08/04/2007 12:00AM

Ruling in fen-phen case


A U.S. District Court judge has ruled that three Lexington lawyers who are under indictment on charges of conspiracy must repay at least $42 million of a $200 million settlement the lawyers negotiated on behalf of plaintiffs in a 2001 suit against the maker of a diet-drug combination.

Two of the lawyers - Shirley Cunningham Jr. and William Gallion - own a 20 percent interest in 2007 Preakness Stakes winner Curlin, who was scheduled to start in Sunday's Haskell Invitational. The other lawyer is Melbourne Mills.

Special Judge William Wehr issued the ruling on the repayment as part of an extension of an earlier ruling that the three lawyers had breached a fiduciary responsibility to their clients in the lawsuit against the manufacturer of fen-phen. Of the $200 million settlement, the lawyers' clients received $74 million.

The three lawyers were suspended by the state bar following Wehr's initial ruling last year. In June, a federal grand jury indicted each of the three lawyers on a charge of conspiracy to defraud.

The plaintiffs in the lawsuit have also filed a civil lawsuit, seeking punitive damages. Earlier this week, Judge Wehr ruled that the civil lawsuit be postponed until the criminal case is completed. The case is scheduled to be tried in U.S. District Court in Covington beginning Oct. 15.

Attorneys for the plaintiffs have indicated that they would seek to lay claim to Cunningham's and Gallion's stake in Curlin. The pair bought the colt for $57,000 in 2005 at the Keeneland September yearling sale, and sold an 80 percent stake in the horse earlier this year for a reported $3.5 million.