that could be understood by a layperson.156 Mr, Chesley did not
149
See Bar's Brief; KBA File 9342, Ky, BarAss'n v. Helmers, pp. 42-43.
150
M a t 44.
151
Id. at 69.
152
Tr. H, Chesley, pp. 814, 875.
1
See, e.g., Tr. II, Phipps, pp. 83-85 (Rebecca Phipps' testimony that Mr. Chesley was not involved).
154
Stilz Depo., pp. 15-16.
155
Id. at 7-9, 50.
156
Id. at 17.
36
ask Ms, Stilz to work on the letter, and she never told Mr. Chesley that she had assisted Mr.
Helmers.157 Helmers never refuted Ms. Stilz' account of these events.
Mr. Chesley played no part in planning or implementing the second distribution and did
not communicate with any of the Guard attorneys on the subject.
Moreover, there is absolutely no evidence that Mr. Chesley had actual knowledge of the
specific conduct of Gallion, Cunningham, Mills and Helmers at the time of the purported
February 2002 hearing, as required for a finding of ratification under Rule 5.1(c)(1).158 Contrary
to the Trial Commissioner's assertion that Mr. Chesley "had to have learned that the settlement
fund had not been properly administered . . . when he learned after Mills' confrontation with
Cunmngham that a second distribution would be required,"159 there is no evidence Mr. Chesley
knew the amounts distributed (or undistributed) to the Guard plaintiffs, or the amounts Gallion
and Cunningham had stolen. Thus, even assuming the meeting occurred, there is no evidence
that, by merely attending the meeting, he overtly indicated that he fully knew and intended to be
bound by the consequences of the G-C-M's theft.160
B. Bar Counsel failed to carry the burden of proving that Mr. Chesley's alleged
participation in other events constitutes "after the fact" ratification under
the applicable standard.
The Trial Commissioner's Report also uncritically adopted Bar Counsel's argument that
Mr. Chesley participated in the cover-up (and thereby ratified all of the conduct of all of the
Id. at 18. Ms. Stilz' testimony also demonstrates the flaw in the Trial Commissioner finding that Mr. Chesley's
responses to Questions 17 and IS, wherein he stated neither he nor any employee of his firm had any
comimmication with the other Guard attorneys about a second distribution and that neither he nor any employee of
his firm drafted documents relative to a second distribution of funds. KBA 270. The evidence shows that Mr.
Chesley had no knowledge of Stilz' communications with Helmers. He was unaware that she, at Helmers* request,
edited the letter that was sent to claimants regarding the second distribution. Ms. Stiiz had not told Mr. Chesley
about her assistance. Stilz Depo., pp. 17-18. The KBA offered no proof to the contrary and the Trial Commissioner
certainly did not cite any such proof.
153
See Rule 1.0(f).
159
iM RESTATEMENT (THIRD) OF AGENCY §§ 4.01,4.06 (2006).
37
other attorneys involved in Guard) because he: (1) attended meetings regarding the settlement of
David Stuart's suit against Melbourne Mills and contributed money toward the settlement; (2)
allegedly reviewed documents prepared by Whitney Wallingford to send to the KBA that were
later determined to be inaccurate; and (3) spoke at one of the Judicial Conduct Commission's
hearings on Judge Bamberger.161 However, none of these claimed events constitute "after the
fact" ratification under the applicable legal standard, much less evidence that Mr. Chesley was
directly involved in "orchestrating" the concealment of G-C-M's theft.
1. Bar Counsel failed to carry its burden of proving that Mr. Chesley
contributed to the David Stuart settlement with actual knowledge of
G-C-M's fraud.
Mr. Chesley's contribution to the settlement in the fee dispute between Mills and his
former partner David Stuart was in no way a ratification of G-C-M's fraud in the Guard
settlement allocations. Indeed, there is no evidence that Mr. Chesley had actual knowledge of
the scheme employed by Gallion, Cuiiningham, Mills and Helmers at the time he agreed to
contribute to the David Stuart settlement
Simply contributing to the fee dispute settlement in no way overtly affirmed or ratified G-
C-M's theft. Mr. Chesley contributed $250,000 to the settlement because Stuart sought to
recover attorneys' fees from the fen-phen litigation and, without a release, Stuart potentially
could sue Mr. Chesley to recover a portion of those fees he received, or Chesley could be third-
partied into a lawsuit between Mills and Stuart if that case failed to settle.162
Compare Report of Trial Commissioner, pp. 25-26 to Bar's Post-Hearing Brief, pp. 62-63.
162
Tr. H, Chesley, pp. 839-41; see also pp. 21-22, supra. The memorandum of the Stuart settlement reflects this
idea, specifically stating "[bjecause Stuart has been informed that one or more of the other attorneys who
participated in the pharmaceutical class action are contributing to the amount which will be paid to Stuart in
settlement of this action Stuart is willing to give releases to all of the other attorneys participating in that action."
Tr. n , Ballantine, p. 546-47.
38
Indeed, absolutely nothing in the record supports an inference that the settlement was part
of an effort to cover up the other lawyers' theft from the Guard plaintiffs. Whitney Wallingford
testified that counsel for Mr. Mills, Bill Johnson, originated the idea of a contribution to the
settlement by Chesley.163 Similarly, Mr. Chesley testified that Bill Johnson suggested the idea of
contribution and encouraged Mr, Chesley do so in order to obtain a release from Mr. Stuart.
Mr. Stuart testified he required additional consideration before giving those releases.165 None of
this testimony establishes that Mr. Chesley had actual knowledge of the other attorneys' specific
illegal acts, or that contributing to this settlement manifested Mr. Chesley's assent to those acts
as his own.156 Paying adequate consideration for a release from Stuart did not ratify everything
Gallion and Cunningham had done.
2. Bar Counsel failed to carry its burden of proving that Mr. Chesley
approved documents sent to him by Whitney Wallingford with actual
knowledge that the documents were factually inaccurate, and as part
of a cover-up of G-C-M's theft.
The evidence likewise fails to support the Trial Commissioner's acceptance of Bar
Counsel's claim that Mr. Chesley ratified the other lawyers' misconduct by allegedly approving
a supplemental subpoena response submitted by attorney Whitney Wallingford on behalf of
Gallion, Qinningham and Mills.167 Although no record citations were provided by Bar Counsel
nor supplied by the Trial Commissioner, this claim presumably refers to KBA Exhibit 134, a
spreadsheet purporting to show distributions to the Guard plaintiffs that was prepared by
attorney Whitney Wallingford.168 Mr. Chesley denies that he ever received or reviewed the
Tr. I, Wallingford, p. 109S.

Tr. II, Chesley, pp. 839, 842.
Tr.H, Stuart, p. 434.
Rule 1.0(f); RESTATEMENT (TfflRD) OF AGENCY §§ 4.01,4.06 (2006).
See Bar's Post-Hearing Brief, p. 62; Report of Trial Commissioner, p. 26.
Tr. I, Wallingford, p. 1081.
39
supplemental response.169 Mr. Wallingford's testimony is the only suggestion that Mr. Chesley
even saw the response before it was submitted to the KBA, 17° and Wallingford did not allege that
Mr. Chesley knew the spreadsheet was inaccurate.
Indeed, there is no evidence, at all, that Mr. Chesley knew the spreadsheet was
inaccurate. Either Gallion or his accountant David Price supplied Mr. Wallingford's office with
apparently inaccurate information.171 Even assuming, for the sake of argument, that Mr. Chesley
did review Mr. Wallingford's transmittal letter to the KBA, Mr. Chesley most certainly had no
reason to know that the information provided by Mr. Wallingford in the enclosed spreadsheet
was inaccurate, any more than Wallingford knew the information supplied to him by Gallion was
inaccurate. And without knowledge of the inaccuracies in the supplemental response, Mr.
Chesley could not have overtly indicated that he fully knew and intended to be bound by the
consequences of G-M~C's theft.
3. Bar Counsel failed to carry its burden of proving that Mr. Chesley's
attendance at Jndge Bamberger's JCC hearing was with actual
knowledge of G-C-M's fraud.
Mr. Chesley's appearance at one of Bamberger's several Judicial Conduct Commission
hearings cannot demonstrate a ratification of Cunningham's and Gallion's theft. The Trial
Commissioner again accepted Bar Counsel's substitution of conjecture for proof, and failed to
cite any credible evidence that would support a finding of ratification.
First, there is a total failure of proof that Mr. Chesley had actual knowledge of the
misconduct of Gallion and Cunningham at the time of Judge Bamberger's JCC proceeding. This
by itself defeats a ratification charge.
m
Tr. H, Chesley, pp. 817, 898.
170
Tr. I, Wallingford, p. 1087.
171
Id, at 1073,1075-76.
111
RESTATEMENT (THIRD) OF AGENCY §§ 4.01,4.06 (2006).
40
Second, there is simply no specification in the Report of what overt act Mr. Chesley
might have taken at the JCC proceeding to adopt or endorse Gallion and Cunningham's
misconduct. There is no transcript of that hearing. Mr. Chesley merely met with Judge
Bamberger in advance of his second informal appearance before the Judicial Conduct
Commission and spoke as an unsworn witness at that informal hearing.
Bar Counsel implied that Mr. Chesley .was counsel for Bamberger at the hearing,
asserting that Mr. Chesley "presented his argument" to the JCC in support of the application of
the cy pres doctrine to the Guard settlement.174 But Bar Counsel cited only Mr. Chesiey's own
testimony in this proceeding (pages 924-928) to support that proposition, and that testimony
simply does not support the Trial Commissioner's finding.175 Significantly, Bamberger did not
provide any testimony at Mr. Chesiey's hearing as to what was said at the JCC hearing - Bar
Counsel did not even make that inquiry of him, presumably because Bar Counsel knew
Bamberger would not support their allegation.
In sum, the KB A failed to meet its burden of proof with regard to ratification under Rule
5.1(c)(1), yet the Trial Commissioner not only found that Mr. Chesley ratified the conduct of G-
C-M but also that he played a leading role in the cover-up of their theft. These findings are
totally unsupported by the record, and Trial Commissioner's conclusions must therefore be
vacated.
173
T r . n , Chesley, p. 922.
174
175
See Tr. IE, Chesley, pp. 924-28. Mr. Chesley offered only the following opinions in response to the KBA's very
few questions on this topic: (1) it was inappropriate for the lawyers who were appointed directors to the Fund to
receive a fee; (2) it was inappropriate for Judge Bamberger to receive a fee for being a director of the Fund; and (3)
when he appeared before the JCC, he did not know that the directors of the Fund were receiving fees. See Tr. JJ,
Chesley, pp. 924-26.
41
II. The Rules of Professional Conduct expressly allow a division of labor among
counsel, Mr. Chesley appropriately relied upon other lawyers to communicate with
the Guard plaintiffs and therefore did not violate Rules 1.5(c), 1.5(e), and 1.8(g).
Despite the Trial Commissioner's unsupported findings to the contrary, it is axiomatic
that a team of attorneys may ethically divide their responsibilities to the clients on a particular
matter, which may include allocating the responsibility for communicating with the lawyers'
clients (including communications required by Rules 1.5(c) and 1.8(g)) to only some of the
lawyers. In fact, Bar Counsel's expert witness conceded as much.17 Professor Erichson
specifically testified that it was not unethical for Mr. Chesley to allocate the duty to
communicate with the clients to Cunningham and Mills, the lawyers who had the
agreements with the clients.177 Bar Counsel nevertheless argued that Mr. Chesley "had an
obligation to determine that [communication] was being done by somebody on the team," yet
Professor Erichson expressly refuted that, saying: '1 think that goes too far."179 He testified that
those lawyers' failure to adequately inform the clients pursuant to Rule 1.8(g) does not become
an ethical issue for Mr. Chesley unless he ""knows of the conduct and ratifies i t . . . ."18°
Thus, in finding that Mr. Chesley violated Rules 1.5(c), 1.5(e), and 1.8(g) by his alleged
failure to communicate with the Guard plaintiffs, the Trial Commissioner simply ignored the
undisputed expert testimony demonstrating that the communication responsibilities were
expressly, and properly, allocated to lawyers other than Mr. Chesley. Instead, the Trial
Commissioner determined, without citation to the record or any supporting law, that the
Tr. II, Erichson, pp. 1176,1195-96, 1220-21, attached hereto as Ex. J.

Id. at 1195,1220.
Tr. H, opening statement, p, 728.
Tr. n, Erichson, p. 1220.
Id. at 1195.
42
claimants were Mr. Chesley's clients to whom he personally owed nondelegable duties of
providing information and communication.
The Trial Commissioner's finding basically advocates a sea change in the field of mass
torts. It is a long-standing and well-established practice for plaintiffs* lawyers to seek help in
settling complex cases by retaining other lawyers who have expertise in mass tort settlement
negotiations. The expert negotiators have no contact with the plaintiffs, and the plaintiffs
typically do not know that the expert negotiators are involved in the case.
The Trial Commissioner simply accepted the KBA's characterization of Mr. Chesley's
violation of these Rules, finding that Mr. Chesley violated Rules 1.5(c), 1.5(e), and 1.8(g)
because (1) his fee should have been calculated from the total recovery of each individual client
based upon the contractual percentage agreed to by that client; (2) he had an obligation to
communicate to the clients about, and obtain their informed consent to, the agreement among the
lawyers dividing the labor and the fees; and (3) he failed to inform the clients of the foil terms of
the aggregate settlement. Indeed, portions of the Trial Commissioner's Report on this point are
essentially lifted directly from the Bar's Brief.183
First, the evidence and expert testimony demonstrate that Chesley was actually working
for the other lawyers, not the Guard plaintiffs, and that those lawyers, not the plaintiffs, were
actually his clients, which would negate any independent duty of communication. The evidence
See Report of Trial Commissioner, p. 20 ("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."); p. 22 {"He was class counsel pursuant to bis agreement with Cunningham, Gallion
and Mills. Chesley was fully aware that his clients had not been informed concerning the setdement at the time the
agreement was reached and afterward.").
182
This was the case, for example, when Mr. Chesley negotiated a proposed settlement in the Bendectin litigation.
See Richard L. Marcus, Reexamining the Bendectin Litigation Story, 83 Iowa L. Rev. 231, 251 (1997). As Professor
Miller testified, to require negotiators like Chesley to contact each individual plaintiff would essentially preclude
them from doing their jobs. Tr. H, Miller, pp. 1360-61.
183
Compare Bar's Post-Hearing Brief, p. 51 with Report of Trial Commissioner, p. 19.
43
clearly shows that Mr. Chesley was hired - by the other lawyers - for the sole purpose of
negotiating the Guard settlement. Mr. Chesley's role in the Guard case was created and
expressly defined by his agreement with the other lawyers. He did not have a contract with any
of the plaintiffs.184 He never filed an entry of appearance in the Guardcase.
An attorney-client relationship is created either by contract or by a client's reasonable
belief that the lawyer is undertaking to represent the client.185 Here, the Guard plaintiffs had no
knowledge of Chesley's work on their behalf, and thus no reasonable belief that he was
representing them.186 Without that reasonable belief, there could be no attorney-client
relationship. 1S7
Second, Mr. Chesley's agreement with the other lawyers created a clearly delineated
division of labor among the lawyers that is entirely permissible under the Rules. Gallion was
lead counsel throughout the Guard case, including responsibility for trying the case if it did not
settle. Mills and Cunningham were responsible for communicating with clients.18a Mr. Chesley
was hired—by the other lawyers - for the sole purpose of settlement negotiation. Mr. Chesley
had no other responsibilities undex his contract with the lawyers.190 And Mills and
Cunningham's contracts with their clients contained a provision expressly permitting
Cunningham and Mills to engage the help of additional counsel if they found such assistance to
be necessary.191
134
KBA 148; Vardaman Depo., pp. 48-49; Tr. II, Mills, pp. 157-58; Tr. H, Chesley, p. 680.
185
See Lovell v. Winchester, 941 S.W.2d 466, 468 (Ky. 1997).
186
See, e.g., Tr. I, Curtis, pp. 83-87; Henderson, pp. 129-32; McGirr, pp. 167-70; Carman-Staton, pp. 201-02;
Fannin, pp. 242-44; Centers, p. 279; Ford, pp. 308-09; Turner, pp. 345-46; Peace, pp. 389-92; Miller, pp. 433-34;
Stephenson, pp. 471-72; Bowman, p. 517; Hoover, p. 546; Coots, pp. 586-88; Baldwin, p. 630; McMurtry, pp. 662-
63.
187
Lovell, 941 S.W. 2d at 463
388
KBA 148.
189
Tr. II, Chesley, p. 764.
190
Tr. U, Chesley, pp. 680, 766-68; KBA 148.
191
Tr. II, Hehners, p. 362.
44
The Settlement Agreement likewise assigned the responsibility of client communication
to attorneys other than Mr. Chesley. Under the Settlement Agreement, only the "Settling
Attorneys" undertook the responsibility to communicate with the clients in accordance with Rule
1.8(g).392 The agreement expressly identified the "Settling Attorneys" as Mr. Gallion, Mr. Mills,
Mr. Cunningham, and Mr. Lawrence.193 Mr. Chesley was neither a "settling attorney" nor a
signatory to the settlement agreement.194 In fact, AHP's counsel John Vardaman specifically
testified that he - like Chesley - assumed the attorneys who signed the agreement would comply
with Rule 1.8(g).195 Vardaman did not view the plaintiffs as Mr. Chesley's clients. In his view,
Mr. Chesley was "simply working with the Kentucky lawyers."196
Bar Counsel's own expert conceded that this was a perfectly reasonable division of
labor, yet another fact which the Trial Commissioner failed to address.197
The division of labor among the lawyers settling the Guard litigation was entirely ethical,
as Bar Counsel's expert witness conceded. Mr. Chesley's sole role in the Guard case was to
negotiate the monetary terms of the settlement with AHP. Accordingly, the Trial
Commissioner's finding that Mr. Chesley violated Rules 1.5(c), 1.5(e) and 1.8(g) must be
reversed.
192
Tr. I, Schaefer, p. 955; KBA 6.
193
KBA 6; Tr. I, Schaefer, p. 954-55.
194
KBA 6; Tr. H, Erichson, p. 1197; Tr. II, Chesley, p. 972.
193
Vardaman Depo., p. 93
196
Id. at 49. Also, the KBA initially falsely stated that Mr. Chesley signed the Settlement Agreement, presumably
because the KBA knows that only those signatory, settling attorneys with claimant clients had any obligation to
comply with Rule 1.8(g). See Bar's Post-Hearing Brief, p. 54. la amended page 54, the KB A claimed only that Mr.
Chesley read the Settlement Agreement, implicitly conceding he was not a party to that agreement
197
Tr. II, Erichson, p . 1176, attached as Ex. I
45
III. Bar Counsel failed to carry its burden of proving that Mr. Chesley made the alleged
misrepresentations to tribunals with the requisite knowing falsity so as to find him
guilty of misconduct under Rules 3.3(a), 8.1(a), and 8.3(c).
The Trial Commissioner plainly ignored Mr. Chesley's arguments in response to the
charges under Rules 3.3(a), 8.1(a), and 8.3(c). In addition to failing to cite to the record, he did
not address any of Mr. Chesley's principal responses to the KBA's charges.
Rules 3.3(a) and 8.1(a) provide that any actionable misrepresentation must be
"knowingly''' made by an attorney, which "denotes actual knowledge of the fact in question."198
An examination of the KBA's charges, and the evidence actually in the record concerning these
charges, reveals that Bar Counsel failed to meet its burden of proving (i) that each statement was
false and (ii) that Mr. Chesley had actual knowledge of its falsity at the time it was made.
Indeed, Bar Counsel repeatedly attempted to prove the claims by resorting to paraphrasing Mr.
Chesley's alleged rnisstatements., rather than identifying a specific statement that could be
directly proven to have been made with knowing falsity. And, Bar Counsel characterized
statements of legal opinion (on questions as to which experts in the field reasonably disagree) as
misstatements of fact.
A. Rule 3.3(a) and the alleged misrepresentations made to Judge Bamberger

during the course of the Guard action.
The Trial Commissioner's "findings" with regard to Rule 3.3(a) are unsupported by any
record citations and are only a parroting of Bar Counsel's Briefj which paraphrased purported
statements of Mr. Chesley to Judge Bamberger in 2002.199 Bar Counsel's Brief alleged:
!yH
Rule 1.0(f) (emphasis added).
199
The KBA's charge with regard to Rule 3.3(a) specifically identified three statements allegedly made my Mr.
Chesley in the course of the Abbott action. Mr. Chesley provided a lengthy and vigorous defense to these alleged
statements. However, the Trial Commissioner issued no findings regarding the alleged Abbott statements. As such,
Mr. Chesley assumes that the issues regarding these three statements were resolved in his favor and they are not
being challenged on appeal. The KBA did not file a cross-appeal as to the Trial Commissioner's findings with
regard to these three alleged misstatements.
46
• "He appeared before Judge Bamberger in 2002 and argued that the Court was entitled
under the Grinnell case to authorize fees of 49%, when he knew that the Court had no
such jurisdiction and that the settlement was an aggregate settlement of a group of 440
claims."200
• "[H]e provided a written memorandum of law and argued to the Judge that the cy pres
doctrine could and should be used by the Court to create a charitable fund with what he
described as 'extra' settlement funds, knowing that the doctrine had no proper legal
application to the aggregate settlement in the Guard case."
• "Knowing that the Guard class had received no notice of the settlement, he informed the
Court that because they had never been notified of anything previously there was no
need to notify absent class members that their counsel had agreed to decertify the class.
He said there was no need to tell them he was asking the Court to dismiss their claims so
that their attorneys could enter into a massive settlement on behalf of their identified
contracting clients."202
As detailed above, Bar Counsel failed to provide — and the Trial Commissioner failed to
cite - any credible evidence that most of these purported "statements" were actually made, much
less that Mr. Chesley made them with the requisite knowing falsity. Further, in finding that Mr.
Chesley violated the Rule by (1) attending the February 2002 meeting with Judge Bamberger and
arguing for the application of the Grinnell factors; (2) providing "a written memorandum arguing
the application of the cy pres doctrine to create a charitable fund" although the doctrine "clearly
had no proper legal application to the aggregate settlement"; and (3) "argu[ing] to Judge
Bamberger that no notice was needed to the class members of the agreement to settle the case
and decertify the class" while "knowing full-well that his clients had neither been informed of
the settlement nor had given their consent",203 the Trial Commissioner ignored the fact that all
three paraphrases are legal argument, not statements of fact.
The lack of credible testimony regarding what was allegedly said at the February 2002
meeting — Mr. Chesley's alleged "arguments" in favor of the application of the Grinnell factors,
Bar's Brief, p. 59 (emphasis added).

Id. at 60 (emphasis added).
Id. (emphasis added).
47
the approval of attorney's fees totaling 49% of the total settlement amount and creation of a cy
pres entity - is discussed extensively supra, pp. 30-34. There simply is no testimony supporting
those specific allegations.
Moreover, even assuming arguendo that there was testimony supporting those claims,
Mr. Chesley's alleged misstatements concerning cy pres and the Grinnett factors are more
appropriately characterized as statements of legal opinion, not knowing misrepresentations of
fact. Moreover, Judge Bamberger commissioned an expert opinion on cy pres from the well-
known Lexington mediator, Pierce Hamblin, which provided the legal support for use of the cy
pres doctrine in the Guard case - and there is no indication that the KBA has charged Mr.
Hamblin with making a misrepresentation. In addition, Whitney Wallingford actually served as
tax and corporate counsel to the Fund and raised no issues with its propriety.204 Mr. Wallingford
has presumably not been charged with any violations for serving in that capacity.
The KBA provided absolutely no published precedent in support of its argument that the
cy pres doctrine per se does not apply to aggregate settlements. The KBA relied solely on the
testimony of Professor Erichson for this point. But Professor Erichson's testimony is
demonstrably inaccurate.
Professor Erichson testified cy pres applies only to the undistributed remainder in a
classwide settlement and has no application to aggregate settlements because, he says, in an
aggregate settlement the parties agreed to a specific amount for each plaintiff and there is no
remainder.205 But Professor Erichson also acknowledged that the side letter exposed the Settling
Attorneys to indemnify AHP for up to $7.5 million for potential claims against Dr. Duff, the
Tr. I, Wallingford, pp. 1064-65.

Tr. II, Erichson, p. 1167.
48
doctor who prescribed fen-phen to the claimants.2 Even assuming no other basis for a
holdback, the side letter created a factual basis for Mr. Chesley to believe a holdback had been
proper and that there could be a remainder to which cypres might reasonably be applied.
Moreover, Kenneth Feinberg, a nationally renowned expert on mass torts, testified that he
had never heard of an aggregate settlement where funds were not left over after the initial
distribution and, even after a class is decertified, the court can still retain the type of fiduciary
control that it would have over the class action itself.207 This includes control over benefits to
the aggregate group, the procedural due process necessary to distribute the funds, and fees and
208
expenses.
Professor Hazard, one of the country's preeminent legal ethics scholars, also opined that
the cy pres doctrine could have been applicable here if the settling attorneys had the informed
consent oftiheirclients.209 If the experts can't agree whether cy pres could apply to an aggregate
settlement, how could it be a knowingly false statement for Mr. Chesley to suggest that cy pres
could apply to the Guard case? Yet the Trial Commissioner concluded - without any citation to
the record or to any precedent - that cypres cannot apply to aggregate settlements.2 °
Finally, the Trial Commissioner found that Mr. Chesley violated Rule 3.3(a) by attending
the May 9, 2001 hearing and arguing that no notice was needed to the class members of the
agreement to decertify the case. However, the Trial Commissioner failed even to mention Mr.
Chesley7 s argument that the KBA failed to identify what statement made by Mr. Chesley at the
May 9, 2001 hearing was actually false and, like the KBA, failed to cite any legal autliority in
Jrf. at 1172.
Tr. n , Feinberg, pp. 1087-89.
Id. at 1089.
Tr.H, Hazard, p. 1298.
49
support of Ms finding that Mr. Chesley "misled the Court"211 at that hearing. In fact, contrary to
the Trial Commissioner's finding that Mr. Chesley misled the Court at the hearing hy arguing
that no notice was needed, the Trial Commissioner himself concluded in his Report that
there were conflicting authorities about whether notice was required under these
circumstances, and specifically declined to find a Rule 1.7 ethical violation for the failure to
give notice.212
Thus, in the same Report, the Trial Commissioner found that "the obligations of class
counsel with respect to" notice of decertification and dismissal "under Civil Rule 23 or any other
legal principle" is so unsettled that he could not find a clear violation of Rule 1.7 while also
finding that it was a violation of Rule 3.3(a) for Mr. Chesley to argue that no notice was needed
to the class members.214 This significant internal contradiction is a clear example of the
Trial Commissioner's uncritical acceptance of Bar Counsel's arguments without
independent review of the evidence and applicable ethical standards.
It is undisputed that, given AHP's absolute requirement of confidentiality, insistence on
notice to the class would have scuttled the settlement. And ample precedent supports the
conclusion that Rule 23 does not require notice to unnamed class members when a class is
decertified or settled on a non-class wide basis "if it is plain that there is no prejudice" to the
absent class members' interests. When a class is decertified, the only risk of prejudice to absent
class members is they may allow the statute of limitations to expire without filing their own
5
claims, out of the mistaken belief that their claims are still being represented by class counsel.
m
Id.
2i2
Report of Trial Commissioner, p. 21
213
Id.
214
Id. at 23.
215
Culver v. City of Milwaukee, 211 K3d 908, 915 (7th Cir. 2002). See also Doe v. Lexington-Fayette Urban
County Goy'i, 407 F.3d 755, 763 (6th Cir. 2005); Simer v. Rios, 661 F.2d 655, 666 (7th Cir. 1981) ("Mather than
setting down an absolute rule we choose to place discretion in the district court to assess the prejudice to absent class
50
But that risk is only present when there is reason to believe the unnamed class members have
relied on the class action in deciding not to bring suits on their own behalf/10 Where there is no
evidence that absent class members are abstaining from bringing their own actions in reliance on
the pendency of the class action to toll their statute of limitations, class notice is not required.
In this case, the 70 unknown class members had not received notice of certification of the
Kentucky class, so they could not have been relying on the pendency of that action to toll
limitations on their respective, individual claims. Indeed, they had made the overt decision to
opt out of the national MDL class, indicating an awareness that they needed to protect their own
rights on an individual basis. Professor Miller, one of the country's leading scholars on civil
procedure, testified that on these facts there was nothing improper about not giving the class
notice of decertification.218
The Trial Commissioner acknowledged this precedent and found it was not an ethical
violation to decertify the class and settle without classwide notice.219 However, he contradicted
his own legal conclusions and found that Mr. Chesley made a misrepresentation to the Court by
saying notice was not necessary. Such internal contradictions are plainly not acceptable in a
Report sentencing an attorney to the professional death penalty.
At most, Mr. Chesley's statements regarding notice of decertification evidence a
statement of legal opinion on a question for which there are grounds for good faith disagreement,
rather than a knowingly false statement of fact.220
members caused by the [pre-certification] settlement, the institutional costs of notice and a certification hearing, as
well as other factors relevant" to whether notice should be given).
216
Culver, 277 F.3d at 914.
217
Id, at 915. See also Doe, 407 F.3d at 763.
218
Tr. H, Miller, pp. 1374-75.
219
230
Tr. H, Chesley, pp. 636-87; KBA 120.
51
In sum, the Trial Commissioner's finding that Mr. Chesley violated Rule 3.3(a) must be
reversed.
B. Rule 8.1(a) and the alleged misrepresentations made in response to questions

posed by the KBA.
Like the Trial Commissioner's findings with regard to Rule 3.3(a), his findings with
regard to Rule 8.1(a) are unsupported by any record citations and are only reiterations of the
same unsupported allegations in Bar Counsel's Brief. And the Trial Commissioner again fails to
address the fact that Bar Counsel did not identify any of the precise statements made (to the best
of Mr. Chesley's recollection five years after his limited involvement in the matter), instead
relying upon paraphrasing the alleged statements. Moreover, Bar Counsel failed to cite any
evidence establishing the falsity of any statement, much less any proof whatsoever that Mr.
Chesley made his statements with knowledge of their falsity.
The Trial Commissioner addressed only the alleged misstatements made by Mr. Chesley
in his October 4, 2006 letter to Bar Counsel. He did not issue any findings as to whether Mr.
Chesley violated Rule 8.1(a) by making the alleged misstatements in letters dated May 9, 2006
and August 8, 2006,221 by Bar Counsel. Accordingly, it is assumed that the Trial Commissioner
found in Mr. Chesley's favor with regard to the alleged misstatements in the May 9 and August 8
letters. Since Bar Counsel has not cross-appealed, these alleged misstatements are not addressed
in this brief.222
See Report of Trial Commissioner, p. 24. The Trial Commissioner only addresses Mr. Chesley's answers to
Questions 14,15, 16, 17, and 18, all of which are found in the October 4,2006 letter.
222
Mr. Chesley requests that the Board of Governors grant him leave to supplement this brief so as to address the
alleged misstatements in the' May 9 and August S letters if it is alleged by Bar Counsel or decided by the Board that
the Trial Commissioner did issue findings with regard to the alleged misstatements contained therein.
52
The Trial Commissioner found, without citation to any supporting evidence, that Mr.
Chesley's responses to Questions 14, 15, 16, 17, and 18, in the October 4, 2006 letter were
knowing misstateraents.223
Question 14 asked Mr. Chesley what communications he had with any of the other
attorneys or Judge Bamberger regarding the application of the cy pres doctrine.224 In a factually
accurate reply that the Trial Commissioner found "seriously distorted," Mr. Chesley stated:
I recall that I had a general discussion with the Plaintiffs' attorneys in the Guard
case concerning the doctrine of cy pres and verified to them that it was a device
used in class actions or "mass tort" litigation. I furnished them, as information, a
copy of a document utilized in the case that I handled involving a train derailment
in Miamisburg, Ohio.225
The Trial Commissioner found this response to be a misstatement because Mr. Chesley
"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 fend.
However, as discussed extensively supra, there is no credible testimony regarding what was said
at the February 2002 meeting about the cy pres doctrine.227 Further, Mr. Chesley testified that
around February 2002, Gallion did ask him about the cypres doctrine, and he provided Gallion a
short research memo based upon his firm's work in a different case.228 Mr. Chesley and Gallion
also discussed the use of the Grinnell factors to calculate attorneys' fees in class actions.229
Accordingly, Mr. Chesley's response is simply not an actionable knowing misrepresentation.
22
Bar Counsel did not allege in her Post-Hearing Brief that Mr. Chesley's response to Question 14 was a
misstatement. As such, the issue was not actually before the Trial Commissioner. However, the Trial
Commissioner independently issued afindingwith respect to Question 14, and the alleged misstatement is addressed
herein.
224
KB A 270.
225
Id.
226
227
See supra, pp. 26-33.
228
Tr. II, Chesley, pp. 694-98; KBA 243.
229
53
Mr. Chesley's remaining alleged misrepresentations in the October 4 letter were
paraphrased by the KBA as: "he had no communication of any nature with Bamberger regarding
the establishment of the charitable entity" (Question 15); "he became aware of the second
distribution to clients when he received a check" (Question 16); "neither he nor any employee of
his firm had any communication with the other Guard attorneys about a second distribution"
(Question 17); and "neither he nor any employee of his firm drafted documents that were to be
given to clients regarding the second distribution" (Question 18), The Trial Commissioner
found that each of these statements were misrepresentations, but failed to make anyfindingthat
the statements were made with the requisite knowing falsity.
First, as discussed supra, the only suggestion that Mr. Chesiey even spoke - at all — to
Judge Bamberger about the cy pres doctrine is the dubious and conflicting testimony from
Bamberger and Modlin.231 Bamberger never testified that Mr. Chesiey spoke to him about the
creation of "the charitable entity," at all, stating only that Mr. Chesiey discussed the cy pres
"principle in general," and told him about other cases where excess money had been used for
charitable purposes. Judge Bamberger has testified that he did not even rely solely upon the
alleged discussion of cy pres at the February 2002 meeting, since he commissioned and received
an opinion from Pierce Hamblin on the doctrine before approving the entity.233
There is no testimony that Mr. Chesiey discussed the creation or funding of this particular
entity with Judge Bamberger, or anyone else. Accordingly, contrary to the Trial Commissioner's
finding, even assuming that Mr. Chesiey attended the February 2002 meeting, Mr. Chesley's
230
231
See supra, pp. 30-35; see also Tr. II, Bamberger, p. 458; Tr. H, Chesiey, pp. 691, 694-698; Tr. H~, Modlin. pp.
605-608,642.
332
233
Id. at 506.
54
statement that he had no communication of any nature with Judge Bamberger regarding "the
establishment of the charitable entity" is in fact true.
Second, also contrary to the Trial Commissioner's finding, Mr. Chesley's statement that
he "became aware of the second distribution to clients when he received a check" is also true.
The Trial Commissioner states that Mr. Chesley's response was a misstatement because he "was
well aware that there would be a second distribution prior to his receipt of the $4 million
check."235 However, Mr. Chesley was not asked when he was aware that the concept of a second
distribution had been discussed. Mr. Chesley has never denied that he knew that the May 1
agreement, including the side letter, would probably require the Settling Attorneys to hold back
some funds, which logically could result in a second distribution at some point in time. But that
is not the question asked in the KBA's letter. The KBA asked the following question of Mr.
Chesley:
When did Mr. Chesley become aware of that there would be a "second
distribution" of funds from the Guard settlement to the Plaintiffs or to any of the
attorneys? (Second Distribution refers to any payments in 2002 to clients or
attorneys).23
This compound question specifically defined "Second Distribution" to mean "any
payments in 2002 to clients or attorneys." Thus, the compound question actually asks when Mr.
Chesley became aware that there would actually be a second distribution of payments in 2002 to
clients or attorneys. Mr. Chesley's answer to that question is true; he became aware that
payments were actually made to clients or attorneys in 2002 when he received a check. There is
no evidence that he knew when the second distribution would actually take place prior to that
event. Accordingly, there is no evidence that he knew, when he answered the precise question
234
KBA 270.
235
236
KBA 270 (emphasis added).
55
he was asked, that his answer was false, and the Trial Commissioner's finding to the contrary is
not supported by evidence.
Further, the Trial Commissioner's statement that Mr. Chesley "met with Judge
Bamberger in this secret 2002 meeting to discuss the second distribution"237 is simply untrue, as
discussed supra, pp. 31-33. As noted above, Bamberger was the only witness to actually testify
as to what purportedly occurred at the February 2002 meeting. However, he never testified that
Mr. Chesley spoke to Bamberger about the second distribution. As such, there is literally no
evidence upon which this finding could be based, and the Trial Commissioner cited none.
There is simply no credible proof that Mr. Chesley's statements in the October 4, 2006
Letter were false - much less that they were made with knowing falsity. Mr. Chesley played no
part in planning or implementing the second distribution and did not communicate with any of
the Guard attorneys on the subject As such, the Trial Commissioner's finding that Mr. Chesley
violated Rule 8.1(a) must be reversed.
C. Mr. Chesley did not violate Rule 8.3(c).
Because the KBA failed to set forth any specific conduct mat was in violation of Rule
8.3(c) and did not allege any independent violations of this Rule, Mr. Chesley was unable to
respond to the alleged violation and stated as much in his Brief to the Trial Commissioner.238
Mr. Chesley did reserve the right to supplement his Brief with additional filings if the Rule 8.3(c)
charge was finally specified in Bar Counsel's Reply, but Bar Counsel made no attempt to further
specify its claim that Mr. Chesley engaged "in conduct involving dishonesty, fraud, deceit, or
misrepresentation following the initial distribution of client funds from the Guard settlement" in
its Reply Brief. As such, the KBA's proof for the alleged violation of rule 8.3(c) was never
237
Respondent's Post-Hearing Brief, p. 32 n. 18.
56
produced, and the Trial Commissioner cites none in finding that Mr. Chesley violated this
Rule.239
The Trial Commissioner's Report is replete with completely unsupported findings
regarding Mr. Chesley's alleged unethical behavior under this Rule, including statements that
Mr. Chesley "believed 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;" that he "attempted]
to conceal and cover up" the misdeeds of G-C-M; and that "[hjis entire course of conduct was
one of self-interest and self-preservation of both himself and his co-counsel." The Trial
Commissioner's "findings" are simply not supported by the evidence in the record. And his
rhetorical flourishes are a clear indication that Trial Commissioner was unable to set aside the
preconceived notions he brought to this case, and joined in Bar Counsel's rush to judgment to
sentence Mr. Chesley to the professional death penalty.
The Trial Cornmissioner's finding that Mr, Chesley violated Rule 8.3(c) is entirely
unsupported by the record and must be reversed.
XV. Mr. Chesley's fee - which was only 10% of the settlement amount - was not
unreasonable, and therefore did not violate Rule 1.5(a).
In their Brief to the Trial Corrirnissioner, counsel argued that Mr. Chesley's fee was not
excessive because it amounted only to 10% of the settlement amount, and lawyers routinely
receive 30% to 40% of the settlement proceeds in legal fees. The fact that G-C-M stole an
excessive amount of money from the class does not make Mr. Chesley's 10% fee excessive
under Rule 1.5(a).
It is astonishing that the Trial Commissioner's Report does not even mention Mr.
Chesley's argument, much less offer a reasonable legal analysis why the argument is unsound.
339
57
Instead, the Trial Commissioner uncritically accepted the KBA's simplistic and incorrect
arguments regarding Mr. Chesley's fee.
Bar Counsel argued that the maximum fee Mr. Chesley could receive must be calculated
by multiplying the percentage in his contract with G-C-M by the amounts G-C-M were entitled
to receive under their individual contracts with their clients. But this is a lawyer discipline
case, not a breach of contract case. The dispositive question is whether Mr. Chesley received
an unethically excessive portion of the settlement fund in contravention of Rule 1.5(a), an
argument not even mentioned by the Trial Commissioner in his Report.
As Mr. Chesley set forth in his Brief to the Trial Commissioner, before he became the
lead negotiator in the Guard settlement negotiations, AHP had offered $25 million. Because of
his long standing relationship with AHP's counsel, Jack Vardaman, and their resulting ability to
negotiate with candor, Vardaman and Mr. Chesley knew before the mediation that they could
settle for $200 million.240 For this service, Mr. Chesley ultimately received a tee that totaled
approximately 10% of the settlement fund. Such a fee is reasonable on its face. Lawyers are
routinely paid three or four times that percentage, and Mr. Chesley's contribution to the
extraordinarily successful settlement is undisputable.
Ten percent is certainly reasonable for increasing the settlement fund ten-fold, adding
approximately $175 million to the settlement value of the case. Mr. Chesley possessed unique
expertise in this extraordinarily difficult and complex settlement situation, and he applied this
expertise with remarkable results. Professor Hazard described Mr. Chesley's performance as "a
real home run."241 As Professor Arthur R. Miller put it, 'That's alchemy. That's incredible. His
VardamanDepo., pp. 32,36,103-04; Madonick Depo., pp. 40-45.

Tr. II, Hazard, p. 1306.
58
value added was Si75 million."242 On those facts, a fee of 10% of the total settlement is not
unreasonable and does not violate Rule 1.5(a).
That is the expert opinion of two of the country's most preeminent legal ethics scholars,
Professors Geoffrey C. Hazard, Jr. and Arthur R. Miller. Prof. Hazard was the Reporter for the
RESTATEMENT OF LAW (THIRD) THE LAW GOVERNING LAWYERS and co-author of THE LAW OF
LAWYERING. Prof. Miller is co-author of WRIGHT AND MILLER, FEDERAL PRACTICE AND
PROCEDURE, and is a recognized expert on legal ethics in the class action arena. In the words of
Professor Hazard:
When you are talking about this kind of money involved in the settlement, lawyer
fees in the order of 18, up to 24, 25 percent are within what courts have approved
in class suits.
Now — so I think it is well within the range of reason, particularly given that it
was such a really terrific result.243
Likewise, Professor Miller testified that Mr. Chesley's fee was "definitely within reason."244
The question as to whether Mr. Chesley's 10% fee is unethical is answered by the plain
language of the Rule, which provides as follows:
(a) A lawyer shall not make an agreement for, charge, or collect an

unreasonable fee or an unreasonable amount for expenses. The factors to
be considered in deterrnining 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;
(4) the amount involved and the results obtained;..,
(7) the experience, reputation, and ability of the lawyer or lawyers

performing the services; and
Tr. n , Miller, p. 1363.

Tr.H, Hazard, pp. 1306-07.
Tr. II, Miller, p. 1364.
59
(8) whether the fee is fixed or contingent.
Rule 1.5(a) (emphasis added). As Professors Hazard and Miller opined, under the plain language
of Rule 1.5(a), Mr. Chesley's fee was not "unreasonable."
Indeed, even Bar Counsel's own expert did not opine that the amount of Mr.
Chesley's fee was unreasonable. Tellingly, he was not even asked about Mr. Chesley's fee.
Further, the Trial Commissioner's finding that Mr. Chesley's fee violates Rule 1.5(a)
because it is in excess of what he was entitled to under the contractual agreement with the
clients245 is simply incorrect, as a matter of law. It is undisputed that Mr. Chesley did not have a
fee arrangement with a single one of the Settling Claimants. 46 And Bar Counsel conceded that
all of the Guard plaintiffs "were represented by Gallion, Qinriingham, Lawrence and Mills . . . .
None of these clients had signed an individual contract with the Respondent."2 7
The Trial Commissioner did not mention any of these arguments in his Report, however.
He instead accepted, without question, Bar Counsel's simplistic contention that the only way to
calculate the fee Mr. Chesley should have received was calculating 21% of what G-C-M were
entitled to receive under their contracts with the Guard plaintiffs. According to Bar Counsel and
the Trial Commissioner, Mr. Chesley's fee violates Rule 1.5(a) because the total fees he received
exceeded that 21%, As extensively discussed by Mr. Chesley in his Brief to the Trial
Commissioner and herein, there are multiple other ways to evaluate the reasonableness of Mr.
Chesley's fee. Rather than taking the time to consider the alternatives presented by Mr. Chesley,
the Trial Commissioner accepted the "fifth grade arithmetic" presented by Bar Counsel.
Even assuming for the sake of argument that the G-C-M contract provided the upper
ethical limit of Mr. Chesley's fees, the agreement was for a percentage of the fees received by
245
Report of Trial Commissioner, p, 18.
246
Tr. H, Ericlison, p. 1175.
247
60
the lawyers. Under the terms of the agreement, any payment to Mr. Chesley above the
contractual rate would not reduce the funds received by the individual plaintiffs, only the fees
received by G-C-M. And there is no legal reason why those lawyers could not voluntarily pay
Mr. Chesley more than the agreed 21%. There is simply no authority or law that would suggest,
for example, that anytime a client pays a premium after the fact based on extraordinary results,
the attorney commits an ethical violation if he accepts the voluntary bonus.
Further, the Trial Commissioner's unsupported statement that Mr. Chesley's fee is
somehow unreasonable because "he was present and participated in argument to Judge
Bamberger wherein the Judge approved fees in the case of 49%" is yet another example of the
Trial Commissioner's failure to actually examine the evidence in the record, rather than
accepting Bar Counsel's Brief at face value. As set forth above, there is no believable evidence
that at the alleged February 6, 2002 meeting, the issue of attorneys' fees was actually argued by
Mr. Chesley. And there is not one scintilla of evidence that Mr. Chesley knew on February 6,
2002, that G-C-M had withheld 49% of the settlement funds as legal fees. Furthermore, while
the Order that allegedly resulted from that hearing approved attorneys' fees, that Order did not
mention the amount of the attorneys 'fees, either as an amount or as a percentage.248 Thus, even
if he had seen it, the Order would not have put Mr. Chesley on notice that the amount of the fees
G-C-M were claiming were 49% of the funds.
Viewing Mr. Chesley's 10% fee as unreasonable simply because it was paid to him by G-
C-M out of the larger unreasonable fee stolen by G-C-M, is untenable because the Trial
Commissioner cites no evidence whatsoever - because there is none - that Mr. Chesley was
KBA Ex. 81; Bar's Post-Hearing Brief, p. 33.
61
aware at the time of the size of the unreasonable fee collected by Gallion, Mills, and
Cunningham, nor is there any reason that he should have been aware.249
Further, there is no reason that the amount of Mr. Chesley's fee should have made him
suspicious that Gallion's and Cuimingham's fees were unreasonable. The $16.5 million Mr.
Chesley originally received would roughly equate to 2 1 % of a 40% legal fee, which would not
be a. per se unreasonable amount.250 Even adding the additional $4 million Mr. Chesley received
following the second distribution, the resulting $20 million fee would still be less than 27% (the
amount specified in Mr. Chesley's original fee contract) of a 40% contingency fee. The mere
fact of the second payment would not send red flags, either, as second distributions are a
common occurrence m class action settlements.
Likewise, being paid a "success premium" contemporaneously with a second distribution
- particularly one that arguably equated to the amount that would bring Mr. Chesley's total
compensation up to the amount Guard counsel initially contracted to pay him — would not,
standing alone, inform Mr. Chesley how much the other lawyers had retained for themselves.
Thus, the bare amount of Mr. Chesley's fees is insufficient to show that he was aware of the fee
amounts retained by Gallion and Cunningham, much less that he was a direct participant in
receiving the overall fee taken by G-C-M.
It is undisputed that Mr. Chesley never saw or knew about any of the contingency fee contracts that Gallion,
Mills, and Cunningham had with their clients. Tr. TJ, Chesley, p. 678.
250
See In re Remeron Direct Purchaser Antitrust Litig., 2005 WL 30O88OS at *16 (D.N.J. Nov. 9, 2005) ("Attorneys
regularly contract for contingent fees between 30% and 40% with their clients in non-class, commercial litigation.");
In re Ikon Office Solutions, Inc., Sec. Litig., 194 F.RD. 166, 194 (ED. Pa. 2000) ("[I]n private contingency fee
cases, particularly in tort matters, plaintiffs' counsel routinely negotiate agreements providing for between thirty and
forty percent of any recovery."); Ericksen Constr. Co., Inc. v. Morey, 923 F. Supp. 878, 881 (S.D. W.Va. 1996);
Durant v. TraditionalInvs., Ltd., 1992 "WL 203870 at *4 n.7 (SD. N.Y. Aug. 12,1992).
251
Tr. II, Hazard, pp. 1304-05; Stilz Depo., pp. 21-23.
62
In sum, Mr. Chesley's total fee of $20 million - close to 10% of the $200 million total
settlement fund - is not "unreasonable" under Rule 1.5(a). Accordingly, the Trial
Commissioner's finding that Mr. Chesley violated this Rule must be reversed.
V. Mr. Chesley cannot be ordered to disgorge $7,555,000.00 in a lawyer discipline case.
The Trial Commissioner ordered Mr. Chesley to disgorge $7,555,000.00 of his "excess
fees" in the most vague and nonspecific manner: "either through the auspices of the Abbott case,
should those clients prevail, or some other means designed by the Court."252 The cavalier nature
with which this amount was ordered as restitution is particularly astounding considering the Trial
Commissioner failed to even mention Mr. Chesley's argument that his total fee is not
unreasonable under Rule 1.5(a) because it was close to 10% of the $200 million settlement
fund.253
While the Supreme Court has occasionally approved lawyer discipline that includes
restitution of a sum certain owed to a single client, the Supreme Court has never required
disgorgement of millions of dollars for subsequent distribution to hundreds of members of a class
ofplaintiffs.254
SCR 3.380 sets forth the forms of discipline available in a lawyer disciplinary matter.
The Rule explicitly states that discipline may be administered in four ways: private reprimand,
public reprimand, suspension from practice for a definite time, or permanent disbarment.255
Notably, this Rule does not mention restitution.

253
254
Nor has the Supreme Court ever cited any authority in the Rules for imposing restitution as a sanction in a lawyer
discipline case.
355
SCR 3.380.
63
At least one court has held that restitution cannot be ordered in attorney disciplinary
matters.256 The Ac/zerman court found that restitution cannot be properly ordered in a
disciplinary matter because: (1) a damaged client's remedy should be by way of a civil suit for
damages, where the attorney would have the foil range of defenses, many of which may not be
available in a disciplinary proceeding; (2) issues of damages and restitution should not be
litigated in disciplinary proceedings because those matters are not essential to the main purpose
of the proceeding, which is to regulate the professional conduct of lawyers in the public interest;
(3) the Indiana attorney discipline rules do not authorize findings in support of a damage award
to aggrieved clients; (4) the amount of money damages due the aggrieved client cannot be
constitutionally determined in a disciplinary proceeding because it would deny the lawyer his
constitutional right to trial by jury.25'
Each of the concerns voiced by the Ackerman court is pertinent here. Like the Indiana
disciplinary rules, the Kentucky rules do not provide for restitution or the award of damages to
aggrieved clients. Further, the claimants in the Guard action have brought the Abbott civil action
seeking restitution from Mr. Chesley (and the other attorneys) and they plainly have an adequate
remedy in that action.
Moreover, Senior Judge Wehr denied summary judgment against Mr. Chesley in the
Abbott .action, and the Court of Appeals recently affirmed that denial of summary judgment,
holding that there is at least a genuine issue of material fact whether Mr. Chesley owes those
claimants any money." When Abbott is remanded to the Boone Circuit Court, Mr. Chesley will
be entitled under the Civil Rules to full discovery — a right he was denied by the Trial
Commissioner in this lawyer discipline case. He will also have his constitutional right to trial by
256
In re Ackerman, 330 N.E.2d 322, 323 (Ind. 1975).
257
Id. at 323-24.
258
See Cunningham v. Abbott, 2011 WL 336459 (Ky. App. Feb. 4, 2011).
64
jury, which is not available to him in this lawyer discipline case. Th& Abbott civil litigation is the
proper forum in which to determine whether Mr. Chesley must pay millions of dollars of
restitution to the Guard plaintiffs.259
Finally, the Trial Commissioner's restitution recommendation offers absolutely no plan
for distributing this massive restitution award. The Trial Commissioner did not even recommend
a particular body to distribute the award - casually stating that the restitution should be
distributed either "through the auspices of the Abbott case" or by "some other means designed
by the [Supreme] Court."260 By ordering restitution without even a semblance of a distribution
plan, the Trial Commissioner has saddled some other tribunal with the enormous burden of
crafting a workable plan. The Board of Governors should not join in the Trial Commissioner's
vague and unprecedented restitution decision. For all the foregoing reasons, the Trial
Commissioner's restitution recommendation should be vacated.
VI. The mitigating factors applicable in this case do not warrant permanent
disbarment.
The section of Trial Commissioner's Report recommending permanent disbarment is
notable for both its brevity and its sweeping conclusions unsupported by the evidence. As set
forth above, the record shows that Mr. Chesley was not "in the room" for the three major phases
of the fen-phen scandal: (1) the initial distribution of the funds conducted through the summer
and fall of 2001 through individual settlements with clients conducted by G-C-M and their
respective employees; (2) the establishment of the Kentucky Fund in July 2002, with the
subsequent transfer of the remaining settlements funds to the Fund; and (3) the attempt to cover
259
Indeed, this lawyer discipline case should have been abated until the completion of the Abbott litigation. It has
been uniform practice in KBA lawyer discipline proceedings to abate the KBA charge when there is pending, related
civil litigation. Mr. Chesley's several motions to abate this proceeding were routinely denied, and the disparate
treatment of Mr. Chesley is troubling.
260
65
up G-C-M's theft by making a second distribution of funds in 2002. Despite this, the Trial
Commissioner recommends that Mr. Chesley receive the professional death penalty for his
association with G-C-M.
The Trial Commissioner's recommendation is perhaps attributable to the way in which
his preconceptions about the fen-phen scandal were exacerbated by the KBA's theme of guilt by
association, a theme which permeated these proceedings and the KBA's Brief. The Bar labored
mightily to convict Mr. Chesley of guilt by association with G-C-M, a tactic which appears to
have worked, despite the fact that guilt by association is clearly not a valid basis for the
imposition of permanent disbarment.261 The Trial Commissioner was swayed enough by this
theme to find that nearly all of the ABA aggravating factors "apply emphatically" to the
Respondent. He does not, however, explain how the aggravating factors apply so
emphatically.262
In actuality, multiple mitigating factors justify a reduction in the degree of discipline
appropriate in this case, including (1) absence of any prior disciplinary record; (2) character or
reputation; (3) absence of a dishonest or selfish motive; and (4) free and full disclosure to
disciplinary board or cooperative attitude toward proceedings.263
The best example of the Bar's guilt-by-association innuendo is the gratuitous inclusion of 11 pages in its Post-
Hearing Brief (pp. 23-30 and 34-36) summarizing the testimony of individual plaintiffs who had never even met Mr.
Chesley. The details of the methodology by which Mr. Helmers, Ms. Phipps, and the other staff members
negotiated with each of Mills and Cunningham's clients is totally unnecessary to the ratification count and
completely irrelevant to all the other counts in the Charge. Similarly, the Bar's Post-Hearing Brief devoted a full
page to itemizing the admissions of guilt made by Gallion and Cunningham when they accepted permanent
disbarment. Bar's Post-Hearing Brief, p. 64. The recitation of their confession serves no purpose other than guilt-
by-association; a fact proven by Bar Counsel's statement following that recitation: "There is no reason why this
Respondent should be treated any differently than his cohorts, indeed, . . . there are many aspects of this
Respondent's own individual conduct, especially in light of his experience and expertise, that are just as abhorrently
unethical if not more so." Id. at 65.
2
263
ABA STANDARDS FOR IMPOSING LAWYER SANCTIONS, § 9.32.
66
Mr. Chesley is 75 years old, and has been practicing law in Ohio and Kentucky for fifty
years. He is nationally renowned in the resolution of class actions and mass torts. He has
never been cited for a disciplinary violation, and has served as the Chairman of the Supreme
Court of Ohio Board of Commissioners on Grievances and Discipline. There is no rational
reason why a lawyer with Mr. Chesley's level of professional success, community involvement
and financial security would risk it all to cover up other lawyers' criminal misconduct.
Over the course of a career which even the Trial Commissioner deemed
"distinguished,"265 he has lent his expertise to the some of the most well-known and complex
litigations in recent history, including Agent Orange litigation, the Beverly Hills Supper Club
fire, tobacco litigation, breast implant litigation, and the Lockerbie bombing litigation, Despite
being embroiled in some of the most well-known and complex litigations in recent history,
which contained multiple avenues to trip up even the best of lawyers, he has never been cited for
a disciplinary violation,
Mr. Chesley is a man of exemplary character and the KBA presented no witnesses who
testified to the contrary.266 Instead, Father Michael Graham, the President of Xavier University,
characterized Mr. Chesley as "a man of tremendous personal principles and integrity" who
"believes what he believes in passionately and represents it aggressively" but does not do
"anything but play entirely within the rules."267 Judge Michael Barrett of the United States
District Court for the Southern District of Ohio testified that Mr. Chesley is a leader in
Cincinnati's charitable community with an "impeccable" reputation for truthfulness and
264
Tr. II, Feinberg, p. 1092.
265
Instead, Bar Counsel sought to mock Mr. Chesley's character witnesses. While acknowledging — as she must —
that those witnesses are relevant to mitigation, she belittled them for knowing little about the case and focusing on
Mr. Chesley's lifetime of good work. Cf. Bar's Post-Hearing Brief at 68-70. Of course, that is the role of character
witnesses.
267
Tr. n , Graham, p. 1025.
61
honesty.268 Elisa Crawford, a former class action client, further characterized Mr. Chesley as
"the most trustworthy man I have ever met in my life," classifying him as a man of high ethics,
integrity, and brutal honesty.269
There is absolutely no evidence that Mr. Chesley agreed to negotiate the Guard
settlement for a dishonest or selfish motive. Every lawyer in private practice intends to earn
money; that cannot be the type of selfishness to which the ABA Standards refer. Mr. Chesley
has built a practice out of lending his expertise to highly complex litigation like the Guard
litigation and there was nothing unusual, dishonest, or selfish to his provision of expertise here.
His expertise is precisely why the other lawyers engaged him to settle the Guard litigation.
Despite the Trial Commissioner's impression to the contrary, Mr. Chesley had made full
and free disclosure to the Bar and has been nothing but cooperative. Mr. Chesley promptly
responded to all of the Bar's investigation questions,270 the Charge, and the Amended Charge.
He and his counsel fully participated at the hearing and he was nothing but cooperative during
his testimony. Further, because none was presented by the KBA, the Trial Commissioner failed
to cite either any evidence establishing the falsity of Mr. Chesley's alleged misstatements or any
** Tr. II, Barrett, pp. 1036,1039.

269
Tr. II, Crawford, p. 1062. Mr. Chesley has dedicated himself to serving both his local community and national
and international causes about which he is passionate. On an international scale, he serves as President of the Jewish
National Fund, a United Nations NGO dedicated to developing the land of Israel through various initiatives. Tr. II,
Graham, pp. 1019-20. Locally, he is a charitable leader who is always willing to give his time to worthy causes. Tr.
II, Barrett, p. 1036. He is heavily involved with the University of Cincinnati College of Law where he funds a
yearly lecture series and a litigation prize awarded at commencement Id. a t l 0 3 5 . He is one ofnine members of the
Board of Trustees for the University of Cincinnati. He has been honored for his contributions to Ohio Cancer
Research Associates, and independent organization that is dedicated to the cure and prevention of cancer through the
funding of seed money for cancer research ha the State of Ohio. Id. at 1036. Each summer he provides the funds for
students enrolled in Xavier University's selective Philosophy, Politics & the Public Program, which provides
students with a blended educational experience in and out of the classroom, focusing on politics and civic life, to
participate in internships. Tr. II, Graham, pp. 1023-24.
Those who know and have worked with Mr. Chesley characterize him as "a man of tremendous personal
principles and integrity" who "believes what he believes in passionately and represents it aggressively" but does not
do "anything but play entirely within the rules." Tr. II, Graham, p. 1025. He has an "impeccable" reputation for
truthfumess and honesty and is known with the legal coramunity as a man of his word. Tr. H, Barrett, pp. 1033,
1036, 1039.
27<J
KBA266,268,270.
68
proof whatsoever that Mr. Chesiey made the statements with knowledge of their falsity, nearly
five years after the events in question occurred.271
As a highly successful lawyer in the areas of class action and complex litigation, with an
unblemished record, a reputation for integrity, honesty, and community service, Mr. Chesiey
simply had no logical motive to assist the other lawyers, at enormous risk to himself, in covering
up their massive theft from their clients that he had no role in conceiving.
CONCLUSION
For the foregoing reasons, Bar Counsel failed to carry their burden of proof, and the Trial
Commissioner's findings with regard to Mr. Chesley's alleged violations of Rules 1.5(a), 1.5(c),
1.5(e), 1.8(g), 3.3(a), 8.1(a), 8.3(c), and 5.1(c)(1) must be set aside. The Trial Commissioner's
recommendations of permanent disbarment and the restitution of $7,555,000.00 must also be
vacated. The Board of Governors should exercise de novo review and find that this Respondent
is not guilty as to every Count in the Charge.
Respectfully submitted,
Sheryl
Frost
400 W. Market St., 32nd Fl.
Phone: 502-589-5400
Scott C. Cox
Cox & Mazzoli, PLLC
600 West Main Street, Suite 300
Phone: 502-589-6190
271
69
Mark L. Miller
600 W. Main Street, Suite 300
Phone: 502-589-6190.
James M. Gary
Weber & Rose, P.S.C.
Phone: 502-589-2200
Frank Benton, IV
Benton, Benton & Luedeke
528 Overton Street
P.O. Box 72218
Newport, KY 40172
Counsel for Respondent, Stanley M. Ckesley
CERTIFICATE OF SERVICE
It is hereby certified that on April 25, 2011, a copy of this Brief was hand-dehvered to
Ms. Susan Greenwell, Disciplinary Clerk of the Kentucky Bar Association, 514 West Main
Street, Frankfort, Kentucky 40601, with sufficient copies for distribution to:
Hon. William L. Graham Linda Gosnell
Trial Commissioner Chief Bar Counsel
79 River Bluff Office of Bar Counsel
Frankfort, KY 40601 Kentucky Bar Association
514 West Main Street
Frankfort, KY 40601
Also pursuant to prior order electronic copies were sent to the following:
Linda Gosnell Cary Howard

Kentucky Bar Association Kentucky Bar Association
514 West Main Street 514 West Main Street
Frankfort, KY 40601 Frankfort, KY 40601
lgosneIl(S).kvbar.org choward@kybar.org
Counsel for Respondent, Stanley M. Ckesley
LOUUbrary01I8087.0571I45 1044099v6
70
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fees received by Mr. Chesley in the fen-phen (Guard) case. And the Trial Corrrmissioner
recommended Mr. Chesley disgorge $7,550,000 of the fees he received in Guard. Yet, Senior
Judge Wehr denied summary judgment against Mr. Chesley in Abbott, a decision recently
affirmed by the Court of Appeals.4
Accordingly, this disciplinary proceeding should be held in abeyance pending the
conclusion of the litigation in Abbott.
BACKGROUND FACTS
The Abbott action was filed on January 4, 2004 by former plaintiffs in the Guard class
action litigation concerning the diet drug fen-phen. Gallion, Cunningham, and Melbourne Mills
("G-C-M") were all named defendants, as was Mr. Chesley. Pleading breach of fiduciary duty
and negligent and/or fraudulent misrepresentations, plaintiffs sought to recover all money
received by the defendants, as fees or otherwise, in Guard.
Defendants had hardly begun to take discovery when the plaintiffs moved for partial
summary judgment against G-C-M. The trial court awarded plaintiffs partial summary judgment
against G-C-M in March 2006. In August 2007, the trial court awarded the plaintiffs $42 million
dollars as a "baseline compensatory award" against G-C-M, reserving for trial the plaintiffs'
causes of action for negligent and/or fraudulent misrepresentation and punitive damages.
The plaintiffs moved for partial summary judgment against Mr. Chesley in December
2006. The trial court denied this motion, stating that "[t]he rationale of the previously entered
partial summary judgment [against G-C-M] does not apply to him [Mr. Chesley] since the facts
are in dispute." Senior Judge Wehr concluded that there remains a genuine issue of
4
See Exhibit D.
The Court of Appeals reversed that summary judgment and denied the petition for rehearing. See Exhibit D.
2
material fact whether Mr. Chesley has any liability to the plaintiffs in Abbott (who were the
plaintiffs in Guard).
The Abbott plaintiffs appealed the denial of their motion for partial summary judgment
against Mr. Chesley. Mr. Chesley moved to dismiss the cross-appeal on the grounds that an
order denying summary judgment is interlocutory in nature and not appealable, but the Court of
Appeals denied his motion.
Discovery was then suspended in the Abbott action during the pendency of the
appeals.6 Consequently, Mr. Chesley was not able to take the deposition of even one Abbott
plaintiff, many of whom testified in this disciplinary proceeding. Mr. Chesley's subsequent
request to take discovery in this disciplinary case was denied by Trial Commissioner Messer,
despite SCR 3.300, which expressly provides that "Respondent shall have all the rights secured
to a party by the Rules of Civil Procedure . . . ."
On April 3, 2009, while the Abbott orders were on appeal, Gallion and Cunningham were
convicted for their roles in orchestrating the fen-phen fraud. Both appealed their convictions. At
Gallion's deposition noticed by Bar Counsel for August 18, 2009, one day after he was
sentenced, he declined to answer any questions and asserted his Fifth Amendment privilege due
to his pending appeal. Bar Counsel then stipulated that Mr. Cunningham would similarly assert
his Fifth Amendment privilege, rendering them both unavailable as witnesses. It is believed their
testimony would be helpful to Respondent, as was the testimony of Melbourne Mills after his
acquittal.
Shortly after the appeals were taken - and discovery abated - in Abbott, the Inquiry
Commission filed its charge against Mr. Chesley. Before the charge was issued against him by
the Inquiry Commission, Mr. Chesley filed a motion to stay the Inquiry Commission
6
See Exhibit C.
3
investigation during the tenure of Barbara Bonar as President of the KBA due to the significant
conflict of interest presented by ongoing litigation between Mr. Chesley and Ms. Bonar arising
out of a separate matter.
In 2006, Ms. Bonar filed the action Barbara D. Bonar, et al. v. Waite, Schneider, Bayless
& Chesley Co., L.P.A., et al, in Boone Circuit Court claiming she was entitled to 50% of the
attorneys' fees awarded by Senior Judge John Potter to class counsel, including Mr. Chesley and
his firm, in a class action lawsuit against the Roman Catholic Diocese of Covington. Following
a separate bench trial of the fee dispute, Senior Judge Robert McGinnis (appointed by the Chief
Justice to preside over the class action lawsuit after Judge Potter) determined that Ms. Bonar and
her firm were not entitled to any portion of the fee and dismissed their claims with prejudice.
The Court of Appeals affirmed the lower court's order, and denied the petition for rehearing.
The Supreme Court has recently granted discretionary review.7
This litigation was fraught with attacks by Ms. Bonar on Mr. Chesley's integrity and
conduct as attorney, but in his opinion dismissing Ms. Bonar's claims, Judge McGinnis
determined that it was Bonar's conduct while acting as class counsel that violated the Kentucky
Rules of Professional Conduct. Those findings were affirmed on appeal by the Court of
Appeals.8
Meanwhile, Ms. Bonar's first act as KBA President was to fire from the KBA Ethics
Committee every attorney whom she believed to have had a professional relationship with Mr.
Chesley and his law firm.9 Ms. Bonar's actions led the KBA to authorize a special investigation
into her conduct, which resulted in a report known as the "Houlihan Report" disseminated to *;
See footnote 3.
8
See Exhibit D.
9
Andrew Wolfson, Fired Ethics Panelists Had Link to Foe, THE LOUISVILLE COURIER-JOURNAL, Oct. 12, 2008, at
A-10, attached as Exhibit E.
4
members of the Board of Governors. As a result of Ms. Bonar's misconduct, the Board of
Governors removed her from participating in discipline cases during her time as KBA
President10
The Trial Commissioner denied Mr. Chesley's request to see the Houlihan Report,
thereby denying his opportunity to discover any evidence that Mr. Houlihan discovered on the *
improper influence that Ms. Bonar may have exerted - or attempted to exert - over his otherwise *
confidential disciplinary case. Specifically, counsel for Respondent state, on information and
belief, that witnesses interviewed by Mr. Houlihan told him that Bonar tried unsuccessfully to
get Bar Counsel to suspend Mr. Chesley's license when he testified under a grant of immunity at
Gallion and Cunningham's trial - despite the U.S. Attorney's statements that Mr. Chesley had
never been a target of their investigation,11 and: despite,Judge Reeve's n t o g that Mr. Chesley
was not a co-conspirator but had been "duped" by Gallion;12
At the outset of the evidentiary hearing before Trial Commissioner Graham, Respondent
renewed his motion to abate this discipline case pending conclusion of the Abbott litigation, and
the motion was summarily denied.
On February 4, 2011, three and a half years after the appeals in Abbott were taken, and
well after the hearing in this matter had concluded and post-hearing briefs had been submitted,
the Court of Appeals entered an Order affirming the denial of the plaintiffs' motion for partial
summary judgment against Mr. Chesley. Accordingly, Mr. Chesley may finally gain the ability
to begin discovery in the Abbott action.
10
See Kentucky Bench & Bar, vol. 73, no. 1, p.3 (January 2009), attached as Exhibit F.
11
See excerpt from Brief of the Plaintiff-Appellee United States, United States of America v. Shirley Cunningham,
Jr. and William GaZ/ion, Nos.09-5987,09-5998, attached as Exhibit G.v
12
See Judge Reeve's decision in No. 2:07-CR-0039-DCR, Minute Entry Sheet and transcript excerpt, attached as
Exhibit H.
5
ARGUMENT
I. The Rules of Professional Conduct and established practice in discipline

proceedings dictate that this action be abated pending resolution of Abbott
It appears that this is the first time in the history of the Commonwealth that the Inquiry
Commission and Bar Counsel have proceeded in a disciplinary matter prior to the resolution of
closely related civil litigation.13 Abatement is contemplated by SCR 3.180(2), which expressly
provides:
Proceedings may be deferred by the Inquiry Commission if there is pending civil

or criminal litigation directly involving the Respondent or proposed Respondent
involving substantially similar material allegations to that or those in the
disciplinary proceedings, provided, however, that the Respondent-attorney
proceeds with reasonable dispatch to insure the prompt disposition of the pending
litigation.
There are several examples of bar proceedings being held in abeyance pending the
resolution of a related civil litigation,14 including cases involving lbrmcr Presidents of the KBA.
See Kentucky Bar Ass'n v. Catron, 229 S.W.3d 910, 912 (Ky. 2007) (disciplinary proceedings
against former KBA President held in abeyance during pendency of civil suit filed against him
by City of Bowling Green pertaining to same subject matter as Inquiry Commission Complaint).
In addition, counsel for Mr. Chesley recently learned from counsel for Barbara Bonar
that, after former Magistrate Judge Cleve Gambill resigned as Special Bar Counsel, the KBA has
held its disciplinary action against Ms. Bonar (stemming from the alleged ethical violations
committed in the Diocese matter) in abeyance pending the outcome of that civil litigation.
13
Counsel for Mr. Chesley. completed a review of disciplinary proceedings that involved a related civil proceeding
and cannot find any instance in which the disciplinary proceeding was allowed to precede the completion of the civil
litigation, particularly when discovery had not been completed.
1
There are also multiple instances of bar proceedings" held in abeyance pending resolution of related criminal
actions. See, e.g., Kentucky Bar Ass'n v. Combs, 306 S.W.3d 520 (Ky. 2010); Buehner v. Kentucky Bar Ass'n, 27'1
S.W.3d 531, 532 (Ky. 2008); Haggard v. Kentucky Bar Ass'n, 118 S.W.3d 589, 589 (Ky. 2003); Kentucky Bar
Ass 'n v. Barger, 98 S.W.3d 59. 59 (Ky. 2002); Gettys v. Kentucky Bar Ass 'n, 11 S.W.3d 45,46 (Ky. 2000).
6
Despite the fact that the Abbott plaintiffs seek to recover from Mr. Chesley the attorneys'
fees he received in the fen-phen case and the Bar proceeding seeks to have him disgorge the very
same legal fees, the Inquiry Commission and the Trial Commissioner refused to abate the
proceedings against Mr. Chesley. This disparate treatment of Mr. Chesley, when contrasted with
the preferential treatment provided to the KBA's own, is extremely troubling.
Mr. Chesley has plainly received disparate and unprecedented treatment by being forced
to defend the KBA's charges against him during the pendency of a substantially related civil
litigation, in violation of his rights under Sections 1, 2 and 3 of the KENTUCKY CONSTITUTION.
Accordingly, these proceedings should be abated until the conclusion of the Abbott action.
II. Mr. Chesley has and will continue to be prejudiced by the continuation of these
disciplinary proceedings during the pendency of Abbott
Inconsistent rulings in Abbott and in this disciplinary proceeding is not just a possibility -
it has already occurred. By affirming the trial court's denial of the plaintiffs' motion for partial
summary judgment against Mr. Chesley, the Court of Appeals has indicated that there is at least
a genuine issue of material fact as to whether Mr. Chesley owed them any money. That holding
is obviously in direct conflict with the Trial Commissioner's recommendation that Mr. Chesley
be ordered to disgorge $7,555,000 as restitution to the Abbott plaintiffs "either through the
auspices of the Abbott case, should those clients prevail, or some other means designed by the
Court."15
If this discipline proceeding were to proceed to the Kentucky Supreme Court, a decision
adverse to Mr. Chesley could unnecessarily create collateral estoppel issues in the Abbott case -
despite the fact that Mr. Chesley is entitled by § 7 KY. CONST, to a jury trial on the Abbott
plaintiffs' claim for money damages. See In re Ackerman, 330 N.E.2d 322, 323 (Ind. 1975)
15
7
(disgorgement of attorneys' fees is not available in a lawyer discipline case because, inter alia,
that would deprive the lawyer of his constitutional right to a jury trial).
Further, because discovery was abated in Abbott from essentially the moment the Inquiry
Commission filed its charge against Respondent to date, Mr. Chesley has been repeatedly
prejudiced by his inability to use civil discovery in Abbott to discover exculpatory evidence. Yet
Bar Counsel introduced into evidence Mr. Chesley's entire deposition in that case. Bar Counsel
also called as witnesses 17 of the Abbott plaintiffs and Mr. Chesley was required to go forward
with his cross-examination of those witnesses, despite never having the chance to depose them in
Abbott due to the abated discovery. In issuing his recommendation, the Trial Commissioner
reviewed incomplete Abbott discovery materials and listened to witnesses who had never been
deposed by Mr. Chesley.
In addition, while discovery was foreclosed in Abbott, Mr. Chesley's request for the
provision of exculpatory evidence was denied, and his request to engage in discovery was
denied, leaving him without any meaningful ability to prepare to defend against adverse
evidence, or obtain any exculpatory information.
Now that the Court of Appeals has upheld the trial court's denial of the plaintiffs' motion
for partial summary judgment against Mr. Chesley, he can finally begin taking discovery in
Abbott. He should not be further prejudiced in this matter by being required to pursue his appeal
of the Trial Commissioner's recommendation - especially the recommended disgorgement -
while simultaneously defending the Abbott plaintiffs' claims. Accordingly, these proceedings
should be abated pending final resolution of the Abbott civil action.

III. Reservation of federal claims.
Mr. Chesley expressly reserves, in accordance with the holding of England v. Louisiana
State Board of Medical Examiners, 375 U.S. 411 (1964), his right to present all of his claims that
these proceedings violate his Due Process and Equal Protection rights under the Fourteenth
Amendment to the United States Constitution and his rights to Free Speech and Association
under the First Amendment to the United States Constitution to a U.S. District Court. This
reservation is presented to avoid any assertion by the Kentucky Bar Association that Mr.
Chesley's federal Due Process claims have merged into any judgment which may result from this
proceeding, and to allow the Board of Governors to interpret applicable state law to avoid
violation of Mr. Chesley's federal constitutional rights. These federal constitutional claims are
not to be decided in this appeal and are expressly reserved for presentation to a federal court, if
necessary.
In brief, Mr. Chesley contends that these proceedings violate his federal First
Amendment, Due Process, and Equal Protection rights in the following ways:
1. Mr. Chesley's prosecution by the KBA is based on his having associated with and
provided lawful, ethical advice to attorneys who themselves have been convicted of committing
crimes and ethical violations that are embarrassing to the KBA and notwithstanding that Mr.
Chesley has not himself committed any crimes or ethical violations. The First and Fourteenth
Amendments protect Mr. Chesley against such retaliatory state action based solely on his
association with others and his providing lawful, ethical advice to them.
2. The Office of the Bar Counsel, the prosecuting entity, impermissibly influenced
the appointment of the Trial Commissioner. This system whereby an officer of the Executive
9
Branch is involved in appointing the presiding judicial officer denied Mr. Chesley a fair and
impartial judge in violation of his federal Due Process rights;,
3. Bar Counsel should have been disqualified from further prosecuting this case and
a Special Bar Counsel appointed. Bar Counsel gave a newspaper reporter access to the file in
this lawyer discipline case - at a time when it remained confidential under SCR 3.150 - resulting
in a front page story in a Cincinnati newspaper.16 After certain depositions were taken for use in
both the Helmers and Chesley cases, Bar Counsel announced unilaterally that the cases were-
consolidated for all purposes. When Trial Commissioner Messer recused himself in the Chesley
case, they were deconsolidated. When the Helmers case became public, the Chesley case
remained confidential, but Bar Counsel invited the Cincinnati reporter to view the consolidated
Helmers-Chesley file. Clearly, the reporter did not drive from Cincinnati to the Bar Center to
review the Helmers file. When Trial Commissioner Graham ordered that steps be taken to
maintain the confidentiality of the Chesley file, Bar Counsel defiantly resisted his directive.17
Respondent filed a motion to disqualify Chief Bar Counsel for misconduct. See State v.
Culbreath, 30 S.W.3d 309 (Tenn. 2000); People v. Doyle, 406 N.W.2d 893 (Mich. App. 1987).
The motion was denied.
4. The Trial Commissioner declined to stay the proceeding even though two related
proceedings precluded Mr. Chesley from obtaining and presenting evidence necessary to his
defense of the bar charges against him. The first matter, Abbott v, Chesley, is the civil case
discussed above. From the discussion, it is obvious that Mr. Chesley was impermissibly
restricted from presenting witnesses in violation of his Due Process rights.
See Exhibit I.
See Tr. n, pp. 5-17, attached as Exhibit J.
10
In the meantime, federal criminal indictments were issued against Mr. Gallion, Mr.
Cunningham and Mr. Mills also arising from the handling of the settlement funds in the matter
that prompted this bar proceeding. Mr. Chesley was never targeted for prosecution by the United
States Attorney or the federal grand jury. Those related criminal proceedings resulted in the
convictions of Gallion and Cunningham in United States v. Gallion,, No. 2:07-CR-39, in the
United States District Court for the Eastern District of Kentucky. Both were sentenced on
August 17, 2009, and appealed their convictions. At the time of Lhe proceedings below, Messrs.
Gallion and Cunningham both exercised their Fifth Amendment privilege to decline to give
testimony in the case. The testimony of Messrs. Gallion and Cunningham was vitally necessary
to Mr. Chesley's defense in this case, hi fact, Bar Counsel procured a ruling at the final pretrial
conference that she could use an incomplete deposition of Mr. Gallion taken for the plaintiffs in
the civil case.
An attorney who is subject to discipline proceedings is entitled to due process. In re
Ruffalo, 390 U.S. 544, 550 (1968). At a minimum, this means that he must be provided with an
opportunity to present a defense. Id. at 550-52. The right to present a defense includes the right
to present the testimony of witnesses in support of that defense.
5. Mr. Chesley was precluded from calling a number of witnesses who would have
testified as to his character and reputation through the years. Many of the witnesses were
attorneys or judges who have had extensive experience with Mr. Chesley. This also violated Mr.
Chesley's due process rights.
6. Mr. Chesley has been denied Equal Protection through his disparate
unprecedented treatment of being forced to defend the KBA's charges against him during the
pendency of a substantially related civil litigation. There is no basis for treatment of Mr.
11
Chesley in this fashion and the KBA has not treated similarly situated attorneys in the same
fashion.
7. In the January 2009 Edition of the Kentucky Bench & Bar, page 3, Volume 73
No. 1, it was announced that the Kentucky Bar Association Board of Governors had removed
current President Barbara D. Bonar from participation in discipline cases. Robert F. Houlihan Jr.
was retained to conduct an investigation and actually interviewed many individuals who may.
have had knowledge of the underlying events giving rise to this Bar discipline proceeding. The
Houlihan Report may have conclusions that describe retaliatory action against Mr. Chesley by
then current KBA officers. Mr. Chesley subpoenaed Mr. Houlihan and his report for the hearing
below, but the Trial Commissioner, who did review the report in camera, refused to compel
production of the report to Mr. Chesley. Mr. Chesley, as a matter of due process, was entitled to
review the contents of this report to be adequately apprised of any attempts by Bar Association
officers to use their office in an improper way. Compelled production of the report could have
lead to the discoverability of admiss'ible evidence in this Bar proceeding.
CONCLUSION
For the foregoing reasons, Mr. Chesley respectfully requests that the Board of
Governors to hold his appeal of the Trial Commissioner's Report in abeyance pending
resolution of the ongoing civil action Abbott, et al. v. Stanley M. Chesley, et ah, Boone
Circuit Court, Civil Action No. 05-CI-00436.
Respectfully\sumnitted,
Sher^S/Snyder
FrostjBriwn Tbdd IXC
400 W~Marke1 St., 32nd EL
Phone: 502-589-5400
12
Scott C. Cox
Cox & Mazzoli, PLLC
600 West Main Street, Suite 300
Phone: 502-589-6190
Mark L. Miller
Phone: 502-589-6190
James M. Gary
Weber & Rose, P.S.C.
Phone: 502-589-2200
Frank Benton, IV
Benton, Benton & Luedeke
528 Overton Street
P.O. Box 72218
Newport, KY 40172
Counselfor Respondent, Stanley M. Chesley
13
CERTIFICATE OF SERVICE
It is hereby certified that on April 28, 2011, a copy of this Motion to Abate Proceedings
Pending Resolution of Related Civil Litigation, and Reservation of Federal Claims was sent via
electronic mail and UPS overnight delivery to Ms. Susan Greenwell, Disciplinary Clerk of the
Kentucky Bar Association, 514 West Main Street, Frankfort, Kentucky 40601, with sufficient
copies for distribution to the Board of Governors and:
Linda Gosnell
Chief Bar Counsel
Office of Bar Counsel
Kentucky Bar Association
Frankfort, KY 40601
Also pursuant to prior order electronic copies were sent to the following:
Linda Gosnell
Frankfort, KY 40601
lgosnell@kvfaar.org
Cary Howard
Frankfort, KY 40601
choward@kybar. org
ondent, Stanley M. Chesley
LOUUbrary0118087.0571145 1054905v5
14

Kentucky Bar v. Stanley Chesley, Chesley's Brief On Appeal & Motion To Abate, 4/25/11

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SUPREME COURT OF KENTUCKY

KBA FILE 13785 *fy"**%

BRIEF FOR STANLEY M. CHESLEY

Scott C. Cox Mark L. Miller

James M. Gary Frank Benton, IV

Counsel for Respondent, Stanley M. Chesley

Statement of the Case 7

A. There is no credible evidence showing how Mr. Chesley's alleged

1. Bar Counsel failed to carry its burden of proving that

2. Bar Counsel failed to carry its burden of proving that

3. Bar Counsel failed to carry its burden of proving that

II. The Rules of Professional Conduct expressly allow a division of labor

KENTUCKY BAR ASSOCIATION

STANLEY M. CHESLEY RESPONDENT

BRIEF FOR STANLEY M. CHESLEY

Scott C. Cox Mark L. Miller

James M. Gary Frank Benton, IV

Counsel for Respondent, Stanley M. Chesley

Statement of the Case 7

A. There is no credible evidence showing how Mr. Chesley's alleged

1. Bar Counsel failed to carry its burden of proving that

2. Bar Counsel failed to carry its burden of proving that

3. Bar Counsel failed to carry its burden of proving that

II. The Rules of Professional Conduct expressly allow a division of labor

A. Rule 3.3(a) and the alleged misrepresentations made to

B. Rule 8.1(a) and the alleged misrepresentations made in

response to questions posed by the KBA 52

C. Mr. Chesley did not violate Rule 8.3(c) 56

KENTUCKY BAR ASSOCIATION COMPLAINANT

STANLEY M. CHESLEY RESPONDENT

BRIEF FOR STANLEY M. CHESLEY

May it please the Court:

settlement funds to the fen-phen class members by which GaUion-Cunningham-Mills ("G-C-M")

organizing or operating the Fund.

Chesley cover-up a crime he concededly did not commit?

allegedly transpired at that meeting.5

deems Barnberger a truth-teller in Mr. Chesley's case.

mass tort bar"10: Hon. Stanley M. Chesley.

for a recommendation of permanent disbarment.

engages in inappropriate hyperbole, concluding that "Chesley became 'counsel in chief" of G-

transcript or to any exhibit to support those hyperbolic conclusions - because there is no

evidence of Mr. Chesley "orchestrating" G-C-M's cover-up.

was launched on February 6, 2002, in a "clandestine" meeting allegedly attended by Judge

Commissioner, p. 25 (emphasis added).

But the Trial Commissioner's speculation is completely refuted by the uncontradicted

Moreover, a Zelig-like appearance at this alleged meeting would be inconsequential -

The Report also recommends an unprecedented restitution award of $7,550,000.00. But

client's remedy should be civil litigation. Id.

336459 (Ky. App. Feb. 4,2011).

contravene Rule 1.5(a).

STATEMENT OF THE CASE

with no clients in the consolidated action.

of appearance on behalf of the Guard plaintiffs.

Mr. Chesley engaged in a great deal of pre-mediation settlement discussions with

the two-day mediation.22

Agreement - because he had not been engaged by any of the clients.25

the settlements he negotiated, on confidentiality as a strict condition of settlement.28 Thus, a

need for public notice of the settlement.29

Vardaman Depo., p. 104; Madonick Depo., pp. 40-45

which Mr. Chesley had been engaged was now complete.

First phase of the fen-phen scandal: the "initial distribution".

the settlement and telling him it was only $150 million.36