STANLEY M. CHESLEY: PLAINTIFFS' ATTORNEY PERFECTS CLASS-ACTION STRATEGYPosted On: Oct. 29, 1997 12:00 AM CST
Stanley M. Chesley was a little-known trial attorney in 1977, when he took a case that other lawyers rejected because the payoff didn't seem worth the trouble.
The case centered on a Memorial Day 1977 fire that killed 165 people at the Beverly Hills Supper Club in Southgate, Ky. Mr. Chesley, undeterred by criticism that the insurance payoff would be paltry because coverage limits were low, embarked on a bold strategy to sue multiple defendants that he contended were partly responsible for the fire.
The last of the defendants settled eight years later, bringing the total payout by all defendants to around $50 million.
It was no small victory. Mr. Chesley's tactics changed not only the direction of his career, but also how mass tort cases would be handled.
Since the Beverly Hills Supper Club case, it has become common for plaintiffs lawyers to sue multiple defendants in an attempt to find culpable parties in class-action lawsuits. They rely on the tactic and theories used by Mr. Chesley in the Kentucky case and in subsequent lawsuits such as those related to the MGM Grand Hotel fire in Las Vegas in 1980 and the 1987 Dupont Plaza fire in San Juan, Puerto Rico.
Mr. Chesley, 61, continues to pursue mass tort cases and has represented plaintiffs in dozens of prominent personal injury and product liability cases. He also is a negotiator with the Castano Litigation Group, one of the groups involved in the proposed $368.5 billion global settlement with tobacco companies.
From his Cincinnati office at Waite, Schneider, Bayless & Chesley, Mr. Chesley recently discussed the 1977 case and the future of tort law with Associate Editor Michael Bradford.
Why did you take the Beverly Hills Supper Club case?
That was 20 years ago, I was 41 years old and had some good success in the courtroom. And there weren't a lot of people who wanted to get involved in this case because the owners only had $1.3 million worth of insurance. So I conceived the idea of suing a lot of different culpable defendants under the theory that they contributed to and were a proximate cause of the fire.
What lessons came from that case?
All fires are localized unless it's an explosion, and the question is, what causes them to spread? We learned a lot in that fire. We learned that what really spreads is the smoke and what really kills is the smoke, not the flames.
Back in those days, 20 years ago, they were talking about dying from carbon monoxide. Nobody had ever looked at toxic smoke, which is the hydrogen chloride and cyanide. We got into that and found a whole group of culpable defendants. Aluminum wire was a causative factor, the furnishings, the draperies, the carpet, upholstered goods. All of which was beyond belief. I'll give you an example.
(Mr. Chesley pulled a tiny bit of foam from an envelope marked "Beverly Hills" and touched it with the flame from a disposable lighter. The foam, the type found in the chairs at the supper club, burned for several seconds with a thick black smoke.)
That's cyanide. They didn't have the nerve to go in front of jury on this.
Was that the toughest case you've handled?
I think Beverly Hills was the toughest. I had limited resources at the time. I was groping with areas I was not familiar with, products that I had little or no familiarity with.
That was probably one of the most exciting cases because I wanted to make a difference. And instead of getting a million dollars, we got over 50 million, which back then was a lot of money.
We had a lot of interesting theories. We had enterprise liability and concert of action against the aluminum industry. And we copycatted a lot of things in the MGM Grand and Dupont Plaza fires litigation.
You have to understand, I live in Cincinnati, Ohio. I don't live in New York or even Texas or California. It's very exciting being a River City boy to be able to get involved in some of these things. And I think I've really been able to be on the cutting edge of litigation in the last 25 years.
Courts are taking a hard look at class-action settlements. Are we going to continue to see them? Will there be changes in the way they are handled?
I think the reality is the insurance industry is going to have to rethink how they handle mass tort.
What the insurance industry likes is time, diversion, delays, putting it in 50 jurisdictions with court delays, legal maneuvering. And the class action takes away the legal maneuvering because it's in one place, one trial. The reality is that most defendants, particularly insurance companies, do not want one trial. I realized that back in '77 and that's what I've been using as the pressure point.
They don't want the class action because they're assuming that it's so costly for the average person, who's afraid to go to a lawyer and who doesn't know what lawyer to go to. So they go to the advertising lawyer who's got a legal clinic or is in the yellow pages and doesn't know a darn thing about the case.
In some of these cases, I think the bad reckoning has come for earlier settlements because of the transaction costs of the litigation. There used to be a belief that a defendant could outspend the plaintiff, out-expert and out-maneuver them. That day is over.
And for every Stan Chesley, there's an army right behind me. Us old war horses, we've got a lot of trainees who are in the trenches ready to roll.
How will the Supreme Court's decision to deny class-action settlement of asbestos claims in the Amchem case influence future cases?
I think we're starting to see some impact. Some courts are starting to write about it. But I think it remains to be seen; it's fresh.
Part of the problem with Amchem, which I call Georgine, is how to deal with futures. The unknown future claimants are a problem. If you've got to protect them, how do you notice them? How do they fit into it? They must be dealt with fairly and that's a problem.
I think settlement classes with known claimants have a better result.
Another problem with class settlements is the issue of allowing some claimants to opt out. How should opt outs be handled?
I like the opt-out. Opt outs give everybody a right. You don't like the settlement, you don't like the deal, you don't like going forward as a class? Then opt out. But bear in mind you if you opt out you've got to file suit and go forward.
What is the likelihood that the tobacco industry's settlement proposal with state attorneys general will be approved by Congress?
I think it will.
We're working on some amendments, a tightening of the Food and Drug Administration piece.
It's a question of, when you've got anything new, what does that mean? Where does it go? Who's going to be looking at it? On this one, it's got to be approved by Congress.
People want to know why tobacco settled. I was at the negotiating table. It's very simple. You have 47 million smokers. If they were to lose 10%of their cases and win 90% every cigarette company would be bankrupt because of the volume of cases. It's the same with breast implants. Even if they win a vast majority of the cases, they can't survive.
And the other thing is, they can't put together as many good trial teams on the defense side as we can on the plaintiffs side. We have more bodies, we have more people that are in tune with it, we have more people that are knowledgeable about it.
Will the tobacco settlement remain unique or will there be others structured the same way that will need the approval of Congress?
I think it's too early to tell. It's intriguing. I think the law is ever, ever evolving.
This is very interesting because there are no insurance companies involved.
This is a non-insurance case. In most litigation you have the plaintiff, the defendant and the insurance company.
As things go forward and the plaintiff starts to do better, there becomes a civil war between the insurer and the insured. And then you have a third wave of litigation which is the reservation of rights, failure to pay, the bad faith claims, refusal to participate in the settlement.
Every major case that I've been involved in over the last 18 years has involved these ongoing tangential pieces of litigation: the defendant suing the insurance companies for declaratory judgment. And asking for our help.
For example, in the MGM fire, we testified by deposition for MGM against an insurance carrier. The insurance carrier thought that when we got to about $250 million, it was punitive. We testified that our position was it wasn't punitive, that this was fair compensation and their evaluation of the case was just plumb stupid.
How do you respond to the criticism aimed at attorneys' fees that are paid in class action cases?
My answer to the attorneys' fee issue is that it's a red herring that the insurance industry likes to talk about. When I tell you that the tobacco industry spent $600 million in attorneys fees last year, that doesn't seem to bother anybody. They say, "Well, they have a lot of things going on, they have a lot of lawyers."
But if plaintiffs lawyers get $600 million, there's a hue and cry. And that's the spin the insurance industry has put on it. They would like all plaintiffs to have $50-an-hour lawyers and the insurance industry to be able to hire $300 lawyers. It would be like one baseball team having all $50-an-hour players and the other team having $300 players. Who's going to win?
The bottom line is, they don't like an even-handed playing field. So they attack the contingency fee because they would like to have less of a caliber of lawyer against them.
It always boggles my mind to see this criticism. The person who got his leg cut off or is dying from cancer from cigarettes, the last thing he's able to do is take his unemployment compensation or workers compensation check and send a lawyer an hourly fee.
I believe the insurance industry doesn't want to be in the courtroom. They would much rather have a legislative solution: Capping of damages, getting rid of punitive damages, trying to do something on contingency fees. All the things that have nothing to do with the system of justice but all ways to lobby around what they don't want to have. They don't want to be at the mercy of the judicial system.