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A former Fen-Phen client of Fleming & Associates has sued the Houston-based firm and partner George Fleming, alleging they took too much expense money out of her Fen-Phen settlement, including a share of $29 million for echocardiograms performed on prospective clients. Plaintiff Sandra Karnes, who hired Fleming & Associates to seek damages from pharmaceutical company Wyeth for heart-valve injury she allegedly sustained after taking the diet-drug combination known as Fen-Phen, seeks class certification in the suit filed in the U.S. District Court for the Southern District of Texas. Late last month, U.S. District Judge Ewing Werlein of Houston denied the defendants’ motion for summary judgment. No hearing is yet scheduled on the class certification motion. The allegations in Karnes, et al. v. Fleming, et al.are interesting, because Karnes filed her complaint shortly before an arbitration panel ordered Houston lawyer John M. O’Quinn’s firm to pay more than $41 million to a class of 3,450 former breast implant clients who allege O’Quinn’s firm overcharged them for expenses. However, Fleming and his defense attorney in Karnes say the plaintiff’s allegations largely involve a single expense, unlike the litigation filed against O’Quinn’s firm. “It’s not parallel to the O’Quinn case,” says Ronald Franklin about Karnes. “The Fleming case is about a single disputed expense item. I’m not going to try to describe the O’Quinn case other than to say the charges involved there were not discrete expense items where the only question is whether they are appropriate or not. There were much broader allegations made,” said Franklin, who represents Fleming and the firm. Karnes’ attorney and the lawyer for the putative class, Jeffrey W. Chambers, agrees the scope of expenses at issue in Karnes is different from those expenses at issue in the litigation against O’Quinn. “Our primary focus is on a single issue, a very large charge, where that case ended up being more of a scatter gun of a lot of different charges,” said Chambers, a partner in Ware Jackson Lee & Chambers in Houston. In their petition in Wood, et al. v. John M. O’Quinn P.C.,the plaintiffs allege O’Quinn’s firm wrongfully deducted “Breast Implant General Expenses,” such as the cost of taking depositions that were relevant to all the suits, and other fees from their settlement checks. O’Quinn denied the allegations. In an order issued in March, a majority of the arbitration panel found that the fee agreements between O’Quinn’s firm and the class members do not allow for the deduction of the general breast implant expenses, certain expenses charged the class members were “inappropriate” and the firm’s actions were not authorized by the fee agreements. OPT-OUT SCREENING In an amended class action complaint filed in April, Karnes brings breach of fiduciary duty causes of action against Fleming and his firm on behalf of a class of more than 8,000 clients who were represented by the defendants in connection with settlement of their fen-phen claims against Wyeth. They hired Fleming’s firm when they opted out of the federal multidistrict litigation pending in the U.S. District Court for the Eastern District of Pennsylvania in Philadelphia, Chambers says. Karnes seeks class certification, unspecified actual and punitive damages for herself and other class members, and disgorgement of attorney fees. Karnes alleges she and the other class members were charged for the costs of echocardiograms given to tens of thousands of individuals who had negative results for damage related to the diet drugs under the “guise” they were performed for a study by a cardiologist in Utah. “The clients received no benefit from these negative echocardiograms,” Karnes alleged in the complaint. She also alleged Fleming charged clients hundreds of thousands of dollars for general and unspecified expenses, including “unreasonable transportation and excessive accommodation charges.” The defendants deny the allegations. They sought summary judgment on the ground that Karnes accepted and retained settlement payments from Wyeth before and after she filed Karnes. in February. They allege in the motion for summary judgment that Karnes’ acceptance of the settlement money establishes that she “ratified” the disputed expenses. But on Nov. 21, in a memorandum and order, Werlein denied the motion for summary judgment filed by Fleming and his firm. Werlein found that ratification is an affirmative defense and the defendants bear the burden of proving their conduct benefited the plaintiff and other class members or was fair to them. “Defendants have failed to present evidence, much less uncontroverted evidence, to establish as a matter of law on summary judgment that Plaintiff and other class members benefited from the non-client echocardiograms and other costs for which they were charged,” Werlein wrote in a 13-page order. Werlein also found the ratification argument fails because the settlement funds Karnes accepted and retained were “irrevocably her funds from Wyeth, not Defendants’ funds.” Werlein found that the only funds in dispute are the portion of the Wyeth settlement funds the defendants withheld from Karnes for what she alleges are “unauthorized expenses.” As alleged in the complaint, Fleming informed Karnes and more than 8,000 class members in June 2006 that he had reached a tentative settlement of their claims against Wyeth for fen-phen use. Karnes alleges Fleming and his firm failed to explain to her and others that expenses deducted from their settlement money included the costs of echocardiograms performed on tens of thousands of individuals who did not participate in the settlement. But Fleming says the firm paid for the testing program because of court-ordered requirements for plaintiffs who wanted to opt out of the MDL pending before U.S. District Judge Harvey Bartle in Philadelphia. The judge ordered the opt-out clients to prove that they met medical criteria, among other requirements, he says. “The charges that we made to our clients as a result of a court-ordered echocardiogram program … in our judgment is altogether appropriate, and we’ll defend it,” says Fleming, the founder of Fleming & Associates. He says the firm hired a board-certified cardiologist who spent almost two years supervising the firm’s echocardiogram program, which met the specific requirements of the court order. Karnes alleges while settlement negotiations were “well advanced” Fleming hired a cardiologist who performed a study using results of the negative echocardiograms. She alleges that was a means to convert the $29 million cost of the tests into an expense that could be charged to the settling clients. “The study was simply a scheme to shift Fleming and F&A’s costs for Non-Client Echocardiogram Testing to Clients,” Karnes alleges. Fleming says he used the study and other information from the echocardiograms during settlement negotiations. Karnes also alleges that, prior to sending settlement statements to the clients, a lawyer at the firm told Fleming it was “inappropriate” to charge the clients for the echocardiogram testing and it wasn’t disclosed in settlement materials. She alleges that Fleming “terminated” the lawyer. Fleming, however, disputes that allegation. He says everyone at his firm agreed with the expense charge, and no lawyer was fired for raising questions about the expense. Karnes involves an interesting but narrow issue, says Franklin, a shareholder in Franklin Cardwell & Jones in Houston. “Once someone understands the issues involved in this suit, it will become apparent why the positive and negative [echocardiogram] results were essential in order to protect and prove up the entire echocardiogram program,” he says. Notes Franklin, “All the expenses in the Fleming cases were shared proportionately by all the clients. The only question is whether this single expense item is one that should properly be shared.” This article originally appeared inTexas Lawyer, a publication of ALM. �

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