Sam notes a discouraging word from a plaintiffs' attorney. If you read enough articles about Vioxx, you'll notice a regular theme of plaintiffs' lawyers insisting that shareholder pressure on Merck will force Merck to settle. (Or, perhaps, unmerited bravado about future rulings.) There's a reason for this: they want to create shareholder pressure on Merck that will force Merck to settle. If they repeat it often enough, maybe the financial writers repeat it, then maybe the shareholders start to believe it, and then it happens. A global settlement guarantees billions of dollars of easy profit to the plaintiffs' bar, with lots of money for meritless cases like Cona's and Garza's. The refusal to settle might mean that Merck is saved by appellate court rulings that kill thousands of pending cases.
Every public statement heard from the plaintiffs' bar has to be taken with that gigantic grain of salt: they're hoping to win this case through the media by creating a buzz that the cheapest way out for Merck is to surrender tens of billions now, even though every global settlement for a substantial sum of money in mass-tort history has been marred by huge amounts of fraud. If the plaintiffs' bar really thought that "The verdict value of one win is substantially greater than negotiating the settlement of 10 cases at arm's length," would they really be so eager to settle if they thought they could win substantially more than 10% of their cases? Yes, trying cases is expensive&mdashthough, as the Wall Street Journal reports, a trial-in-a-box pre-packaged case certainly cuts down costs. Either plaintiffs don't think they can win 2 or 3 out of 10 cases, or they don't think a win is worth more than 10 settlements—or both.
Additional evidence that there's a lot of smoke without fire:
- It's now eight months since Mark Lanier won a $253 million verdict in Ernst v. Merck. He still hasn't moved for entry of judgment. Merck noted this fact on their last conference call; none of the media has followed up why. Post-judgment interest doesn't start to run until judgment is entered; judgment can't be entered until Lanier moves for entry. He's either committing grievous malpractice—or, he's explained to his client, and his client has agreed, that moving for entry of judgment will result in an appeal, an appeal will result in a reversal, and Ernst has more chance of getting money by waiting for Merck to go to a global settlement. Meanwhile, Lanier gets to advertise his $253 million verdict (which, combined with his $45.00 verdict in Cona, is an average verdict of $126.5 million) and pretend that it is more than a phantom. Of course, the possibility of a $253 million payday encourages more suits, and more suits encourages more ignorant press coverage about how Merck has no choice but to settle. (Update, NB: When the AP says that "Merck was ordered to pay $253 million," as they did in coverage of the Garza case today, it's completely untrue. Nobody's ordered Merck to pay anything yet, though it's likely an order will be issued in the New Jersey Cona/McDarby case soon.)
- It's a little disturbing that the National Law Journal accepts without further inquiry the face-value claim that "Every time Merck loses, their stock goes down." But every time Merck wins, their stock goes up. On October 20, the stock was trading at $26.92. Today, at 11 am, it's over $35, an increase of over 30% in six months. It's higher today than it was in the aftermath of the withdrawal of the drug.
Indeed, the stock market analysts aren't buying the hype.
While Merck stock has been battered by potential Vioxx liability, shares prices showed only minor declines in the wake of the verdict and Wall Street analysts seem unconcerned about the latest news. Jami Rubin, a Morgan Stan ley analyst, in a research note predicted the punitive award -- and any state criminal probe -- would be overturned on appeal because the case "makes a mockery of the whole jury system."
(George E. Jordan and Ed Silverman, "Merck may face Vioxx probe", Newark Star-Ledger, Apr. 13). More on the future McDarby appeal. Unquestionably, Merck faces very real risks: there are districts out there that don't have caps on punitive damages, and in McDarby, Mark Lanier shamelessly asked the jury to award the entire capitalization of the stock. It's so far faced three judges of various degrees of unfriendliness, and could yet face one even more unfriendly who enters a judgment too large to appeal. The class action pending against it has a potential liability of over $10 billion if the New Jersey or U.S. Supreme Court don't step in to protect Merck's due process rights. But we're sure hearing a lot of whistling past the graveyard by the plaintiffs' bar.