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Abel v. Austin

Supreme Court of Kentucky

October 24, 2013

Barbara A. ABEL, Aileen Mullins, Andrea Messamore, Arlene Marshall, Belinda A. Million, Bobbie Deaton, Brenda Bray, Carol Ann Quisenberry, Charlotte Renee Hall, Christina Bucher, Claudia Sebastian-Shepard, Darby Daniels, Debbie Wampler, Easter Bishop, Eddie Lee Golden, Elizabeth C. Abney, Elizabeth D. Clore, Gwen Holt, Gwyin Cox, Hallie Traylor, Hubert Trosper, Irene Wells, Iva Stevens, James Cook, James Ingram, Janet Coons-Greene, Jessie Parsons, Jody Baldridge, Judy Bundy, Karen M. Austin, Kathy Pollitte, Leisa Perry, Linda Carr, Lorinda Calhoun, Lynn D. Jeffcoat, Mary Frazier, Melissa Gayhart, Mildred Swanson, Opal Collins, Pamela G. Abrams, Paul Floyd, Peggy W. Broughton, Peggy Grigsby, Reva Helton, Robert Wilson, Shannon M. Hall, Tami Holt, Terry Shanks, Toloria Howard, and Vickie Brewer, Appellants.
J. Brent AUSTIN; Langston, Sweet and Freese, P.A.; and Beasley, Allen, Crow, Methvin, Portis & Miles, P.C., Appellees.

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[Copyrighted Material Omitted]

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William C. Rambicure, Lexington, Angela Margaret Ford, Counsel for Appellants.

Perry Mack Bentley, Lucy Anne Pett, Carl Norman Frazier, Lexington, Counsel for Appellee J. Brent Austin.

Melissa Subit, Matthew John Bakota, Jeffrey R. Teeters, Counsel for Appellee Langston, Sweet and Freese, P.A.

David Clyde Trimble, Lexington, Robert A. Huffaker, Jr., Counsel for Appellee Beasley, Allen, Crow, Methvin, Portis & Miles, P.C.


VENTERS, Justice.

Each of the Appellants in this action was a plaintiff in a lawsuit brought in the Boone Circuit Court,[1] Boone County, Kentucky, against American Home Products, the company that marketed the anti-obesity drug combination commonly known as " Fen-Phen." As further explained below, Appellants' claims in that case were transferred fro the Boone Circuit Court to a similar action pending in Alabama, where Appellants were represented by Kentucky attorney J. Brent Austin (Austin), the Mississippi law firm of Langston, Sweet & Freese, P.A. (Langston), and the Alabama law firm of Beasley, Allen, Crow, Methvin, Portis & Miles, P.C. (Beasley Allen). Appellants' claims against American Home Products were then promptly settled.

Several years later, Appellants brought this action in the Fayette Circuit Court alleging that by fraud, misrepresentation, and breach of fiduciary duty, the above-named attorneys, who are the Appellees herein, wrongfully withheld from each Appellant a substantial portion of the settlement award. The Fayette Circuit Court dismissed the action after concluding that Appellants had failed to commence the suit within the time provided by the applicable statute of limitations. The Court of Appeals affirmed.

On discretionary review in this Court, Appellants argue that: 1) the Court of Appeals erroneously affirmed a summary judgment dismissing the claims of all fifty Appellants when the motion before the trial court related to only one particular plaintiff; 2) Appellants' claims are governed by Kentucky's statutes of limitations rather than Alabama's; 3) Appellants' claims of misrepresentation are subject to the general five-year limitation period established by KRS 413.120(7) and (12), rather than the one-year limitation period for professional service malpractice established by KRS 413.245; and 4) the application of the statutes of limitations is dependent upon material facts which must be resolved by a jury. For the reasons set

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forth below, we affirm the opinion of the Court of Appeals.


We begin this recitation of the essential facts with a brief explanation of how fifty plaintiffs in a Kentucky lawsuit with Kentucky lawyers ended up as plaintiffs in an Alabama court case represented by law firms from Mississippi and Alabama.

It was discovered in the mid-1990s that the popular diet drug Fen-Phen caused harmful medical consequences to some individuals. The maker of the drug, American Home Products, soon faced several class action and mass-tort lawsuits brought on behalf of Fen-Phen consumers. One such suit, Moore, et al. v. American Home Products, et al. (the Moore case), was filed in the Boone Circuit Court by Kentucky attorneys William Gallion, Melbourne Mills, and Shirley Cunningham. Appellants were among the more than 400 plaintiffs whose claims were consolidated in the Moore case.

A similar lawsuit, Mary C. Stevens, et al. v. American Home Products, et al. (the Stevens case), was brought in Montgomery, Alabama, where the claimants were represented by Appellees Langston and Beasley Allen.[2] A settlement was reached in the Stevens case whereby American Home Products would establish a Qualified Settlement Fund of some $215 million to settle as many as 3,000 Fen-Phen claims at $72,000.00 each. However, in order to effectuate the settlement, Langston and Beasley Allen had to certify within a given time-frame that they represented a certain minimum number of claimants who were willing to participate in the settlement. The problem was that Langston and Beasley Allen did not have enough Fen-Phen clients to qualify for the settlement.

Meanwhile in the Moore case, many of the plaintiffs had what Cunningham, Gallion, and Mills regarded as " low-value claims." These were individuals who would not fare well in the Kentucky litigation because they had not suffered the seriously disabling effects of Fen-Phen. Tom Methvin, an attorney with Beasley Allen, talked to Cunningham to see if some of the Kentucky claimants could be withdrawn from the Moore case and joined as claimants in the Stevens case. The Moore case attorneys saw the potential advantage to the clients and to themselves, and so they agreed to move the claims of fifty-three " low-value" Moore case plaintiffs to the Stevens case. Fifty of those fifty-three Moore case claimants are now the Appellants in this matter. Langston and Beasley Allen agreed to share with Cunningham, Mills, and Gallion the attorneys' fees associated with the transferred claims. Each of the Moore case plaintiffs involved in the transfer to the Stevens case had agreed to a contingent fee of 33%. The settlement of $72,000.00 for each claimant would, after deducting expenses of $87.84 per claim, yield the reasonable attorney fee of $23,968.32. Each client would receive a net settlement of $47,943.84. The attorneys' one-third share would be split as follows: $13,182.58 to Austin; $5,392.87 to Langston; and, $5,392.87 to Beasley Allen. Appellants allege that they were never informed that their claims would be dismissed in the Moore case so that they could join the Stevens case, and were never informed of the actual terms of the settlement.

Cunningham recognized that the Moore case attorneys could not continue to represent Appellants as they secured a settlement in the Stevens case. Therefore, they recruited Austin to nominally represent Appellants and to facilitate their transfer

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to the Stevens case. Langston and Beasley Allen sent Austin the necessary settlement documents for each client. Within a few days, Austin had obtained the necessary client signatures and returned the signed settlement documents. The Special Master in Stevens then issued a payment from the settlement fund to Langston and Beasley Allen totaling $72,000.00 for each Appellant. Langston and Beasley Allen deducted their portion of the attorney fee, and wired the balance to Austin. In December 2000, and January 2001, Austin issued checks to Appellants. However, instead of the $47,943.84 sum contemplated in the settlement, Austin paid only $29,500.00 to each claimant.

Several months later, the Moore case was settled and American Home Products agreed to pay $200 million to the 431 claimants remaining in the Moore case. In the following months, irregularities and unanswered questions about the disbursement of the Moore case settlement fund aroused the attention of various parties, including the Kentucky Bar Association's disciplinary authorities. Consequently, a number of investigations into the Fen-Phen settlements began.[3]

Attorney Angela Ford of Lexington, Kentucky was retained by several of the Moore case claimants to investigate the disbursement of their settlement fund. That investigation resulted in the filing of a lawsuit against Cunningham, Gallion, and Mills, and others.[4] In the paper chase to unravel the disbursement of Moore case settlement money, Ford discovered that several of the original claimants seemingly received no compensation. When she contacted those individuals she learned that they had received $29,500.00 from Austin. Tracing the source of those funds led Ford to the Stevens case settlement and to Beasley Allen and Langston. She also discovered that, like the claimants who remained in the Moore case, Appellants had not actually received the full amount allocated to them by the settlement agreement.

Eventually, fifty of the plaintiffs whose claims were transferred from the Moore case to the Stevens case retained Ford to initiate this action to recover the misappropriated funds. They alleged that no one had ever explained to them who Austin was or why he, rather than Mills, Gallion, or Cunningham, was acting as their attorney. Appellants alleged that they were not informed that their claims were transferred to the Alabama litigation and that they had not consented to the transfer. They alleged that the details of the settlement were not explained to them, but that each of them was warned by Austin that the settlement was confidential and that public discussion of it could land them in

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jail. Assuming the truth of those allegations, it is apparent that Appellants could not have known in January 2001, when they received a settlement check for $29,500.00, that they should have received $47,943.84.

Appellants filed suit against Appellees on October 31, 2007. Among other defenses, Appellees asserted that the action was barred by the statutes of limitations. That issue was framed in the form of a motion for summary judgment. The trial court granted the motion and entered summary judgment dismissing Appellants' claims as time-barred. The Court of Appeals affirmed. We granted discretionary ...

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