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Commonwealth v. Dolt, Thompson, Shepherd & Conway, P.S.C.

Court of Appeals of Kentucky

January 25, 2019

COMMONWEALTH OF KENTUCKY, ex rel. WILLIAM M. LANDRUM, III, SECRETARY OF THE KENTUCKY FINANCE AND ADMINISTRATION CABINET, AND WILLIAM M. LANDRUM, III, IN HIS OFFICIAL CAPACITY AS SECRETARY OF THE FINANCE AND ADMINISTRATION CABINET APPELLANTS
v.
DOLT, THOMPSON, SHEPHERD & CONWAY, P.S.C. f/k/a DOLT, THOMPSON, SHEPHERD & KINNEY, P.S.C.; COMMONWEALTH OF KENTUCKY, ex rel. ANDY BESHEAR, ATORNEY GENERAL; AND, ANDY BESHEAR, IN HIS OFFICIAL CAPACITY AS ATTORNEY GENERAL FOR THE COMMONWEALTH OF KENTUCKY APPELLEES

          APPEAL FROM FRANKLIN CIRCUIT COURT HONORABLE THOMAS D. WINGATE, JUDGE ACTION NOS. 17-CI-01129 AND 17-CI-01130

          BRIEFS FOR APPELLANT: M. Stephen Pitt S. Chad Meredith Matthew F. Kuhn Frankfort, Kentucky Patrick W. McGee Frankfort, Kentuck

          BRIEF FOR APPELLEE, DOLT, THOMPSON, SHEPHERD & CONWAY, P.S.C.: J. Guthrie True y Richard M. Guarnieri Frankfort, Kentucky

          BRIEF FOR APPELLEES, THE COMMONWEALTH AND THE ATTORNEY GENERAL: Andy Beshear Attorney General J. Michael Brown Deputy Attorney General, La Tasha Buckner, Marc G. Farris Laura C. Tipton Assistant Attorneys General Frankfort, Kentucky

          BEFORE: JONES, NICKELL AND TAYLOR, JUDGES.

          OPINION

          NICKELL, JUDGE.

         In this consolidated appeal of two complaints filed almost simultaneously in Franklin Circuit Court, the Commonwealth of Kentucky ex rel. William M. Landrum III, Secretary of the Kentucky Finance and Administration Cabinet ("FAC"), and Landrum, in his official capacity as FAC Secretary, seek reversal and remand of a grant of summary judgment entered on February 26, 2018, in favor of Dolt, Thompson, Shepherd & Conway, P.S.C. f/k/a Dolt, Thompson, Shepherd & Kinney, P.S.C. ("Dolt"); the Commonwealth of Kentucky, ex rel. Andy Beshear, Attorney General ("AG"); and Andy Beshear, in his official capacity as Kentucky's current AG.[1] Having reviewed the record, briefs and law, we vacate the grant of summary judgment and remand for further proceedings due to premature entry of summary judgment without opportunity for discovery.

         This case highlights another aspect of litigation spawned by the OxyContin epidemic.[2] This time the focus is on legal work performed by Dolt as outside counsel to OAG in settling a case[3] originally filed in 2007 against Purdue Pharma L.P. and others in Pike Circuit Court by then-AG Greg Stumbo.

         The first inkling trouble was brewing came on October 24, 2017, when FAC sent a letter to Beshear stating FAC "has reason to believe that your office may have unlawfully authorized or facilitated payment of approximately $4.2 million to [Dolt] in connection with the settlement of the lawsuit against various entities associated with Purdue Pharma L.P." The letter directed OAG to maintain all relevant documents and information while the Cabinet investigated.

A similar letter was simultaneously sent to Dolt stating FAC
has reason to believe that your law firm may have unlawfully received and retained up to approximately $4.2 million of the Commonwealth's money in connection with the settlement of the lawsuit against various entities associated with Purdue Pharma L.P. ("Purdue Pharma"). Records we have reviewed indicate that your law firm's written contract with the Commonwealth expired on June 30, 2015, and was not renewed or extended. It thus appears that at the time of the Purdue Pharma settlement, on December 22, 2015, your law firm did not have a valid, written personal service contract with the Commonwealth. Kentucky law dictates that service providers must return to the Commonwealth all amounts received in the absence of a valid, written contract.
Based upon the foregoing facts, this letter serves as a demand for your law firm to return all monies received and retained in connection with the Purdue Pharma matter, including all amounts representing your purported contingency fee and alleged reimbursement of expenses. Please remit this amount to the above-referenced address by 5:00 p.m. on October 26, 2017.

         The letter to Dolt concluded with a directive to "preserve and do not destroy" documents and information in any way relevant to the Cabinet's investigation. Dolt did not refund any money. FAC filed suit a few days later.

         The specific focus of this appeal is whether a valid contract was in place during critical times-particularly on December 22, 2015, when the Pike Circuit Court filed an agreement and release reached by then-AG Jack Conway with the drug companies and entered an agreed judgment with stipulation of dismissal with prejudice, directing the drug companies to pay the Commonwealth $24 million in nine installments. The drug companies paid the initial installment of $12 million directly into Dolt's escrow account.

         In their pleadings and briefs, the parties in this appeal reference three separate contracts. The first contract, covering a two-week period beginning June 15, 2014, and expiring June 30, 2014, is the only one appearing to be fully executed.

         The original two-week contract, "Doc ID No: PON2 040 1400003637 1," was forward-looking, containing no retroactivity language. Under the terms of this contingency fee contract, Dolt's compensation was conditioned on the Commonwealth receiving a settlement or award from which Dolt would be paid- no taxpayer dollars would be spent. Dolt was also to front all litigation costs for which it would be reimbursed for "all reasonable, normal, and verified 'out of pocket' costs and expenses." The AG was to determine how 84% of any settlement or judgment proceeds would be applied, and Dolt was to receive the remaining "16% or less" of any judgment up to $25 million, and a decreasing percentage of any amount over $25 million. Different percentages applied to a quicker resolution, but such did not occur. The contract required approval by FAC, as well as the Government Contract Review Committee of the Legislative Research Commission ("LRC").

         Under Kentucky law, a contract cannot encompass more than one biennium, KRS[4]45A.145(1), [5] but a contract can be renewed to cover another biennium. By the contract's own terms, when the two-week period expired, it could be renewed "for as many additional two-year terms as needed for the purpose of and to the extent that said renewals are necessary to permit [Dolt] to conclude any work," subject again to approval by both FAC and LRC. Based ...


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