CUNNINGHAM (SHIRLEY A), ET AL. VS. ABBOTT (MILDRED), ET AL.
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RENDERED: FEBRUARY 4, 2011; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2007-CA-001971-MR
SHIRLEY A. CUNNINGHAM, ET AL.
v.
APPELLANTS
APPEAL FROM BOONE CIRCUIT COURT
HONORABLE WILLIAM WEHR, JUDGE
ACTION NO. 05-CI-00436
MILDRED ABBOTT, ET AL.
APPELLEES
AND
NO. 2007-CA-001981-MR
MELBOURNE1 MILLS, JR.
v.
APPEAL FROM BOONE CIRCUIT COURT
ACTION NO. 05-CI-00436
MILDRED ABBOTT, ET AL.
1
APPELLANT
APPELLEES
We note discrepancies in the notice of appeal regarding the spelling of Mills’s first name, We
are aware the correct spelling of his first name is Melbourne and have chosen to use that spelling
in this opinion.
AND
NO. 2007-CA-002173-MR
CHARLOTTE BAKER, ET AL.
v.
APPELLANTS
CROSS-APPEAL FROM BOONE CIRCUIT COURT
ACTION NO. 05-CI-00436
STANLEY M. CHESLEY, ET AL.
APPELLEES
AND
NO. 2007-CA-2174-MR
MILDRED ABBOTT, ET AL.
v.
CROSS-APPELLANTS
CROSS-APPEAL FROM BOONE CIRCUIT COURT
ACTION NO. 05-CI-00436
STANLEY M. CHESLEY, ET AL.
CROSS-APPELLEES
OPINION
AFFIRMING IN PART, VACATING IN PART, REVERSING IN PART
AND REMANDING
** ** ** ** **
BEFORE: NICKELL, STUMBO, AND WINE, JUDGES.
NICKELL, JUDGE:
BACKGROUND
THE GUARD ACTION
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This appeal flows from the mediated settlement of 431 claims against
American Home Products (AHP), the manufacturer of fenfluramine and
phentermine, commonly referred to as “Fen-Phen,” a drug combination used for
weight loss that was ultimately removed from the market in the 1990’s after
numerous users suffered heart damage. As a result, class action lawsuits were filed
across the nation. At least one such action was filed in Kentucky, Darla S. Guard,
et al. (or Jonetta Moore, et al.) vs. American Home Products Company, Inc. et al.,
Boone Circuit Court Case No. 98-CI-795.
The 431 plaintiffs in the Guard action were represented by one of
three attorneys, Shirley A. Cunningham, Jr., William J. Gallion, or Melbourne
Mills, Jr. (collectively referred to as GMC).2 Their representation was based upon
contingency fee agreements allowing reasonable attorney fees not to exceed
between thirty and thirty-three and one-third percent of the recovery. A fourth
attorney, Stanley M. Chesley, negotiated a $200,000,000.00 settlement on behalf
of the class in May of 2001. Chesley did not have a contingency fee agreement
with any of the 431 plaintiffs, but he did have a fee-splitting agreement with GMC
whereby he was to receive twenty-one percent of the gross fees and GMC was to
2
As a result of their representation of several plaintiffs in the Guard action, Cunningham and
Gallion were charged with twenty-two violations of our Supreme Court Rules. Both men moved
the Supreme Court of Kentucky to allow them to withdraw their membership in the Kentucky
Bar Association under terms of permanent disbarment. By opinion and order entered October
23, 2008, the Court granted their motions, disbarred them permanently, and terminated all
disciplinary proceedings against them. Gallion v. Kentucky Bar Ass’n, 266 S.W.3d 802 (Ky.
2008); Cunningham v. Kentucky Bar Ass’n, 266 S.W.3d 808 (Ky. 2008). As a result of Mills’s
participation, he was permanently disbarred by the Supreme Court of Kentucky. Kentucky Bar
Ass’n. v. Mills, --- S.W.3d ---, 2010 WL 2017103 (Ky. 2010).
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receive seventy-four percent of the gross fees. A fifth attorney, Richard D.
Lawrence, received the remaining five percent under the fee-splitting agreement.
One requirement of the settlement was that the class be decertified
which then-Judge Joseph F. Bamberger3 did by order entered on May 16, 2001.
That same order dismissed the action but authorized the parties to continue filing
motions with the court pertaining to enforcement of the settlement. Bamberger
entered orders in the case through December 30, 2003.
Another clause in the settlement agreement stated in relevant part:
15. The Settling Attorneys will maintain in absolute
confidence the terms of this Letter Agreement and will
not directly or indirectly communicate the Settlement
Amounts to any person other than the Settling Claimants.
GMC withheld the terms of the ultimate settlement agreement from the plaintiffs
(the settling claimants) and did not reveal to them how their individual payouts
were calculated. GMC threatened the plaintiffs with jailtime or forfeiture of their
recovery if they discussed receiving a settlement with anyone.
Pursuant to their fee agreements with the plaintiffs, as alleged by
plaintiffs in their sixth amended complaint, GMC was to receive $60,798,783.14,
of which Chesley’s portion was to be $12,767,744.46. However, GMC paid itself
and others $126,793,551.22, well over half of the $200,000,000.00 settlement
fund.
3
Bamberger was publicly reprimanded by the Judicial Conduct Commission for his handling of
the Guard case and resigned rather than face removal from the bench. As a result, he will be
referred to simply as “Bamberger” throughout the remainder of this opinion.
-4-
Once the class was decertified, GMC met with their individual clients
and began dispersing checks to the 431 plaintiffs, all of whom signed a release and
a statement of satisfaction with the amount of compensation received. A
significant amount of money was withheld by GMC in the event other claimants
came forward. About nine months later, Bamberger entered an order authorizing a
second round of checks, equal to fifty percent of the residue, to be paid to the
plaintiffs. Again, each recipient signed a release and a statement of satisfaction.
The remaining fifty percent of the residue was to be retained by GMC for
“indemnification or contingent liabilities.” GMC never told their clients the class
had been decertified,4 the total amount of the settlement, how each plaintiff’s
recovery had been calculated, nor the full amount of fees and expenses GMC was
receiving. The clients did receive a letter informing them that if funds remained
after all disbursements had been made from the gross settlement, the court was
considering donating the remaining funds to charity.
$20,000,000.00 was ultimately set aside by court order to establish a
non-profit corporation named The Kentucky Fund for Healthy Living, Inc.
(KFHL)5 with GMC being named as directors. The clients were not told a
charitable organization was being created with the remaining funds nor the amount
of funds being used for this purpose.
4
A requirement of Kentucky Rules of Civil Procedure (CR) 23.05.
5
On January 23, 2003, KFHL was established as a non-profit organization under Kentucky law
by filing Articles of Incorporation with the Office of the Kentucky Secretary of State.
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Despite many opportunities to submit proof of expenses, Cunningham
and Gallion never did. Mills tendered expenses including salaries, daily office
operation and maintenance, advertising, rent, utilities, phones, supplies, a legal
publication and postage. Mills also claimed a lump sum of $1,303,831.81 for
services from Business Securities Solutions/Litigation Consultant, but submitted
no invoice or detailed explanation for said services and no proof it related
exclusively to the Guard litigation. While the record does not contain an
accounting of attorney’s fees and expenses charged to the plaintiffs, nor an
accounting of settlement funds and dispersals, the order Bamberger entered on
June 6, 2002, states that the court approved an accounting of settlement proceeds,
including attorney’s fees and expenses. In an order entered on July 31, 2002,
Bamberger again stated he had received an accounting of funds and had been
“advised of the consent of the individual plaintiffs who received settlements for
use of the remaining funds for charitable purposes.” Contrary to this order, the
plaintiffs assert they were never told a charity was being created to receive and
disburse the excess funds and they were misled into believing the amount given to
charity was “miniscule.”
THE ABBOTT ACTION
The appeal currently under review flows from, but is independent of,
the Guard action in that the defendants are different, the issues are different, and
the orders being appealed from were not entered in the Guard action. Guard was a
products liability action against a drug manufacturer whereas the current litigation
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focuses on the conduct, and alleged misconduct, of the attorneys who represented
the settling claimants in the Guard action. The current allegations were not
brought in the settlement of the plaintiffs’ claims against AHP and there has been
no attempt to re-open the Guard action to set aside orders entered in that litigation.
The goal of the Abbott action is to retrieve misallocated monies and to receive
damages for breaches of professional duty that may amount to legal malpractice.
At GMC’s request, on December 30, 2003, Bamberger entered an
order relinquishing jurisdiction over KFHL. One year later, on December 30,
2004, suit was filed under CR 23 in Fayette County6 by several plaintiffs from the
Guard action (collectively referred to as Abbott)7 against GMC, Chesley and
KFHL. In count one of the amended complaint, Abbott alleged breach of fiduciary
duty based on GMC and Chesley putting “themselves in a unique position of trust
and confidence with” Abbott and Abbott having confidence in GMC and Chesley
“to faithfully and honestly perform their duties,” thereby creating a fiduciary
relationship. Abbott further alleged GMC and Chesley:
have failed to disclose material information related to
[Abbott’s] settlement and have refused to provide other
basic information to which they are entitled, including
6
We note that a substantially similar matter was originally filed in Woodford Circuit Court.
After discovering an error in choosing that venue, the plaintiffs filed a motion to change the
venue to Fayette County. However, the Woodford Circuit Court ordered the matter transferred
to the Boone Circuit Court. Thereafter, the plaintiffs voluntarily dismissed the action pursuant to
CR 41.01. Following the dismissal of that complaint, a new action was filed in Fayette Circuit
Court alleging many of the same claims, albeit with a new and expanded group of plaintiffs.
This action was ultimately transferred to Boone Circuit Court.
7
Mildred Abbott, et al. and Charlotte Baker, et al. are both represented by the same counsel.
Baker is a group of fifteen plaintiffs who were omitted from the notice of appeal filed by GMC.
By order of this Court entered July 7, 2008, Case Nos. 2007-CA-002173 and 2007-CA-002174
were ordered consolidated. Both Baker and Abbott shall be referred to as “Abbott” for purposes
of this opinion.
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copies of settlement agreements, information related to
expenses deducted from settlement funds and
information related to settlement funds diverted into a
corporation established, owned and controlled by [GMC
and Chesley].
Count two of the amended complaint alleged fraudulent
misrepresentation against GMC and Chesley based upon claims that they:
themselves or through their agents intentionally
misrepresented or failed to disclose material facts
regarding the amount of settlement funds set aside for
purported charitable contributions in that [Abbott was]
either never told that settlement funds were set aside or
were expressly or implicitly told that only a small amount
of funds was going to be donated to charity when, in
truth, millions of dollars were set aside and transferred to
a corporation owned and operated by [GMC and
Chesley.] [GMC and Chesley] owed a duty as fiduciaries
to give full and complete disclosure to [Abbott] and to
refrain from misrepresenting or failing to disclose
material information regarding the settlement funds.
142. [Abbott] relied on the material
misrepresentations of [GMC and Chesley] and had they
known that all settlement funds had not been distributed
they would have acted differently with respect to the
settlement. [GMC and Chesley’s] failure to disclose to
[Abbott] the true amount of settlement funds set aside to
fund a corporation established by them was intentional,
misleading and constitutes fraudulent and deceitful
conduct for which [Abbott is] entitled to recover
compensatory and punitive damages in excess of the
minimum jurisdictional limits of this Court.
Counts three, four and five of the amended complaint sought a
declaratory judgment for GMC and Chesley’s “breach of their contractual, ethical,
fiduciary and professional duties”; an accounting of all settlement funds received
by GMC and Chesley, including those transferred to KFHL; disgorgement of any
-8-
and all fees earned; and imposition of a constructive trust on all settlement funds
currently held by or under the control of the defendants, specifically including
those funds held by KFHL. Abbott did not ask that Bamberger’s orders in the
Guard action be rescinded or set aside.
GMC successfully moved to have the Abbott case transferred to
Boone County where the case was ultimately assigned to Judge William J. Wehr as
a special judge. Two years later, in preparation for trial, Abbott unsuccessfully
moved to have the case transferred back to Fayette County.
GMC, Chesley and KFHL all moved for summary judgment prior to
answering the complaint arguing there were no genuine issues of material fact in
dispute, the complaint was untimely because the one-year statute of limitations
arising from the rendering of professional services to others under KRS8 413.245
had expired, the settling claimants had been adequately compensated, and the
$20,000,000.00 placed in KFHL was simply “excess funds.” Abbott filed a
consolidated response to all of the summary judgment motions arguing it had
started requesting copies of sealed orders in the Guard action and disclosure of
other relevant documents as early as October of 2004 but nothing had been
forthcoming. Abbott further argued it had sufficiently pled its claims to withstand
a motion for summary judgment and was entitled to a jury trial.
As for the applicable statute of limitations, Abbott argued it was either
five years from the date of discovery of the fraud under KRS 413.120(12) and KRS
8
Kentucky Revised Statutes.
-9-
413.130(3), or five years under KRS 413.120(6) on the theory of breach of
fiduciary duty. Even if the one year period for legal malpractice applied, Abbott
contended the complaint was timely filed because Bamberger’s last order,
relinquishing control over KFHL, was entered on December 30, 2003, and the
complaint was filed one year later, on December 30, 2004. Furthermore, Abbott
argued the “continuous representation rule” tolls the running of any statute of
limitations so long as the attorney continues to represent the client in the
underlying matter, and GMC and Chesley still represented the 431 plaintiffs on
December 30, 2003. By order entered on July 1, 2005, all defense motions for
summary judgment were denied.
On December 6, 2005, following receipt of the Settlement Agreement,
Abbott moved for partial summary judgment against Chesley and GMC on its
allegations of breach of fiduciary duty, declaratory judgment, disgorgement and
constructive trust. Abbott sought to have Chesley and GMC made:
jointly and severally liable to [Abbott]for all settlement
funds withheld from [Abbott], based upon settlement
amounts listed in the Settlement Agreement and the
payments actually made to [Abbott], plus interest from
the date of the first distribution of settlement funds,
disgorgement of [GMC and Chesley’s] fees, and
[recognition] that any and all settlement proceeds that
[GMC and Chesley] withheld from their clients are
subject to a constructive trust in favor of [Abbott].
If granted, the only remaining issues would be the fraudulent misrepresentation
allegation and Abbott’s claim for punitive damages under the breach of fiduciary
duty claim.
-10-
In the same motion, Abbott moved for partial summary judgment
against KFHL on its requests for declaratory judgment and constructive trust.
Abbott sought “[a] judgment declaring [Abbott is the rightful owner] of all
settlement proceeds held by the [KFHL].” Coupled with the request for partial
summary judgment was a request for dismissal of a Petition for Declaration of
Rights9 filed by KFHL.
The same five orders entered by Judge Wehr are challenged on appeal
by all parties. The first order was entered on March 8, 2006,10 to resolve Abbott’s
motions for partial summary judgment against GMC and KFHL. Based upon
GMC’s fee contracts and a schedule of deposits and disbursements, the court found
GMC had breached its fiduciary duty to Abbott. The court’s rationale was as
follows:
Defendant Gallion had fee contracts with his client (sic)
calling for an attorney fee of thirty-three (33%) percent
and an agreement to make no settlement without the
consent of the claimant. Defendant Cunningham had a
fee contract for thirty-three and one-third (33 1/3%)
percent and likewise agreed to make no settlement
without the consent of his clients. Defendant Mills had
an agreement with his clients that attorney’s fees shall be
set by the Court, but shall not be more than thirty (30%)
percent of client’s net recovery. Although these three
defendants argue that they operated as a consortium in
the handling of matters in this case, they still are bound
by the individual fee contracts of the others. Defendant
Chesley was to receive a percentage of the fees obtained
by these three Defendants, not a percentage in addition
9
The Petition, dealing with whether KFHL should continue in existence, was treated by Judge
Wehr as a counterclaim pursuant to an order entered on May 2, 2005. The motion to dismiss the
Petition was denied.
10
Due to the need for ongoing discovery, this order did not resolve any issue regarding Chesley.
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thereto. Instead, according to their own exhibit, which
they identified as Attachment “6”, they admitted paying
themselves over more than Twenty Million Dollars
($20,000,000.00) each, the same as to Defendant
Chesley, millions to other lawyers and close to Three
Million Dollars ($3,000,000.00) to non-lawyers for a
subtotal of over One Hundred and Six Million Dollars
($106,000,000.00) Dollars (sic) out of Two Hundred
Million Dollars ($200,000,000.00) in a category called
“Subtotal for Attorney Fees and Other Costs”. Their
justification for all of this is a blanket Court Order
(entered by a now reprimanded presiding judge)
approving their expenditures which does not afford them
the protection they desire, for it does not identify either a
percentage or a dollar amount which they were allowed
to charge. Furthermore, since contingency fees cannot be
shared with non-lawyers, there is no explanation as [to]
how such large sums of money were arrived at in
expenditures to such individuals. This same document
shows that these three defendants accepted directors’ fees
of Eighty-Five Thousand Six Hundred Dollars
($85,600.00) each with another One Hundred and
Twenty Thousand Dollars ($120,000.00) disbursed to a
non-defendant director of The Kentucky Fund for
Healthy Living, Inc.
As argued by Plaintiffs’ counsel, simple arithmetic
shows that the above subtotal for attorney fees and other
costs yields a figure far in excess of any contracted for
contingent attorneys’ fees in this case. The only
plausible argument made by these three Defendants as to
why this simple mathematical approach might be off
somewhat has to do with the side letter agreement of
May 29, 2001 (sic) as part of this Two Hundred Million
Dollar ($200,000,000.00) settlement. Under that side
letter agreement, Seven Million, Five Hundred Thousand
Dollars ($7,500,000.00) was set aside according to the
documents produced in discovery, that money sat for a
year with no claims being made and during a hearing on
June 27, 2002, the Court did authorize the attorneys to
just keep it. Earlier that month, the Court noted an
absence of any objection by any individual claimant as to
how much attorney fees were being taken by these
individuals. But it is now clear that no notice of fees
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being requested or taken in excess of the fee contracts
were ever disclosed to any of their clients. Likewise, it
was represented to the Court during the June 27, 2002,
hearing regarding that Seven Million Five Hundred
Thousand Dollars ($7,500,000.00) that all clients had or
would agree to the balance of funds going to charity. It is
now clear from the paper discovery produced that same
was not true, and none of the clients were advised of the
magnitude of the funds being transferred.
These three Defendants argue that all of these
issues could have and should have been raised in the
underlying tort action, but clearly that was impossible
since all of the above was never disclosed to their clients.
They argue that at first this was a class action with
different guidelines to be followed, but they were all part
of the mediation settlement agreement where this case
reverted back to individual claims after the class action
was decertified. Likewise, an argument has been made
that special rules might apply to mass tort litigation
which might be applicable herein, but again these three
Defendants are bound by the fee contracts they
themselves executed. To get the vague Order of
Approval from the Court that did not spell out
percentages or amounts, they represented that all
proceeds were handled in accordance with the intention
of the parties. In reality they were passing out money to
themselves and others like it was theirs (sic) to do with as
they wished.
Via paper discovery and documents found under
seal or in the judge’s office in Boone County, it is now
clear that it was not true that none of the Plaintiffs’ (sic)
objected to the amounts they were receiving. There was
no disclosure of any settlement details to the clients.
There was no agreement by the Plaintiffs to fund a
charitable corporation in the amount of Twenty Million
Dollars ($20,000,000.00) and have these attorney
defendants continue to make money from that fund. It is
not true that excess dollars were used to pay numerous
claims of various constituencies as represented by them.
As to The Kentucky Fund for Healthy Living, Inc.,
that corporation was created in January of 2003, and until
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September of 2004, there were no grants. However, the
directors were paying themselves over Twenty-Three
Thousand Dollars ($23,000.00) per month in either fees
or expenses. At least twice during their meetings in
2003, they were reminded how essential it was to keep
financial information in the corporation private, and that
it should be deemed “highly sensitive and confidential”.
Since the funds used to create this corporation came from
funds as a direct result of the Defendants breach of their
fiduciary duty, the relief of a declaratory judgment and
constructive trust is applicable both to these defendants
and the Fund they created. Other than CPA expenses
necessary to seek an extension of time for their approving
grants and filing other reports in the event of an appeal
hearing, no further expenditures of any type shall be
made. One need look no further than the Fund’s May
2003 minutes where the Directors agreed to treat
themselves to a trip for a meeting and retreat in Pebble
Beach, CA, to see why the Court’s earlier Order entered
in this record was appropriate.
In conclusion, the uncontroverted facts show that
in rounded figures the Plaintiffs received Seventy Four
Million Dollars ($74,000,000) from this litigation,
lawyers and others received One Hundred Six Million
Dollars ($106,000,000) with some of that going to
expenses, and the other Twenty Million Dollars
($20,000,000) deposited into a “charitable fund”. A
Court Order based on false representations does not
afford the Fund any protection. A review of the financial
data for the first two years showing that the Directors
paid themselves more than they ever paid out in grants
(January 2003 through January 2005) negates any
argument that the Fund should be allowed to continue
unless, as is argued by Plaintiffs (sic) counsel, the Fund
wants to do so without any dollars derived from the
underlying Fen-Phen litigation.
Summary judgment is governed by C.R. 56.03
which states that judgment shall be entered from the
moving party if the “. . . pleadings, depositions, . . . show
that there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter
of law.” Id. In Steelvest, Inc. v. Scansteel Service
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Center, Inc., 807 S.W.2d 476 (Ky[.] 1991), the Kentucky
Supreme Court specifically rejected the federal standard
for summary judgment and adopted instead the standard
set forth in Paintsville Hospital Company v. Rose, 683
S.W.2d 255, 256 (Ky[.] 1985):
“We adhere to the principle that summary
judgment is to be cautiously applied and
should not be used as a substitute for trial.
As declared in Paintsville Hospital (sic), it
should only be used ‘to terminate litigation
when, as a matter [of] law, it appears that it
would be impossible for the respondent to
produce evidence at the trial warranting a
judgment in his favor and against the
movant.’ It is vital that we not sever
litigants from their right of trial, if they do in
fact have valid issues to try, just for the sake
of efficiency and expediency.”
Steelvest v. Scansteel, 807 S.W.2d 483.
“The Kentucky Supreme Court has held that the
word ‘impossible’ as set forth in the standard for
summary judgment, is meant to be ‘used in a practical
sense, not in an absolute sense’.” Lewis v. B&R
Corporation, 56 S.W.3d 432, 436 (Ky. App. 2001), citing
Perkins v. Hausladen, 828 S.W.2d 652, 654 (Ky. 1992);
Welch v. American Publishing Co. of Kentucky, 3 S.W.3d
724 (Ky. 1999). The trial court must view the evidence
in the light most favorable to the non-moving party, and
summary judgment should be granted only if it appears
impossible that the moving party will be able to produce
evidence at trial warranting a judgment in his favor. The
trial court should not decide any issues of fact but should
look at the evidence in the record to discover if a real
issue exists. Id. As discussed herein, it does not, as to
these three defendants, nor through them, The Kentucky
Fund for Healthy Living, Inc.
Accordingly, Plaintiffs’ Motion for Partial
Summary Judgment as to Count One (Breach of
Fiduciary Duty) against Defendants
Cunningham/Gallion/Mills is sustained. By operation of
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law, that holding necessitates sustaining as well
Plaintiffs’ Motion for Declaratory Judgment and
Constructive Trust as to both these three Defendants and
The Kentucky Fund for Healthy Living, Inc. The Court
is of the opinion that the Motion for Partial Summary
Judgment under Count Five (Disgorgement) is not a
matter for summary judgment disposition.
The next order appealed was entered on April 4, 2007. It denied a
motion by Mills to vacate the partial summary judgment awarded to Abbott on
March 8, 2006, because the fees received by GMC were not supported by a
“vague” court order “obtained without disclosing fee contract information[.]” It
also denied a motion by Chesley to reconsider the order denying his motion to
dismiss and denied Abbott’s motion for partial summary judgment against Chesley
because of a factual dispute. It overruled Abbott’s motion for joint and several
liability of GMC, but allowed the issue of whether a Steelvest exception applied to
be revisited in the future. It partially granted Abbott’s motion for compensatory
damages because GMC did not reveal their contingency fee contracts to
Bamberger and stated that once legitimate expenses are calculated, “each
Defendant will be ordered to [pay] into the settlement fund as part of the
previously entered partial summary judgment[.]” It denied Abbott’s motion for an
order of disgorgement/fee forfeiture until a jury could decide factual disputes.
Finally, it granted Abbott’s motion to compel the surrender of Chesley’s telephone
records.
The third order being appealed was entered on August 1, 2007. This
order awarded Abbott:
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$42 million dollars as a baseline compensatory damage
award. Prejudgment interest is awarded at the legal rate
of interest of 8%. This amount was arrived at by
rounding down to 64 million the overpaid amounts
claimed by [Abbott], and then deducting a rounded up
figure of 20.5 million used to fund the [KFHL] and
another 1.5 million as rounded up for expenses claimed
by Defendant Mills.
The fourth order being appealed was entered on August 27, 2007. It
denied motions to alter, amend or vacate filed by Abbott and GMC and made final
and appealable the order entered on March 8, 2006, awarding partial summary
judgment to Abbott and overruling Abbott’s motion for a change of venue. The
appeals of GMC and the cross-appeal of Abbott followed.
The final order being appealed was entered on September 24, 2007. It
denied Gallion and Cunningham’s motion to vacate the order of August 27, 2007,
which Mills joined. GMC argued there were genuine issues of material fact about
whether they had breached their fiduciary duties toward Abbott and that
Bamberger was “overtly aware” of their contracts with their clients when he
approved their taking of excess funds. The court explained:
On the record in Boone Circuit Court on April 23,
2007, Ms. Meade-McKenzie was questioned about her
statement in pleadings that there were “repeated
assertions” in the file to this same effect. She was asked
to identify where they were and give even one example.
She asked for additional time during which she stated
that she would be happy to supplement the record, but
has never done so. She then stated that two examples
were the specific orders issued by Judge Bamberger in
the Swiger and Toler Orders of June 20, 2002. She said
then, and again now, that those Orders make specific
reference to the contingency fee contracts. They do not.
Furthermore, and contrary to counsel’s argument, it does
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matter. The class had been decertified, Judge Bamberger
was not made aware of the fee contracts, and the
Plaintiffs were not made aware of how much the case
was settled for nor the amounts that their lawyers were
taking in fees or dispersing to others.
Second, the Court’s Order of August 27, 2007, is
not facially invalid nor an attempt to compensate persons
not parties to this litigation. As explained on the record,
this is why the Court accepted the Plaintiffs’ argument of
a base line judgment award and rounded every figure
down in its analysis. The only clients considered were
those who have been made part of this litigation and
whose cases were settled as part of the underlying FenPhen litigation in Boone County, not others whom Ms.
Ford and Mr. Ramsey now represent.
As to the partial summary judgment previously
entered and now being finalized with a base line
compensatory damage amount, the movants express
dismay that since they have filed an affidavit a partial
summary judgment can never be entered. However,
there is nothing in the record to demonstrate that the
affiants attempted to be relied upon knew the true
undisputed facts of this case. An affidavit signed by
someone based only on the information you want them to
know does not provide the “cover” Defendants seek from
a partial summary judgement (sic). Furthermore, they
are totally incorrect when they argue that a partial
summary judgment is inappropriate unless the entire
matter can be disposed of in that fashion. Here, summary
judgment on the breach of fiduciary duty claim was
called for based upon the undisputed facts adduced
through discovery, while the claims for disgorgement,
etc., were not. Clearly some counts in a lawsuit can be
disposed of by summary judgment while others remain
for trial as here, and the civil rules do not preclude such
handling. It follows, also, that if a partial summary
judgment is called for and the minimum damages are
clear then a damage award also is appropriate.
Since the movants also have incorporated by
reference other arguments made earlier in their motion to
vacate the August 1, 2007, Order, two arguments made
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therein need to be addressed in this Order as well. The
movants claim there is no factual basis for a $42 million
base line compensatory damage award, and that already
was addressed in open Court on the record on August 18,
2007, and in the Court’s Orders of August 1, 2007, and
August 27, 2007. Movants then argue that a lot of this
money is now in the hands of others whom Plaintiffs
chose not to pursue. They are correct. The $7 million
plus clearly overpaid to Defendant Chesley does
constitute part of that $42 million. Any other attorneys
or individuals who are not parties to this action but who
have been given significant dollars will have to be
pursued by the movants, not the Plaintiffs. Defendants,
Gallion, Cunningham, and Mills, were the ones who were
in complete control of this $200 million, who never
disclosed to their clients the true handling of these
dollars, and who treated this money as their own long
before any alleged Court permission was sought.
The Motion to Vacate the Court’s Order of August 27,
2007, is OVERRULED. There being no just cause for
delay, this Order shall constitute a final and appealable
Order.
LEGAL ANALYSIS
The arguments presented on appeal by GMC are as follows: (1) Was
the independent action filed by Abbott an impermissible collateral attack on orders
entered by Bamberger in the Guard action? 2) Did the trial court err in denying
GMC’s motion for summary judgment? 3) Did the trial court err in granting
partial summary judgment to Abbott in light of disputed material facts?
The arguments presented by Abbott on cross-appeal are as follows:
(1) Did the trial court err in denying Abbott’s motion to transfer venue from Boone
County back to Fayette County for purposes of trial? (2) Did the trial court err in
denying Abbott a partial summary judgment regarding Chesley? (3) Should the
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trial court have found Mills lacked standing to appeal dismissal of KFHL’s
counterclaim and imposition of a constructive trust on its funds? (4) Whether the
trial court erred in awarding Mills unsubstantiated expenses?
Independent Action
GMC’s first argument is that Abbott’s filing of an independent action
is an impermissible collateral attack on valid orders entered by Bamberger in the
Guard action even though they have not specified any such order that has been
attacked.11 They contend that to garner review of GMC’s handling of the Fen-Phen
settlement, Abbott should have moved to alter, amend or vacate the judgment in
the Guard action under CR 59.05; moved to set aside the Guard judgment under
CR 60.02; appealed the Guard judgment under CR 73; or entered an appearance in
the Guard action through separate counsel under CR 23.03(2)(c). Having taken
none of these steps, GMC argues the filing of an independent action was forbidden
because the Boone Circuit Court had both personal and subject matter jurisdiction
over the Guard action and therefore its judgment and orders are presumed valid
absent clear and convincing evidence to the contrary. Burchell v. Hammons, 289
S.W.2d 737, 739 (Ky. 1956); Mitchell Mill Remnant Corp. v. Long, 3 S.W.2d 639
11
Because GMC’s appellate briefs do not state with specificity how and where in the record this
issue was preserved, they do not conform to CR 76.12(c)(v). The same is true of briefs filed by
the other parties. When a brief does not comport with the requirements of CR 76.12(c)(v), we
are authorized to strike the brief entirely. Elwell v. Stone, 799 S.W.2d 46 (Ky. 1990).
Alternatively, we may review the allegations of error for manifest injustice rather than
considering them on the merits. Id.; CR 61.02.
Because no party has scrupulously heeded the rule, and we will not sanction one party
without sanctioning all, we choose to review the allegation on the merits. However, we will not
hesitate to impose sanctions in the future.
-20-
(Ky. 1928); Luckett v. Gwathmey, 16 Ky. 121 (1811). Finally, they argue it is not
the role of one circuit court to review the orders of another circuit court. Lowe v.
Taylor, 29 S.W.2d 598, 599 (Ky. App. 1930).
Abbott counters with the argument that it had no knowledge of GMC
and Chesley’s misconduct until well after the time to challenge the Guard action
had expired.12 Furthermore, there has been no request to set aside any orders in
the Guard action and different defendants are being sued in the Abbott action.
Abbott points out that GMC gave it no notice of the true amount of fees it was
taking, or that it had asked Bamberger to approve fees in excess of the contingent
fee contracts it had executed. Moreover, GMC made no disclosures to Abbott
regarding settlement details, creation of KFHL, or actual dollar amounts it intended
to donate to “charity.” Abbott argues that the case before us is not against the
Guard defendants, but instead challenges the distribution of settlement funds by
GMC. These matters, it says, were not addressed in Bamberger’s orders, and
hence, this is not an impermissible collateral attack brought under the guise of an
independent action.
This issue presents a matter of law. Therefore, our review is de novo.
Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381 (Ky. App. 2002);
First Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829 (Ky. App.
12
Under CR 60.02(d), a motion for relief due to fraud must be filed within “a reasonable time.”
While Abbott could still file such a motion upon a showing of reasonableness, such filing is not a
prerequisite to filing an independent action. CR 60.03 specifies, “Rule 60.02 shall not limit the
power of any court to entertain an independent action to relieve a person from a judgment, order
or proceeding on appropriate equitable grounds.” Therefore, Abbott’s choice not to file a CR
60.02 motion was not fatal.
-21-
2000). After careful consideration, we deem Abbott’s argument to be both
compelling and convincing. For the following reasons we reject GMC’s argument.
First, because the record was sealed, and requests for basic
documents, such as the settlement agreement, went unanswered, Abbott, through
no fault of its own, had no opportunity to learn of GMC’s handling of the
settlement in time to take the actions GMC suggests. Upon discovering that GMC
had made unauthorized use and disbursements of settlement funds, it was too late
for Abbott to appeal those orders, or seek to have them altered, amended or
vacated. We will not allow GMC to benefit from its own dilatory and allegedly
fraudulent tactics.
Second, the Guard action was a products liability case against AHP
whereas the Abbott action is against GMC and Chesley for conduct amounting to
legal malpractice. The orders Abbott challenges were directive in nature,
instructing the attorneys to act accordingly as agents. Bamberger’s orders
approved the dispersal of the settlement funds and are necessarily involved in
determining whether GMC and Chesley misappropriated funds in the breach of
their fiduciary duties. As such, the orders themselves may be considered evidence
of any professional misconduct. This is an independent action that is not the result
of a modification or vacation of Bamberger’s orders in the Guard action.
Third, the failure of GMC to disclose settlement details, the amount of
attorney’s fees, and information regarding the creation of KFHL, prevented Abbott
from appearing or presenting its concerns in opposition to Bamberger’s orders.
-22-
Because Abbott remained unaware of the Guard orders, and was misinformed on
many of the issues therein, it had no reason to believe they should have any
concerns regarding attorney misconduct or court orders. Those claimants who
were diligent in their efforts to follow the settlement and the resulting litigation
were refused the necessary information to discover the extent of GMC’s acts.
GMC and those commissioned by it made Abbott believe it was getting the best
deal from the settlement and that its best interests were being protected. We can
infer, then, that Abbott was “lulled, gulled, or seduced” into inactivity during the
course of the Guard litigation and was unable to discover GMC and Chesley’s
misdeeds until after time had passed to file an appeal. Grubb v. Wurtland Water
Dist., 384 S.W.2d 321, 323 (Ky. 1964). Although Abbott received a settlement
from the manufacturer and distributors of Fen-Phen, in a sense it was still defeated
because it did not receive as great a settlement as it might have received had GMC
and Chesley only paid itself the amounts for which it had contracted.
Fourth, independent actions are an effective method of obtaining relief
from a judgment or order once time for an appeal has expired. CR 60.03 offers
equitable relief for parties by means of an independent action, so long as such
relief was not previously denied under CR 60.02. Under CR 60.03, an independent
action must satisfy three requirements: (1) the movant must have no other
available or adequate remedy; (2) the movant must not have created the situation
for which he seeks equitable relief, by his own fault, neglect, or carelessness; and
(3) the equitable relief must be justified based on a recognized ground such as
-23-
fraud, accident, or mistake. Bowling v. Commonwealth, 163 S.W.3d 361, 365 (Ky.
2005). Based upon our review of the facts, the filing of an independent action
pursuant to CR 60.03 was appropriate.
As noted in Judge Wehr’s orders, GMC knew and controlled the
details of the settlement. Because it did not apprise its clients of those details, the
clients fully relied upon GMC to protect their interests. GMC did not. Abbott had
no reason to question Bamberger’s orders or ask that they be rescinded—indeed,
Bamberger’s orders establish GMC’s conflict of interest and pursuit of its own
self-interest over that of its clients. For the foregoing reasons, we are convinced an
independent action was properly filed to review GMC’s alleged misconduct.
Grant of Partial Summary Judgment to Abbott
GMC’s next argument is that the trial court erred in awarding partial
summary judgment to Abbott when genuine issues of material fact were in dispute.
We agree and for that reason reverse and remand for proceedings consistent with
this opinion.
We begin with an explanation of our standard of review as expressed
in York v. Petzl America, Inc., --- S.W.3d ---, 2010 WL 3717266, (Ky. App. 2010):
When a trial court grants a motion for summary
judgment, the relevant standard of review is “whether the
trial court correctly found that there were no genuine
issues as to any material fact and that the moving party
was entitled to judgment as a matter of law.” Lewis v. B
& R Corp., 56 S.W.3d 432, 436 (Ky. App. 2001)
(quoting Scrifes v. Kraft, 916 S.W.2d 779, 781 (Ky. App.
1996)). The party opposing summary judgment must
present “at least some affirmative evidence showing that
there is a genuine issue of material fact for trial.” Lewis,
-24-
56 S.W.3d at 436 (quoting Steelvest, Inc. v. Scansteel
Service Center, Inc., 807 S.W.2d 476, 482 (Ky. 1991)).
The trial court must “view the evidence in the light most
favorable to the nonmoving party[.]” Id. (quoting
Steelvest, 807 S.W.2d at 480-82). Because summary
judgment involves only legal issues, “an appellate court
need not defer to the trial court's decision and will review
the issue de novo.” Lewis, 56 S.W.3d at 436.
In response to Abbott’s motion for partial summary judgment, the seventeen-page
affidavit of Hon. Kenneth R. Feinberg, a practicing attorney and an expert in mass
tort litigation, was submitted. Feinberg’s affidavit concluded the settlement
entered in the Guard action was “reasonable” and the “side letter” agreement
supported the conclusion that the $200,000,000.00 paid by AHP was not intended
to compensate only the 431 plaintiffs, but was also intended “to provide for other
payments, including potential claims or (sic) other Phen-Fen (sic) users,
subrogation claim holders, and other unforeseen claims.” Feinberg went on to
state:
There was nothing out of the ordinary in the Boone
Circuit Court approving the use of approximately twenty
million dollars from Guard for cy pres purposes or in
approving the formation of a charitable foundation, the
Kentucky Fund for Healthy Living, Inc. (Kentucky
Fund), to administer the cy pres funds. I am aware that
certain of the plaintiffs’ attorneys were appointed by the
Court to serve as directors of the Kentucky Fund. In my
opinion, there was no conflict of interest or impropriety
whatever in those appointments. The plaintiffs’ attorneys
were in an excellent position to understand the purposes
of the fund and to carry out the intent of the Court that
approved the establishment of the charitable foundation.
...
-25-
In my opinion, the case was handled properly and
ethically. I have seen nothing that credibly suggests any
misconduct by the attorneys or any inappropriate action
by the judge who presided over the case. It appears that
the instant action against the plaintiffs’ attorneys in
Guard is based on nothing more than misinformation or
lack of understanding of the procedures involved in class
action or common fund or aggregate mass tort settlement.
Feinberg’s affidavit was sufficient to create genuine issues of material fact such as:
whether the entire settlement, minus fees and expenses, was to be split between the
431 settling claimants; whether the settling complainants were fairly and
adequately compensated; whether KFHL was funded with money that should have
been distributed to the settling claimants or was funded with excess funds for
which the plaintiff’s consent to its ultimate use was not required; and, whether
GMC and Chesley were obligated to indemnify AHP for additional claimants who
might come forward after the settlement had been dispersed. The foregoing
questions of fact justified going forward with trial. Steelvest, 807 S.W.2d at 48082; See also, Chalothorn v. Meade, 15 S.W.3d 391 (Ky. App. 1999).
Therefore, reversal is necessary. Because we have determined partial
summary judgment was improvidently granted to Abbott, several issues stemming
from the order entered on March 8, 2006, are rendered moot including the award of
$42 million dollars in baseline compensatory damages, the award of allegedly
unproven damages, the application of joint and several liability, the lack of proof
of damages by the individual plaintiffs, and the denial of due process.
Denial of Summary Judgment to Gallion & Cunningham
-26-
Next, Gallion and Cunningham contend the trial court erred in
denying their motions for summary judgment and dismissal of the action. They
contend each of the individual claimants in the Guard action—now plaintiffs in
this action—settled their claims, signed multiple documents acknowledging their
understanding and satisfaction with the compensation and representation received,
and thus were foreclosed from complaining about inadequate representation. In
addition, they argue the present action was barred by the running of the statute of
limitations. They argue that either of these grounds was sufficient to support the
granting of summary judgment in their favor and the trial court erred in not so
holding. Alternatively, Gallion and Cunningham contend these same grounds were
sufficient to foreclose the grant of summary judgment in favor of Abbott.
“It is well-settled in this Commonwealth that the denial of a motion
for summary judgment is interlocutory and is not appealable.” Roman Catholic
Bishop of Louisville v. Burden, 168 S.W.3d 414, 419 (Ky. App. 2004) (citing Ford
Motor Credit Co. v. Hall, 879 S.W.2d 487 (Ky. App. 1994); Transportation
Cabinet, Bureau of Highways, Com. of Ky. v. Leneave, 751 S.W.2d 36 (Ky. App.
1988); Gumm v. Combs, 302 S.W.2d 616 (Ky. 1957); Battoe v. Beyer, 285 S.W.2d
172 (Ky. 1955); Bell v. Harmon, 284 S.W.2d 812 (Ky. 1955)). There is one
exception to this general rule. “The exception applies where: (1) the facts are not
in dispute, (2) the only basis of the ruling is a matter of law, (3) there is a denial of
the motion, and (4) there is an entry of a final judgment with an appeal therefrom.”
Leneave, 751 S.W.2d at 37. Here, there were disputed facts present regarding both
-27-
grounds urged in support of the motion for summary judgment and the trial court’s
ruling was not purely one of law, thus precluding application of the exception.
Therefore, this challenge to the denial of a motion for summary judgment is not
well-taken.
Further, an order denying dismissal of an action is inherently
interlocutory and non-appealable. Gooden v. Gresham, 6 Ky.Op. 560 (Ky. 1873)
(denial of motion to dismiss is not a final order from which a party may appeal);
Parton v. Robinson, 574 S.W.2d 679 (Ky. App. 1978) (denial of motion to dismiss
was not final and appealable order); see also Louisville Label Inc. v. Hildesheim,
843 S.W.2d 321 (Ky. 1992) (order denying motion for voluntary dismissal is not
appealable and action below merely continues). We see no reason to deviate from
this sound principal of law.
We have previously determined the trial court erred in granting partial
summary judgment to Abbott. Therefore, we need not comment on Gallion and
Cunningham’s alternative contention that the trial court erred in denying entry of
summary judgment for Abbott based on these same grounds.
Mills’s Standing to Defend KFHL
Mills additionally engages in a discussion regarding the
appropriateness of the creation of KFHL as a cy pres trust utilizing the “excess
funds” from the original settlement amount. He argues KFHL was properly
created as a legitimate act of the discretion of the Boone Circuit Court in Guard.
Thus, he contends Judge Wehr, without authority to do so, effectively “dissolved”
-28-
KFHL by seizing all of its assets and imposing a constructive trust on those funds.
We agree that creation of a cy pres trust is a valid option under the appropriate
circumstances. However, Mills has failed to grasp that he has no standing to
appeal on behalf of a corporate entity. Without citation to authority, Mills argues
“that as a member of the governing board of the trust and a citizen of the
Commonwealth of Kentucky . . . he is in the best position to pursue this matter on
behalf of the cy pres trust.” We disagree.
KFHL is a separate corporate entity which was a party to the Abbott
action. KFHL participated in the instant litigation and had the ability to appeal
from an adverse ruling, but it did not do so. A notice of appeal must be filed
within thirty days of the notice of service of the adverse judgment. CR
73.02(1)(a). Under CR 73.02(2), the time for filing a notice of appeal is
considered mandatory and subject to strict compliance. Fox v. House, 912 S.W.2d
450, 451 (Ky. App. 1995). The failure to timely file a notice of appeal deprives
appellate courts of jurisdiction. Burchell v. Burchell, 684 S.W.2d 296, 299 (Ky.
App. 1984). Such a defect is fatal and cannot be cured. Fox, 912 S.W.2d at 451.
Because KFHL did not appeal from the adverse ruling seizing its
assets and placing same in a constructive trust, it is not a party to this appeal and
we are without jurisdiction to consider the argument Mills attempts to present on
its behalf. Mills is properly a party to this appeal, but he cannot “bootstrap” an
argument in support of KFHL onto his appeal as he has no standing to prosecute an
appeal on behalf of this corporate entity. Mills cites us to no authority supportive
-29-
of his contention to the contrary and we are convinced none exists. Thus, no
further discussion of the issue is warranted, and that portion of the order of March
8, 2006, seizing all KFHL assets and imposing a constructive trust thereon shall
stand.
ABBOTT CROSS-APPEAL
On cross-appeal, Abbott contends Judge Wehr erred in denying its
motion for a change of venue, allowing Mills an offset in the judgment for
undocumented expenses, and improperly denying its motion for summary
judgment against Chesley. We shall discuss each of these contentions in turn.
Venue
First, Abbott contends Judge Wehr erred in denying its motion to
transfer venue to the Fayette Circuit Court. It is axiomatic that decisions on
motions for a change of venue are left to the sound discretion of the trial court and
we review such rulings only for an abuse of discretion. Bringardner Lumber Co.
v. Knuckles, 278 Ky. 356, 128 S.W.2d 727 (1939); Louisville Times Co. v. Lyttle,
257 Ky. 132, 77 S.W.2d 432 (1934); Drake v. Holbrook, 28 Ky.L.Rptr. 1319, 92
S.W. 297 (1906). In the absence of such an abuse, we will not disturb a trial
court’s ruling on appeal.
The instant complaint was initially filed in Fayette Circuit Court but
was transferred to the Boone Circuit Court over Abbott’s objection. Following
nearly two years of litigation in Boone Circuit Court, Abbott petitioned the court
for a change of venue to Fayette Circuit Court for purposes of conducting the trial
-30-
of this matter. Although Abbott made a conclusory statement indicating Boone
Circuit Court was an improper venue, the true thrust of the petition was centered
on the argument that Boone Circuit Court was a forum non conveniens. The trial
court heard arguments on the matter on two separate occasions.
Following the second hearing, Abbott filed a supplemental pleading in
support of its original motion. In the supplemental pleading, Abbott contended
that Fayette Circuit Court was the only appropriate venue for the action, Boone
Circuit Court was an improper venue, and, pursuant to KRS 452.105, Judge Wehr
had no discretion but was required to grant the change of venue as requested.13
Interestingly, Abbott’s prayer for relief still sought to have the case moved for trial
purposes only. Upon reviewing the various written pleadings and oral arguments
of the parties, Judge Wehr ultimately determined a transfer of venue was
unwarranted. After a careful review of the record before us, we discern no abuse
of discretion in Judge Wehr’s determination.
Abbott contends before this Court that the only proper venue for this
action is in Fayette Circuit Court. It argues the initial transfer to Boone Circuit
Court in March of 2005 was improper and the Fayette Circuit Court was without
jurisdiction to order the transfer. Abbott then argues the Boone Circuit Court
13
Abbott also engaged in a lengthy discussion of the “law of the case” doctrine as being
inapplicable to the issue at bar. This discussion was intended to correct a perceived
misperception by the Boone Circuit Court that it was powerless to make a determination on this
point of law because of the Fayette Circuit Court’s prior order. The trial court ultimately did not
rely on the law of the case doctrine and no mention of the matter appears in Abbott’s brief before
this Court. Thus, no further discussion on this point is necessary.
-31-
abused its discretion in failing to transfer the case back to the Fayette Circuit Court
upon being informed its jurisdiction was suspect.
As a preliminary matter, we must dispel the notion that Abbott can
properly complain about the actions of the Fayette Circuit Court. We note that
although designated as a part of the record on appeal, no transcripts of the Fayette
Circuit Court’s numerous hearings on the original change of venue motion appear
in the record before this Court. We must attribute this failure to Abbott as the
responsibility for ensuring a complete record falls upon the party appealing the
adverse ruling. In the absence of a complete record, we must assume the omitted
portions of the record support the rulings of the trial court. Thompson v.
Commonwealth, 697 S.W.2d 143, 145 (Ky. 1985).
Further, the actions of the Fayette Circuit Court are not properly
before us in this appeal. Had Abbott wished to contest the rulings of that court, it
had ample opportunity to do so, but did not. Although Abbott did request specific
findings of fact from the Fayette Circuit Court, none were forthcoming. However,
during the two years of litigation following the transfer of this matter to the Boone
Circuit Court, it took no further action to challenge the transfer. Rather than object
to the transfer, Abbott nearly immediately filed a motion seeking appointment of a
special judge to replace Judge Anthony Froelich whom Abbott contended had a
special relationship with Bamberger. Upon receiving notice Judge Froelich had
not actually been assigned the case, Abbott filed a supplemental pleading objecting
to the assignment of the matter to Judge Stanley Billingsley as he likewise had a
-32-
close personal relationship with Bamberger. These pleadings did not complain of a
lack of jurisdiction in the Boone Circuit Court, nor did any subsequent pleadings
lodge objections to the transfer of venue until 2007 when Abbott moved to transfer
the case back to Fayette County. Any objection to a change of venue is waived by
a subsequent appearance in and failure to object to the jurisdiction of the court to
which the transfer was made. Vinsen v. Lockard, 70 Ky. 458 (1870). Abbott
simply cannot now be heard to complain about the actions of the Fayette Circuit
Court.
We must now turn to Judge Wehr’s denial of Abbott’s motion to
transfer. Although Abbott makes cursory reference to the venue statutes in arguing
the Boone Circuit Court was an improper venue, the true crux of its argument was
that Boone Circuit Court was a forum non conveniens. In fact, in written pleadings
filed in support of its motion, the convenience to the parties was the main issue set
forth. It is well-settled that convenience is insufficient to justify a change of
venue. See Blankenship v. Watson, 672 S.W.2d 941 (Ky. App. 1984), overruled
on other grounds by Dept. of Educ. v. Blevins, 707 S.W.2d 782 (Ky. 1986).
Further, counsel indicated at a hearing on the motion that Abbott was seeking only
to move the trial to Fayette Circuit Court but all other matters could continue to be
heard in Boone Circuit Court. This position was likewise evident in the written
pleadings filed in the Boone Circuit Court. We know of no statutory provision
allowing for such bifurcated proceedings and Abbott cites us to no authority
supportive of its proposition of transferring venue of a case for trial purposes only.
-33-
Venue is purely a legislative matter and the courts are powerless to add or subtract
from the wording of the statutes. Copass v. Monroe County Medical Foundation,
Inc., 900 S.W.2d 617 (Ky. App. 1995). Thus, we discern no abuse of discretion in
Judge Wehr’s denial of the motion to transfer the case to Fayette Circuit Court.
We also believe it important to emphasize that following the transfer
of this matter to the Boone Circuit Court, Abbott actively prosecuted this matter
for nearly two years before complaining to the court regarding venue. The failure
to assert a request for a change of venue in a timely fashion and without undue
delay operates as a bar to such request. Miller v. Watts, 436 S.W.2d 515 (Ky.
1969). See also Pierce v. Crisp, 267 Ky. 420, 102 S.W.2d 386 (1937); Paducah
Gulf Railroad Co. v. Adams, 8 Ky. Opin. 100 (1874). Although Judge Wehr did
not rely on waiver as a basis for his ruling, we believe he would have been well
within his discretion to have done so.
Mills’s Undocumented Expenses
Second, Abbott alleges the trial court erred in granting Mills an offset
in the judgment for undocumented expenses. However, because of our resolution
in the direct appeal reversing and remanding the entry of partial summary
judgment in favor of Abbott and the resulting April 4, 2007, order awarding
baseline compensatory damages, this issue is rendered moot. Thus, it is
unnecessary for us to explore this question in detail.
Denial of Motion for Partial Summary Judgment Against Chesley
-34-
Third, Abbott argues the trial court erroneously denied its motion for
partial summary judgment against Chesley. As we have previously noted, the
denial of a motion for summary judgment, being interlocutory, is not appealable.
Further, the exception to this general rule, as stated in Leneave, 751 S.W.2d at 37,
and set forth previously in this Opinion, does not apply. As noted by the trial court
and contrary to Abbott’s assertions, there were issues of disputed facts remaining
in relation to Abbott’s claims against Chesley, and discovery was still ongoing.
Further, there has been no entry of a final judgment on any of Abbott’s claims
against Chesley. Therefore, the exception has no application in the case sub judice
and we are thus without jurisdiction to consider this claim of error. Abbott’s
contention that judicial economy would be served by addressing this issue may be
laudable, but it is without justification under the well-settled law of this
Commonwealth.
For the foregoing reasons, that portion of the order of the Boone
Circuit Court entered on March 8, 2006, awarding partial summary judgment in
favor of Abbott on its breach of fiduciary duty claim, is reversed and this matter is
remanded for further proceedings consistent with this Opinion. Subsequent orders
stemming from the improvident grant of partial summary judgment are necessarily
vacated. Thus, the order of April 4, 2007, insofar as it partially granted
compensatory damages to Abbott, is hereby vacated; and that portion of the order
of August 1, 2007, awarding Abbott baseline compensatory damages in the amount
of $42 million dollars and declaring GMC to be joint and severally liable is also
-35-
vacated. All other orders, or portions thereof, not specifically referenced are
affirmed.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENT
FOR APPELLANTS,SHIRLEY A.
CUNNINGHAM, ET AL.:
MARY E. MEADE-MCKENZIE
BRIEFS FOR APPELLANT,
MELBOURNE MILLS, JR.:
CALVIN R. FULKERSON
J. CHRISTIAN LEWIS
JAMES A. SHUFFETT
AT ORAL ARGUMENT:
JAMES M. SHUFFETT
CONSOLIDATED BRIEFS AND
ORAL ARGUMENT FOR
APPELLANTS, CHARLOTTE
BAKER, ET AL. AND
APPELLEES/CROSSAPPELLANTS, MILDRED
ABBOTT, ET AL.:
ANGELA M. FORD
BRIEF AND ORAL ARGUMENT
FOR CROSS-APPELLEE STANLEY
M. CHESLEY:
C. ALEX ROSE
JAMES M. GARY
AT ORAL ARGUMENT:
JAMES M. GARY
-36-
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