(Reuters) - Stanley Chesley, once one of the most powerful plaintiffs’ lawyers in the country, is no longer a lawyer. After hundreds of former clients sued him and three other lawyers for allegedly stealing millions of dollars from settlement funds for diet drug victims, Chesley was disbarred in Kentucky in 2013. He resigned from the Ohio bar soon thereafter.
But Chesley has never litigated with more determination than he’s recently shown in maneuvers to avoid paying those former clients what courts have determined he owes them.
In 2014, a judge in Boone County, Kentucky, held Chesley liable for $42 million in damages to the fen-phen clients. A Kentucky appeals court affirmed the judgment last March. By then, however, Chesley was already years into what the Ohio Supreme Court last week described as “an ongoing campaign … to shelter assets from his judgment creditors.”
Much of Chesley’s wealth – including a continuing stream of millions of dollars a year in fees from tobacco litigation - was wrapped up in his sole ownership of the law firm he used to preside over, Waite Schneider Bayless & Chesley. In 2013, Chesley purported to give up his ownership of the firm. He executed a wind-up agreement transferring shares of the law firm to a trust overseen by his friend and employee Thomas Rehme.
Was that a real transaction? The former clients to whom Chesley owes $42 million certainly don’t think so. They sued Chesley, Rehme and the firm for fraudulent conveyance in federal court in Cincinnati. U.S. District Judge Robert Cleland, who is overseeing the fraudulent conveyance case, sided with the former clients. After granting and extending a temporary restraining order blocking the disposition of Waite Schneider assets, Judge Cleland issued a permanent injunction in April. In particular, the judge barred Chesley from receiving any money from the firm.
Meanwhile, in Kentucky, Boone County Circuit Court Judge James Schrand ordered Chesley in 2015 to transfer his interest in Waite Schneider to former fen-phen clients, calling Chesley’s wind-down agreement with Rehme a sham deal intended to shield Chesley’s assets from his judgment creditors. Noting in particular that Chesley moved $59 million from personal accounts to the law firm before enacting the trust agreement with Rehme, Judge Schrand said Chesley owes his former clients whatever money he receives from the law firm.
Chesley went to court in Ohio to block Judge Schrand’s Kentucky order. (I’m simplifying litigation that was stultifyingly complex.) He was initially successful in Ohio’s Court of Common Pleas, but in June 2016, the Ohio Supreme Court issued a writ of prohibition barring the Ohio state-court judge from interfering with former fen-phen clients’ efforts to collect the money Chesley owes them.
Team Chesley had yet another trick up its sleeve, though. As the former clients litigated unsuccessfully in Colorado and Nevada to claim legal fees owed to Waite Schneider, law firm trustee Rehme went to probate court in Ohio in September 2016 to establish a claims process against the firm. The former fen-phen clients, represented in Ohio by Dinsmore & Shohl, sued to block the probate case, which they called yet another sham secretly orchestrated by Chesley.
On Oct. 5, a divided Ohio Supreme Court granted Chesley’s creditors another writ of prohibition. Though the trustee in the probate case, a bankruptcy lawyer named Eric Goering, insisted that Chesley himself had nothing to do with the probate filing and, as of April 2017, had received no money from the probate claim process, the state Supreme Court majority said Chesley and his former firm were serial abusers of the Ohio judicial process.
“Prohibition is also a proper remedy to prevent vexatious abuse of process. In our judgment, the conduct of Chesley and (Waite Schneider) warrants this extraordinary relief,” the majority wrote in a per curiam opinion. Chesley and his former law firm had shown a pattern of obstructing collection of the former clients’ $42 million judgment and concealing Chesley’s “ongoing control” of his former firm, the opinion said. There was even evidence, according to the court, that the probate action, “ostensibly filed to discharge (Waite Schneider’s) debts, was itself the product of fraud.”
The Supreme Court’s ruling halts Waite Schneider’s probate action, leaving the firm under the preliminary injunction imposed by Judge Cleland in federal court. I reached out to creditors’ lawyers Angela Ford and Brian Sullivan but didn’t hear back. I also emailed Chesley counsel Vincent Mauer of Frost Brown Todd. He said in an email that he would ask Chesley about responding. I didn’t hear anything further from Mauer.
Stan Chesley never was like other plaintiffs’ lawyers. I interviewed him many years ago, when he was leading multidistrict litigation over silicone gel breast implants, in his football-field-sized Waite Schneider office in Cincinnati. As a supporter of class actions to resolve personal injury claims, he was not a popular member of the plaintiffs’ bar in those days. In person, he seemed far too mild to have stoked such fear and loathing from fellow plaintiffs’ lawyers.
Chesley managed to prove his detractors right. And the harder he fights to evade paying the former fen-phen clients, the more dirt he smears on his former profession.