Continental Cas. Co. v. Law Offices of Melbourne Mills, No. 10-5814 (6th Cir. 2012)Annotate this Case
The attorney represented more than 400 plaintiffs in a class action related to the diet drug Fen-Phen. Lawyers’ fees were to be limited to 30 percent of the clients' gross recovery. The case settled for almost $200 million. Plaintiffs together received $74 million, 37 percent of the settlement; $20 million was used to establish Kentucky Fund for Healthy Living. The attorney served on the Fund’s board, for which he received $5,350 monthly. The attorney knew that the Kentucky Bar Association was investigating fee division in the case and possible unauthorized practice of law by his paralegal. The attorney subsequently applied to renew his malpractice insurance and answered "no" to questions about possible pending claims and investigations. The policy excluded coverage for dishonest acts and omissions. Members of the class subsequently filed malpractice claims and were awarded $42 million. The insurer sought a declaration that it was entitled to rescind the policy. The district court granted the insurer summary judgment and awarded $233,674.49 for its outlay on defense costs. Class members intervened to protect their ability to recover. The Sixth Circuit affirmed. Disbarment constituted a sufficient "regulatory ruling" under the dishonesty exclusion clause and there were material misrepresentations on the application.