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Ernst v. Merck - one more view

[bumped, updated, and expanded from original August 20 post]

1. You might've thought that you needed to marry a billionaire to get $24 million from a one-year marriage, but we now know that that a one-year marriage to a 59-year-old Wal-Mart produce manager with arteriosclerosis is worth $24 million in compensatory damages. Mrs. Ernst is apparently very lucky that her new husband died from a sudden arrhythmia rather than from a brain tumor or lightning strike, because I'll bet a year's salary that she didn't have a $24 million life insurance policy on him to compensate her in the event of a sudden death.

Compensatory damages are supposed to be compensatory and leave the plaintiff in the same position as if the tort never happened. Awards like this demonstrate the problem with uncapped non-economic damages, which, with no rational basis for computation, are determined solely by the self-serving testimony of the plaintiff and friends, and the whim of the jury. If Mrs. Ernst were less grandmotherly looking, or of a different race than the jurors, or had a hideously grating speaking voice, or if the jury decided to value more her testimony that she didn't even know the children of the husband she told the jury was a great family man she mourned so much, the award is completely different.

With a $250,000 cap on non-economic damages, and Texas's punitive damages cap, the jury's award would still have been a healthy and over-compensating $2.3 million, surely more than whatever insurance policy the Ernsts bought—and Ernst might not even have been able to obtain insurance if his arteriosclerosis had been known.

2. This verdict is bad news for all of us, and some of us will die prematurely because the lawsuit deterred the research and development of life-saving drugs.

And Vioxx was one such life-saving drug. The painkillers that it replaced (and is now replaced by) cause their own health problems, and current medical thinking is that, for at least some people, Vioxx would be a safer as well as a more effective pain-killer than aspirin, despite what we now know to be the latter's better cardioprotective profile. But Merck can't collect $26 million from each person whose life they save, even if it were possible to point to a particular Alvy Singer of Hypothetical City, Iowa, who didn't die of aspirin-related complications because he was taking Vioxx. One can even envision a drug that saves the lives of a hundred people for every person killed by a side-effect needing to be pulled from the market because of the cost-benefit analysis that the plaintiffs' bar wishes to impose on the pharmaceutical industry.

If only the surest, safest drugs are allowed to be sold without risk of bankrupting the company that develops them, that makes the odds of successful development of a drug all the more of a long-shot, and the probability that a drug company deciding a research project is not worth the candle all the more likely. (Derek Lowe makes a similar point, via Kevin MD.)

Too bad we won't be able to sue the trial lawyers when these inevitable deaths happen. On the other hand, maybe this year Mark Lanier will have the money to book that rock star he really wanted to play at his Christmas party.

Monday's Wall Street Journal ($) shows hints of some of these ripple effects that will delay approval of drugs for multiple sclerosis and a non-injectable form of insulin, but the real downside will be with research & development projects that never begin but would've been successful.

3. Evan Schaeffer observed:

[T]his was a case perceived to have causation problems that made it virtually unwinnable for the plaintiffs.

This is perhaps because the Ernst v. Merck case did have causation problems that made it virtually unwinnable for plaintiffs in a fair trial. Plaintiffs simply got around the causation problem by presenting a parade of experts who simply asserted, without any scientific basis, that Vioxx caused Ernst's death.

Professor Bainbridge frets that cases like Ernst could drive Merck into bankruptcy, but I'm (perhaps naively) more sanguine. Merck has indicated that they're not going to roll over and settle, but rather fight an unfair judgment. While press coverage barely hinted at it, this trial was so ludicrously unfair that it's hard for me to imagine that Texas appellate courts are going to let the verdict stand.

Texas effectively adopted a Daubert-like standard in Merrell Dow v. Havner. Havner presented the same fact-pattern as Ernst: an expert testifying based purely on speculation and conjecture that a drug was responsible for causation. The Texas Supreme Court noted "Reasonable probability cannot be created by the mere utterance of magic words by someone designated as an expert." A reasonable appellate court is going to strike the expert testimony, and reverse the case for retrial, and might even grant judgment for the defendants. A reasonable appellate court is not going to countenance the mass of irrelevant and prejudicial testimony that was introduced regarding executive wealth. I'll let others evaluate whether Texas law would also reverse based on the procedural shenanigans pulled with a surprise witness introduced after the opening statements, but it seems rather pointless to have procedural rules against such "sandbagging" if they aren't invoked in this circumstance. It might have to get to the Texas Supreme Court before a reversal happens, but I think it will.

But when it does, it will be little compensation for Merck, whose reputation will be tainted from the publicity from this verdict. The soundbites most people get from press coverage won't include the details that indicate the tilted playing field Merck was on. Merck will also be hurt to the tune of tens or hundreds of millions of dollars because this suit will encourage others to come out of the woodwork and sue on similarly flimsy causal connections, or, worse, factually fraudulent claims. (Indeed, in Rogers v. Merck, an Alabama case that almost preceded Ernst to trial, it appears that the plaintiff didn't even take Vioxx.)

4. And despite all this prejudice, the jury verdict was only 10-2. Had Ernst's lawyers not engaged in fraudulent joinder, and the case was in federal court where it belonged, the federal requirement of a unanimous jury and the increased likelihood that Daubert would've been applied correctly would almost certainly have changed the result. A minor reform of the removal laws to prevent plaintiffs' lawyers from benefiting by gaming the system would have tremendous benefits to the economy as a whole by preventing this sort of forum-shopping.

5. Is anyone else amused that the LA Times' front-page article as of Friday night makes no mention of the likelihood that the $253 million damage award will be reduced? The Saturday morning paper does bring this up in the fifth paragraph, without giving precise figures, while the New York Times, Washington Post, and WSJ note that the $229 million of punitive damages will be capped at $1.6 million.

6. The same LA Times article has one juror singling out the fact that no senior Merck executives attended the trial; the Wall Street Journal ($) is even more explicit: "The big guys didn't show up," said [juror John] Ostrom. "That didn't sit well with me. Most definitely an admission of guilt." Is there a better demonstration how the verdict was the product of emotion, rather than reason? There are several thousand Merck lawsuits. Not even every senior Merck attorney can attend every single Merck trial. Is the company supposed to shut down so the executives can spend all their time as a full-time courtroom audience? Ostrom also proudly brags to the Journal how he didn't understand any of the medical evidence.

7. Saturday's New York Times quotes another juror insisting on the impossible: "In the first label, it didn't jump out at you that [cardiovascular] events were happening," Ms. Blas said. "You had to dig three levels to see it." In other words, Merck was blameworthy because it failed to violate FDA rules and emphasize cardiovascular events in a different part of the label than the FDA told them to. And lay jurors are expected to evaluate a warning label designed to be read by medical professionals?: of course the laypeople are going to be confused.

8. Another Wall Street Journal disclosure that explains a lot. Jury consultant Lisa Blue of Baron & Budd, who advised plaintiff during the trial, said "This jury believes they're going to get on Oprah," Ms. Blue told Mr. Lanier. "They only get on Oprah if they vote for the plaintiff."

And [Lanier] hammered home the point that they would be sending a message that would be heard widely. "I can't promise Oprah," he said, but "there are going to be a lot of people who'll want to know how you had the courage to do it."

As he made the Oprah reference, Mr. Lanier looked at Ms. Blas in the eye. She says she broke out into laughter and liked the lawyer's attention to her. "That told me he read those profiles and tried to assess each and every one of us," Ms. Blas said.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.