WILLIAM J. GALLION V. KENTUCKY BAR ASSOCIATION
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WILLIAM J. GALLION
V.
MOVANT
IN SUPREME COURT
KENTUCKY BAR ASSOCIATION
RESPONDENT
OPINION AND ORDER
The Movant, William J. Gallion, KBA Member Number 24167, 163 East Main
Street, Suite 401, Lexington, Kentucky 40507, moves this Court to withdraw his
membership to the Kentucky Bar under terms of permanent disbarment . Pursuant to
SCR 3.480, Movant admits that his conduct in the case, Darla Guard, et. al . or Jonetta
Moore, et al . in A. H. Robins Company, et. al . 1 (hereinafter the Fen-Phen case), violated
certain Supreme Court Rules as charged in KBA File 9340 . For the reasons set forth
herein, we grant Movant's motion.
The charges against Movant stem from a class action lawsuit filed against
American Home Products (AHP) in the Boone Circuit Court in July 1998, on behalf of
several plaintiffs who claimed to have been injured by AHPs diet drug, Fen-Phen . All of
the plaintiffs Movant represented entered into contingency fee contracts with him. A
settlement agreement was reached in May 2001 resulting in one lump sum payment to
1 Boone Circuit Court, Case Number 98-CI-795
be divided among all plaintiffs . The agreement also provided that a portion of the
settlement would be paid to Movant and two other attorneys, Melbourne Mills, Jr. and
Shirley A . Cunningham, Jr., who were affiliated with the case. The agreement allowed
- ,1iova- nt;- Mills, - and Cunn;ingharn - io divide - the settlement amount between plaintiffs at
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their discretion and also determine how much they personally were to be paid . The total
amount of settlement funds to be distributed was $200,450,000.
A staff member working with Movant, Mills, or Cunningham contacted each of the
plaintiffs and informed them how much settlement money he would receive . The
plaintiffs were never informed that their lawyers actually determined the amount of
money they were to be given . If a plaintiff complained about the settlement amount, he
was coerced by the attorneys or their staff to take the amount offered under the guise
that it was what AHP had specifically offered them . Each plaintiff signed a
confidentiality agreement and some plaintiffs were even told that they could go to jail if
they discussed the terms of their individual settlement . At no point were the plaintiffs
told about the total settlement arrangement from AHP. No plaintiff received a notice of
the settlement process, the manner in which their settlement amounts were decided
upon, or their right to opt out of the settlement and proceed to trial . Additionally, Movant
previously entered into an agreement with attorneys Stanley Chesley, David Helmers,
and Richard Lawrence to share attorney fees received from the case . The plaintiffs
were never informed of this fee-splitting arrangement .
In June 2002, nearly $70 million of the settlement funds had not been distributed .
The money was improperly depostied in the personal accounts of the attorneys . An
order was entered by Judge Bamberger of the Boone Circuit Court to give fifty percent
of the remaining funds to the plaintiffs, and fifty percent to Movant, Mills, Cunningham
and several other attorneys for "indemnification or contingent liabilities." The record
shows that there were no "contingent liabilities ."
-In-July 2002 another order was iE~sueu by the Boone Circuit , Court . - This divided
any remaining funds between the attorneys for "outstanding litigation and administrative
expenses" and a charitable organization which was to be created. No statement exists
showing what outstanding litigation or administrative expenses existed at that time. The
July 2002 order implied that all plaintiffs had consented to the creation of the charity.
However, the record clearly shows that the plaintiffs did not knowingly consent to the
creation of a non-profit charity like the one being proposed.
In January 2003, The Kentucky Fund for Healthy Living, Inc., was registered with
the Secretary of State as a 501(c)(3) corporation . Movant, Mills, and Cunningham
transferred $20 million of the remaining settlement from their own personal accounts in
order to fund the entity . Movant was paid a salary for serving as one of the charity's
board members .
In total, the attorneys received approximately $104,337,000 from the total
settlement . Movant and his firm received fees in excess of $56 million .
From these acts, Movant is charged with twenty-two violations of our Supreme
Court Rules . These charges are:
1) The Movant violated SCR 3.130-1 .4(a) by failing to adequately communicate
with the plaintiffs that he represented in the Fen-Phen case;
2) The Movant violated SCR 3.130-1 .4(b) by failing to inform his clients in the
Fen-Phen case of relevant information, including but not limited to : the failure to
communicate the amount of the total settlement from AHP to his clients ; the
failure to explain to his clients the process for determining the amount that each
of the plaintiffs would receive; the failure to inform his clients of the options
available in the event that the settlement amount for that individual client was
rejected by the client; and by instructing or allowing others to give his clients
inaccurate information about multiple aspects of the case ;
3) The Movant violated SCR 3.130-1 .5(a) by receiving an excessive fee in the
Fen-Phen case, by receiving both a contingency fee from each of his clients who
were plaintiffs in the lawsuit and additional fees from the' total ,settlement
proceeds;
4) The Movant violated SCR 3.130-1 .5(c) by failing to provide his clients with a
written statement explaining the outcome of the matter, by failing to provide each
of his clients with an accounting stating how the client's settlement, the attorney
fee, and reimbursement for costs were calculated, and by providing incorrect
information as to the method of determination of the client's portion of the
statement ;
5) The Movant violated SCR 3 .130-1 .5(e) by failing to disclose to his clients that
he divided fees with Mills, Cunningham, Chesley, Helmers, and Lawrence; by
dividing fees with the other lawyers, not in proportion to the services performed,
nor pursuant to a proper agreement, and by failing to gain the approval of his
clients for splitting fees with other attorneys not in his law firm; and because the
totality of the fees paid to the Movant, Cunningham, Mills, Chesley, Helmers, and
Lawrence was unreasonable;
6) The Movant violated SCR 3.130-1 .7(a) when in representing multiple clients
who were competing for the same settlement funds he failed to explain the
ramifications of the multiple client representation to his clients, and by failing to
obtain his clients' consent in the multiple representation and division of the
settlement funds;
7) The Movant violated SCR 3.130-1 .7(b) by accepting a lump sum settlement
from AHP, assisting in allocating less than one-half of the settlement funds to the
clients, and then receiving an excessive fee for himself and those under his
control from the remainder of the settlement proceeds. This method of
determining the individual settlement amounts of his clients while having a stake
in retaining a large amount of the settlement funds for his own attorney fees or
contractual obligations of fee-splitting with non-lawyers and other lawyers,
violates SCR 3 .130-1 .7(b). In addition, the Movant failed to obtain consent of
multiple clients in a single matter or to include any explanation of the implications
of such an arrangement in the division of the money;
8) The Movant violated SCR 3.130-1 .8(a) by acquiring an interest in the
settlement funds beyond his written fee agreement . The Movant's interest in the
settlement funds was created when he accepted a lump sum settlement to be
divided between his clients, the other plaintiffs, the other attorneys, and the lay
persons with whom he would split fees, in order to receive a fee in excess of the
amount stated in the contingency fee contracts with his clients ;
9) The Movant violated SCR 3 .130-1 .8(g) as referenced above, including but not
limited to, his actions: in failing to explain to his clients that AHP made a lump
sum settlement to all of the plaintiffs and the total amount thereof; in failing to
Explain that tire settlement agreement'stated that , the plaintiffs' attorneys would
determine the amount that each plaintiff would receive from the lump sum
settlement ; in failing to disclose or explain the proposed allocations in the
settlement agreement ; in failing to communicate the amount of the total
settlement from AHP to his clients and to the plaintiffs in the overall lawsuit ; in
failing to consult with his clients at all; and in failing to obtain the consent of his
clients to make an aggregate settlement ;
10) The Movant violated SCR 3 .130-1 .8(j) by acquiring a proprietary interest in
the litigation . The Movant's interest in the litigation was created when he
accepted a lump sum settlement to be divided between his clients, the other
plaintiffs, the attorneys, and the lay persons with whom he had agreed to split
fees, all with the knowledge that he would receive a fee in excess of the amount
stated in the contingency fee contracts with his clients ;
11) The Movant violated SCR 3.130-1 .15(a) by co-mingling his property with that
of his clients, by using those funds for personal use, by participating in transfers
of money from the escrow account to purchase automobiles for his employees ;
and by moving, or participating in moving, funds belonging to clients out of the
state ;
12) The Movant violated SCR 3.130-1 .15(b) by failing to turn over to the clients
the funds to which they were entitled, and by failing to provide an accurate
accounting of the distribution of the total settlement received from AHP as well as
the individual clients' settlement distribution ;
13) The Movant violated SCR 3.130-1 .15(c) by removing funds that did not
belong to the Respondent, re-depositing the funds in a personal account, and
later transferring personal funds back to the original account to cover second
client distributions, and initially, upon receipt of the funds, by failing to make the
proper accounting to his client before withdrawing funds for himself ;
14) The Movant violated SCR 3.130-2 .1 by failing to exercise independent
professional judgment in distributing the lump sum settlement from AHP or by
failing to render any candid advice to his clients during the representation,
including whether to accept the proposal the attorneys made;
15) The Movant violated SCR 3 .130-5 .1 by making insufficient efforts to
supervise his associate, David Helmers, and permitting his associate to violate
the Rules of Professional Conduct, as well as directing and ratifying the conduct
of David Helmers in misleading and deceiving the clients in connection with the
acceptance of the settlement amounts which had been arrived at by the Movant
and co-counsel, rather than in an arms length negotiation ;
16) The Movant violated SCR 3.130-5 .3(a) by failing to have in effect policies and
procedures to ensure that his non-lawyer employees were acting in accordance
with the lawyer's ethical duties in their dealings with the clients and discussions
about settlement matters ;
17) The Movant violated SCR 3.130-5 .3(b) by failing to appropriately supervise
his non-lawyer employees in order to ensure that their conduct was compatible
with his ethical duties in their dealings with the clients and discussions about
settlement matters;
18) The Movant violated SCR 3 .130-5 .4(a) by paying a percentage of legal fees
to non-lawyers, including but not limited to a trial consultant and a mediator;
19) The Movant violated SCR 3.130-5 .5(b) by assisting and permitting nonlawyers in his employ and that of the other counsel to give legal advice to his
clients with regard to their litigation and the acceptance of proposed settlements ;
20) The Movant violated SCR 3.130-8 .3(a) by violating the Rules of Professional
Conduct and by knowingly assisting the other plaintiffs' lawyers, non-lawyers
working for the plaintiffs' lawyers, and the Boone Circuit Judge to violate the
Rules of Professional Conduct ;
21) The Movant violated SCR 3.130-8 .3(c) as described"above, including, but not
limited to, his actions: in deceiving his clients into accepting the individual
settlement amounts ; in deceiving clients about their claims even after demand for
more specific accounting ; in misrepresenting to the Boone Circuit Court that his
clients had agreed to donate a substantial portion of the total settlement received
from AHP to charity ; in failing to inform the Boone Circuit Court that he had
contingent fee contracts with all of his clients which set a specific fee; and in
providing, or assisting in providing, false or misleading information to the Boone
Circuit Court about the fees and expenses, as well as the manner in which the
settlement had been reached by each of his clients, and in misappropriating
funds over and above his fee contracts ;
22) The Movant violated SCR 3.130-3 .3(a)(1) by advising the Boone Circuit
Court that his clients had agreed to donate millions of dollars to a charitable
organization, when in fact some of the Respondent's clients were not informed of
the possibility that a portion of the settlement proceeds may be donated to
charity, some clients were informed that a nominal amount may be donated to
charity, and others objected to the donation of any amount of the settlement to
charity. Further, the Movant advised, or participated in advising, the Boone
Circuit Court of false statements of fact relative to the method of dividing the
settlement among the client and the lawyers, and the application of the fee
contracts to that division.
The Movant now moves to withdraw his membership from the Kentucky Bar and
to terminate the disciplinary proceedings against him . Movant admits that "his conduct
violated certain Rules of the Kentucky Supreme Court as charged by the Inquiry
Commission ." In particular he admits that:
1) he did not tell his clients in writing that he had made fee arrangements with
other attorneys ; 2) he did not advise his clients concerning the mediation of their
case, or provide them an opportunity to be present at the mediation or present
input as to the value of their specific case; 3) he did not advise his clients of the
total settlement amount and did not comply with the requirements of SCR 3.1301 .8(g); 4) he did not advise his clients that he was seeking fees that were more
than the contingent fees provided in his contingent fee contracts ; 5) he did not
comply with the requirements of SCR 3 .130-1 .15 to "hold property of clients or
third persons that is in a lawyer's possession in connection with a representation
separate from the lawyer's own property . . . in a separate account maintained in
the state where the lawyer's office is situated . . ."; 6) he did not disclose to the
clients that he intended to request that the Judge consider placing approximately
$20,000,000 of the settlement funds into the Kentucky Fund for Healthy Living,
Inc., or obtain their consent to that distribution ; 7) he participated as a paid
director of that Fund without client consent; and, 8) he did not disclose to his
clients that their individual settlement amounts were being determined by a
settlement protocol developed and administered by their own lawyers, not by the
Defendant .
The KBA strongly urges this Court to sustain the motion and disbar Movant. In light of
the seriousness of the charges against Movant and his admission of guilt, we grant
Movant's motion .
Thus, it is ORDERED that :
1) Movant, William J. Gallion's motion to withdraw his membership in the
Kentucky Bar Association under terms of permanent disbarment is granted. Movant
thusly, may never apply for reinstatement to the Bar under the current rules;
2) Movant in accordance with SCR 3 .390, shall notify all Courts in which he has
matters pending and all clients for whom he is actively involved in litigation and similar
matters, of his inability to continue representation ;
3}- Movant shall immediately cancel and cease any advertising activities in
accordance with SCR 3.390 ;
4) All current bar disciplinary proceedings against Movant are hereby terminated ;
5) In accordance with SCR 3 .450, Movant is directed to pay all costs associated
with these disciplinary proceedings in the amount of $24,928.25 for which execution
may issue from this Court upon finality of this Order.
All sitting . All concur.
ENTERED : October 23, 2008
CHIEF JUSTICE
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