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First cracks appear in Vioxx settlement



Some follow-up to my earlier post:

  • The settlement is on-line at Merck's website.

  • The settlement does not affect any pending class actions against Merck.
  • Merck does not admit liability; plaintiffs do not admit lack of merit. (� 13)
  • The settlement does not cover cases brought after the settlement: thus, no feeding frenzy or incentive for attorneys to advertise for more claimants to join the settlement. Merck is relying upon the statute of limitations (three years or less in 42 states) to preclude further litigation. (I have some thoughts on this, but because I did statute-of-limitations analysis for Merck as an attorney in private practice, I withhold comment. Needless to say, I do not speak for Merck or its attorneys.)
  • Individual plaintiffs who agree to settle will receive points depending on how much Vioxx they used and the degree of their injury. Administration costs will be funded from interest from the settlement fund. As a closed fund, the Vioxx settlement should not suffer the same problems as the fen-phen settlement did, but that assumes that plaintiffs' lawyers will not pursue claims of latent injury. There is no scientific basis for a theory of latent injury, but that has not stopped a number of claims going forward. Mark Herrmann has a good analysis of why Merck can settle Vioxx cases with more comfort than Wyeth/American Home Products could with fen-phen.
  • The settlement has strong provisions requiring claims to be proveable: evidence of actual Vioxx usage, evidence of actual injury, etc. The fraudulent plaintiffs will not receive much, if anything, and the claims administrator has the power and obligation to audit and investigate fraud (� 10). The question then becomes whether the Leonel Garzas of the world, who were bringing suits against Merck on a lottery basis in the first place, will agree to settle. (The Garza case itself is on appeal, and Merck has not discussed settlement with Garza's attorneys. The Garza case, like the Ernst case and other Merck losses on appeal is excluded from the settlement.)
  • Various plaintiffs' attorney administrative committees have the ability to petition the court for common-benefit fees and costs. (� 9.2)
  • For the settlement to go through, 85% of each of four classes of plaintiffs have to agree to settle; any substantial number of opt-outs among, say, wrongful death plaintiffs, has the potential to crater the settlement. (� 11)
  • Merck tried to contain the number of opt-outs by requiring plaintiffs' attorneys agreeing to the settlement to agree to recommend settlement to all of their clients and attempt to withdraw if they refuse. The provision is problematic under current ethical rules, as suggested by Erichson, Zipursky and Rhode: an attorney's first duty is to his client, and it is unclear how such an attorney can agree with the client's adversary to recommend a particular course of action or to withdraw from the case. But, more realistically, plaintiffs' attorneys, as Nathan Koppel reports, are simply going to ignore the provision. Section 1.2.8 forbids attorneys from cherry-picking: if an attorney submits one client to the settlement program, he or she has to agree to have recommended all of his or her clients, and to withdraw otherwise. But Merck has no realistic means to enforce the provision other than effectively cratering the entire settlement. (Sections 1.2.8 and 1.2.9 permits Merck to "enforce" the provision, but with what remedy, other than forbidding client participation, and making the opt-out problem worse?) And one can imagine some plaintiffs' attorneys gaming the system by referring subsets of their clients to the settlement program through referrals to law firms that act as settlement attorneys (with private agreements to share resulting fees), while cherry-picking the ones they wish to continue to bring suit on. If enough of them do this, the 85% threshhold will not be met, and Merck will have to back off the settlement. Moreover, the severability provisions of the agreement (� 16.4) may end up invalidating the withdrawal provision entirely, as it creates conflicts of interest for attorneys with multiple clients, some with weak cases that should settle, others with stronger cases where the clients might prefer lottery litigation. (Update: Exhibit 1.1, which, if adopted by the courts, would require attorneys to disclose clients in which they have a financial interest, would appear to close the loophole of cherry-picking. An attorney thus must submit all or none of his clients to the settlement. Again, however, this does not solve the underlying problem of conflicts of interest, and it remains unclear how the "recommendation" provision of the settlement would be enforced; I continue to strongly suspect that many clients are mysteriously going to decide to decline the recommendation, and enforcing withdrawal will become problematic. What really stops Mark Lanier from showing up as trial counsel for a new batch of plaintiffs in 2010 once the settlement money has been paid out? What stops another attorney from refusing to submit his clients to settlement, but giving them the option to apply for settlement through another "Enrolling Attorney" while retaining a lien on the recovery?)
  • Regardless, even if the settlement goes through, one can expect Merck to still end up defending hundreds, and more likely thousands of suits, as well as the pending class actions. Merck's press conference indicated that it would continue to fight these.
  • Speaking of class actions, in late October Merck argued for reversal of Sinclair v. Merck, which contemplated the possibility of a medical monitoring class certification. [New Jersey Law Journal]
  • Update: Eric Turkewitz writes to remind us that this is a USA settlement, rather than a global settlement, so there are many unsettled cases pending, including at least a thousand in Australia. Of course, the plaintiffs' Vioxx claims are sufficiently weak that most judicial systems would not countenance them, and it is only the US system's lack of loser-pays, more lenient evidentiary rules, and possibility of unbounded damages that gives them any value here.

  • Update: note also Exhibit 2.7.3, a clever provision to prevent sandbagging or cherry-picking by plaintiffs. Without it, a plaintiff might try to game the system by being excluded from settlement for lack of supporting evidence, and then introducing new evidence at trial to claim that he or she has a strong case.

 

 


Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.