Friday, May 15, 2020

Fen-Phen Fee Fight Remanded

The Utah Supreme Court remanded  a dispute between a departed attorney and his former firm 

This appeal arises out of a longstanding dispute between attorney Gregory Jones and his former law firm, Mackey Price Thompson & Ostler, P.C. (MPTO), over the distribution of litigation proceeds. Jones claims a right to some of the fees collected by the firm in personal injury cases arising out of the use of the diet drug known as Fen-Phen. Jones has asserted claims for quantum meruit/unjust enrichment, breach of fiduciary duty, and fraudulent transfer. He also claims a right to an award of punitive damages and seeks to impose a constructive trust on the funds held by MPTO.

In 2017, after nearly ten years of litigation (including a previous appeal to this court), a jury entered a $647,090 verdict against MPTO on a quantum meruit/unjust enrichment theory. But the district court dismissed Jones’s claims for breach of fiduciary duty, fraudulent transfer, and punitive damages after MPTO filed a motion for directed verdict. It also rejected Jones’s request for a constructive trust.

Both sides appealed

We affirm the directed verdict on the fiduciary duty claim but reverse the dismissal of the fraudulent transfer and punitive damages claims and reverse and remand for further proceedings on Jones’s request for imposition of a constructive trust. We also affirm the denial of Jones’s alter ego and statutory claims against Mackey, Price, and Mackey Price Law because such claims cannot be asserted in post-judgment proceedings under Brigham Young University v. Tremco Consultants, Inc., 2007 UT 17, 156 P.3d 782. And we uphold the jury verdict on the quantum meruit/unjust enrichment claim on the ground that the district court did not abuse its discretion in admitting the testimony of Jones’s expert witness.

The dispute

Two attorneys associated with MPTO, Jeffrey Thompson and Russell Skousen, initiated a Fen-Phen program with MPTO to litigate claims arising from the fallout surrounding the beleaguered weight-loss pill. Jones also worked for MPTO and focused on Fen-Phen cases from 2002 to May 2005. At that time, Jones developed dissociative amnesia, which severely impaired his memory and prevented him from continuing his work. The Fen-Phen cases eventually generated over $1 million in fees for MPTO. After Jones claimed to be entitled to some of the Fen-Phen funds, MPTO deposited the fee checks into its trust account and agreed as a “professional courtesy” to let Jones know if any of the funds were to be distributed.

The court rejected the fiduciary claim

We affirm because we find no evidence of a trustee-beneficiary relationship between Jones and MPTO. Trusts and corresponding fiduciary relationships are generally created by contract, statute, judicial decree, or some manifestation of an intent to create a trust. Jones’s situation matches none of these scenarios, and he has not identified a basis for an exception to the general rule...

Because neither general trust principles, rule 1.15(e), nor the law-of-the-case doctrine supports a finding that MPTO owed Jones a fiduciary duty, we affirm the district court’s entry of partial directed verdict on Jones’s claim for breach of fiduciary duty.

Fraudulent transfer

We first conclude that a “mixed motive” is sufficient to establish an “actual intent” to hinder, delay, or defraud under the Fraudulent Transfer Act. We then hold that Jones was required to establish such actual intent by clear and convincing evidence. With these premises in mind, we conclude that there was sufficient evidence in the trial record for a jury to find by clear and convincing evidence that there was a fraudulent transfer in this case...

MPTO’s failure to explain its calculation of Jones’s payment, as well as its possible offset for Jones’s alleged mishandling of cases, make it more likely that MPTO also acted to hinder or delay Jones in his efforts to recover his share of the Fen-Phen fees. We hold that there was sufficient evidence for a reasonable jury to conclude by clear and convincing evidence that MPTO acted with actual intent to hinder or delay Jones. And we accordingly reverse the directed verdict on this claim.

The court also reversed the dismissal of the punitive damages and constructive trust claims

In so doing we are not endorsing the propriety of a constructive trust in the circumstances of this case. See Wilcox v. Anchor Wate, Co., 2007 UT 39, ¶ 34, 164 P.3d 353 (identifying factors for consideration in the imposition of a constructive trust). We leave the resolution of that question for the district court on remand.

As to the cross appeal on the expert witness

Hansen’s experience, methodology, and opinions were all highlighted in his report and deposition. MPTO was thus on notice about the substance of Hansen’s trial testimony. There is no undue surprise when experts summarize factors listed in their report into succinct groupings or use slightly different terminology. We hold that Hansen’s testimony was properly admitted and that Jones’s disclosure of Hansen’s expert testimony was adequate under the then-applicable rule 26 of the Utah Rules of Civil Procedure.

And as to the new firm

Once the district court determined that it had jurisdiction over Mackey Price, LLC, it should have required Jones to show that Mackey Price, LLC was in fact a successor in interest to MPTO. The district court should not have taken Mackey Price, LLC’s silence during a special appearance as a concession or endorsement of Jones’s position. We reverse and remand for a resolution of Mackey Price, LLC’s status on the merits—under procedures deemed appropriate by the district court on remand.

Conclusion

We reverse the dismissal of Jones’s fraudulent transfer and punitive damages claims, the decision that a constructive trust was categorically unavailable, and the default determination that Mackey Price, LLC was a successor in interest to MPTO. But we affirm the district court in all other respects and remand for further proceedings consistent with this opinion.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2020/05/the-utah-supreme-court-this-appeal-arises-out-of-a-longstanding-dispute-between-attorney-gregory-jones-and-his-former-law-fi.html

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