Fleming v. Kinney ex rel. Shelton

395 S.W.3d 917, 2013 WL 1420377, 2013 Tex. App. LEXIS 4507
CourtCourt of Appeals of Texas
DecidedApril 9, 2013
DocketNo. 14-11-00611-CV
StatusPublished
Cited by20 cases

This text of 395 S.W.3d 917 (Fleming v. Kinney ex rel. Shelton) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fleming v. Kinney ex rel. Shelton, 395 S.W.3d 917, 2013 WL 1420377, 2013 Tex. App. LEXIS 4507 (Tex. Ct. App. 2013).

Opinion

SUBSTITUTE OPINION

WILLIAM J. BOYCE, Justice.

We overrule the motion for rehearing, withdraw our opinion dated February 28, 2013, and issue the following substitute opinion.

George Fleming and his law firm, Fleming & Associates, L.L.P., appeal from a judgment against them and in favor of Sandra Kinney, on behalf of Maybell Shelton; Elizabeth Parzanese; Annette Vincent; Annette Ruiz; Carol Martin; Renee Gaona; Helen Smith Blankenship; Lana Beth Herron; Michelle Lindesmith; and Shirley Danford.1 We reverse the trial court’s judgment and remand for proceedings consistent with this opinion.

Factual Background

This appeal arises in connection with claims asserted against attorney Fleming by former clients who contend that he improperly deducted certain expenses from their recoveries when they settled personal injury suits against pharmaceutical company Wyeth.

Fleming represented the former clients in litigation seeking recovery for personal injuries attributed to consumption of a combination of the prescription diet drugs fenfluramine and phentermine — “fen-phen” for short. See generally In re Diet Drugs, 553 F.Supp.2d 442, 449 (E.D.Pa.2008). Studies indicated an association between heart damage and the use of fenflu-ramine and dexfenfluramine; both were removed from the market in 1997. Id.; see also In re Diet Drugs, 282 F.3d 220, 225 (3d Cir.2002). Some 18,000 individual suits and 100 class actions were filed after these drugs were withdrawn.

A federal multidistrict litigation (MDL) court was designated to handle fen-phen cases; the MDL court eventually certified a nationwide class action. See generally In re Diet Drugs, 385 F.3d 386, 389-90 (3d Cir.2004). The MDL court established procedures to be followed by litigants who wished to opt out of the federal fen-phen class action and pursue individual claims. Among other requirements, opt-out litigants had to establish their eligibility to sue under a scientific testing program that required them to undergo an echocardio-gram resulting in a “FDA-positive” reading as measured by criteria established by the MDL court. Cases that did not meet the “FDA-positive” threshold were subject to dismissal.

To address this requirement, Fleming set up a nationwide echocardiogram program supervised by a board-certified cardiologist at a cost exceeding $20 million. More than 40,000 potential clients were screened pursuant to this program; approximately 8,000 were determined to have “FDA-positive” echocardiograms that would allow Fleming to pursue individual claims on their behalf against Wyeth.

Fleming’s clients signed written contingency fee agreements that allowed Fleming to recover reasonable expenses incurred in handling each client’s claim. As an example, the fee agreement between Maybell Shelton2 and Fleming stated as follows:

[921]*921In the event of a recovery, the Client understands and agrees that out of the Client’s portion of any recovery, the Firm will be paid all reasonable costs, charges or expenses made or incurred by the firm in the Firm’s handling of the Client’s claim and causes of action, including but not limited to expenses or charges for court costs, filing fees, certified mailing fees, depositions, expert witnesses, long distance telephone, travel, parking, data management, investigation, research, telecopying and photocopying at the Firm’s normal rate, costs or charges for pretrial and trial exhibits and any other reasonable charges or costs made or advanced by the Firm.

Fleming ultimately entered fee agreements with 8,051 clients.

Fleming and Wyeth engaged in settlement negotiations in 2005. Wyeth insisted on an aggregate settlement to which at least 95 percent of Fleming’s clients had to agree. Wyeth and Fleming agreed to an aggregate settlement in May 2006 that totaled $339 million and encompassed all of Fleming’s 8,051 clients.

Fleming’s clients received a settlement packet, which included a grid showing the sums assigned to each of the 8,051 clients. The settlement packets also included a settlement statement showing deductions for expenses, attorneys’ fees, and other items. More than 95 percent of Fleming’s 8,051 clients consented in writing to the settlements, including payment of a proportionate share of expenses.

Procedural Background

Sandra Kinney filed this suit in 2008. Among other things, she asserted that Fleming breached his fiduciary duty to Maybell Shelton when he deducted from her fen-phen recovery a share of expenses attributable to echocardiograms performed on thousands of other potential clients who ultimately were deemed not to be “FDA-positive” after screening and whose cases were turned down by Fleming.

Eventually, more than 600 former clients sued Fleming in this case. They alleged claims for breach of contract, breach of fiduciary duty, fraud, conversion, statutory theft, and unjust enrichment. The trial court selected 10 plaintiffs from this group for trial pursuant to a Rule 11 agreement.

At trial in late 2010, the parties hotly contested many aspects of the settlement including the propriety of deducting expenses attributable to non-client echocardi-ograms from recoveries obtained for Fleming’s 8,051 fen-phen clients.

The former clients contend that only echocardiogram costs attributable to an individual client’s own FDA-positive echo-cardiogram should have been deducted. According to the former clients, Fleming’s decision to allocate a proportionate share of non-client echocardiogram costs to his 8,051 clients improperly boosted Fleming’s fees from the $339 million aggregate settlement by more than.$20 million at their expense.

According to Fleming, allocating a proportionate share of non-client echocardio-gram expenses to his settling clients was reasonable and appropriate because creating a sophisticated, selective, and scientifically sound screening program was essential to (1) demonstrate that his 8,051 clients actually had compensable injuries notwithstanding the absence of medical expenses related to diet drugs; and (2) convince Wyeth to settle. Fleming contends that the high percentage of potential clients whose cases were rejected bolstered the strength of cases that ultimately were accepted and filed; therefore, according to Fleming, his clients’ interests were advanced by all of the echocardio-[922]*922grams that were conducted — not just by their own individual “FDA-positive” echo-cardiograms.

The former clients presented expert testimony at trial from attorney Lillian Hard-wick. Her testimony included the following opinions.

• “My opinion is that Mr: Fleming violated the fiduciary duties of candor and loyalty in two primary respects with the allocation issue.”
• “The first way is that this was a group representation. And in my opinion, that was not revealed to the clients and it should have been revealed to the clients in their settlement package.”
• “The second way is that in having a group allocation that Mr. Fleming was doing, he had conflicted loyalties among the various clients and he had a conflict with his own personal interest. And that was not revealed to the clients.”

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Cite This Page — Counsel Stack

Bluebook (online)
395 S.W.3d 917, 2013 WL 1420377, 2013 Tex. App. LEXIS 4507, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fleming-v-kinney-ex-rel-shelton-texapp-2013.