Results matching “fen-phen”

Thoughts on litigation financing - PointOfLaw Forum

I'd like to opine briefly on the notion of litigation financing, which our editor referenced this morning, eliciting a very thoughtful reply from Larry Ribstein.

Walter has generally been a critic of the erosion of traditional restrictions on maintenance and champerty, dating back to his wonderful discussion of contingency fees in The Litigation Explosion (the chapter is available here). Like Walter, Lester Brickman, and others, I'm generally troubled by the perverse effects contigency fees can generate (for more, see my discussion with Alex Tabarrok here), though I wouldn't go so far as to eliminate such arrangements entirely, even assuming such were politically feasible.

In his post, Larry notes that we should distinguish among types of litigation and that outside funding helps to "eliminate the potential conflict of interest between a corporate client with diversified investors and a risk-averse lawyer who may have an incentive to settle cases that could be productively litigated," excellent points that shouldn't be ignored. I also think Larry is largely correct in stating that legal-system problems would best be remedied "directly by rules constraining improper litigation practices [than] indirectly by constraining firms' ability to pursue the litigation."

The question remains, however, to what degree "outside litigation financing might increase the amount of socially inefficient litigation." As Walter perhaps would, I would tend to believe that the answer could be, "significantly."

In her December paper on loser pays, my colleague Marie Gryphon describes how our current system of litigation encourages what she calls "abusive litigation." She defines "abusive lawsuits" as those that have "have little legal merit, regardless of the magnitude of the recovery sought." Abusive suits in turn break down into "lottery suits" -- those that combine "low legal merit and very high stakes" -- and "nuisance suits" -- those that combine "modest stakes and little legal merit."

Lottery suits include class action and birth-defect litigation: the stakes are so high that such suits have a substantial settlement value, even if the probability of ultimate success is very low. By reducing barriers to entry, outside litigation financing would probably encourage more such suits.

What I'd worry about even more, though, are nuisance suits, which consist primarily of small-value "shakedown suits" and mass-tort "manufactured suits." As a theoretical matter, the existence of such suits at all is a bit of a puzzle, as Marie explains in her paper. The mass-tort context is perhaps easiest to see. If a lawyer has a portfolio of some cases -- say, asbestos claims -- that are valid, but others that are bunk, he can collect on the bunk cases precisely because it is too expensive for a corporate defendant to litigate each case through to final judgment, since his costs are never reimbursed under the American Rule. Outside financing improves the lot of legitimate plaintiffs in mass-tort situations precisely because it would get rid of risk aversion that leads plaintiffs' lawyers to settle such claims on the cheap; but for the same reason it improves the credible threat presented by manufactured claims and thus increases their settlement value. So the total cost of such litigation rises. How one might view this problem depends on how one views such litigation, but the evidence from asbestos, silicosis, and Fen-Phen suggests that the ratio of bad to good cases is actually quite high.

So where are we left? If we limited large-award contingency fees and adopted loser-pays principles, there's much to be said for outside litigation financing. Indeed, Marie's proposal itself calls for eliminating maintenance and champerty barriers to outside insurance, an important access need for a loser-pays reform. (In separate conversations, Tony Sebok has expressed to me a tentative embrace of loser pays combined with outside financing.) Absent such reforms, however, I share Walter's worry about the real-world consequences that outside litigation financing brings.

Judge Solomon Olivier Jr. of the The United States District Court in Cleveland has just ruled that some claims against drug manufacturers are still pre-empted by FDA approval, despite the Supreme Court decision in Wyeth v. Levine.

Longs v Wyeth concerns Redux, one-half of the diet-drug cocktail known as fen-phen. Plaintiff sued for design defect, alleging that Redux was so dangerous a drug that it never should have been approved by the Food and Drug Administration. In February 2008 Judge Olivier dismissed the case on the ground that the FDA had approved Redux. The plaintiff moved for reconsideration of this decision in light of Levine.

Judge Olivier has just upheld his ruling. He distinguished Wyeth v Levine as being concerned with post-FDA-approval events. The claim against Redux was about pre-approval facts, all known to the FDA when it made its ruling that the drug was worthwhile.

We've discussed Lester Brickman's important work on rampant fraud and misdiagnosis in asbestos, silicosis and fen-phen mass screenings, and now the Cardozo lawprof is out with an SSRN paper entitled "The Use of Litigation Screenings in Mass Torts: A Formula for Fraud?" with some sobering estimates of the scope of the problem. Abstract:

Lawyers obtain the "mass" for some mass tort litigations by conducting screenings to sign-up potential litigants en masse. These "litigation screenings" have no intended medical benefit. Screenings are mostly held in motels, shopping center parking lots, local union offices and lawyers' offices. There, an occupational history is taken by persons with no medical training, a doctor may do a cursory physical exam, and medical technicians administer tests, including X-rays, pulmonary function tests, echocardiograms and blood tests. The sole purpose of screenings is to generate "medical" evidence of the existence of an injury to be attributed to exposure to or ingestion of defendants' products. Usually a handful of doctors ("litigation doctors") provide the vast majority of the thousands and tens of thousands of medical reports prepared for that litigation.

By my count, approximately 1,500,000 potential litigants have been screened in the asbestos, silica, fen-phen (diet drugs), silicone breast implant, and welding fume litigations. Litigation doctors found that approximately 1,000,000 of those screened had the requisite condition that could qualify for compensation, such as asbestosis, silicosis, moderate mitral or mild aortic value regurgitation or a neurological disorder. I further estimate that lawyers have spent at least $500 million and as much as $1 billion to conduct these litigation screenings, paying litigation doctors and screening companies well in excess of $250 million, and obtaining contingency fees well in excess of $13 billion.

On the basis of the evidence I review in this article, I conclude that approximately 900,000 of the 1,000,000 claims generated were based on "diagnoses" of the type that U.S. District Court Judge Janis Jack, in the silica MDL, found were "manufactured for money."

Around the web, July 11 - PointOfLaw Forum

  • Our own Ted Frank on punitive damages after the Exxon Shipping decision [yesterday's WSJ]. Also check out Gordon Crovitz's take [WSJ earlier]
  • After acquittal of Mills, Kentucky fen-phen trial results in hung jury for Gallion and Cunningham; prosecutorial fumbles blamed [Ted at OL]
  • Adventures in class action choice of law: New Mexico high court sees no problem applying its law to transactions in other states [Albuquerque Journal courtesy US Chamber]
  • Alabama drug-pricing trial: Jere Beasley gets jury to award $114 million against Glaxo and Novartis, demand letters sent to 69 other drugmakers charged with the same supposed fraud [CNBC, FiercePharma]
  • Abbe Lowell files Fifth Circuit appeal of client Paul Minor's conviction [White Collar Crime Prof Blog, appeal in PDF]
  • WSJ on hurricane insurance models is stronger on hand-wringing than on analytical rigor [Salmon, Portfolio]
  • Defense bar lagging plaintiffs' in new media involvement? [Genova]

Around the web, July 2 - PointOfLaw Forum

  • Kentucky jury acquits Melbourne Mills, the "too drunk to pay attention" fen-phen defendant, can't reach agreement on others [Ted @ OL]
  • Related: Florida A&M says no one's proved $1 million law school donation from Ky. scandal's Shirley Cunningham came from tainted funds, so why give it back? [ABA Journal]
  • Law of the land: Chicago's Daley isn't so hostile toward the Second Amendment that he'd defy the Supreme Court, or is he? [Chapman]
  • "I don't hate lawyers. I hate the unfair legal SYSTEM." [docblog Fertility File]
  • Southern Illinois forum-shopping: "None of the claimants reside in St. Clair County" but all seven have gone there to file contact-lens suits against Bausch & Lomb [St. Clair Record]
  • Next up in cellphone early termination class actions: trial against Verizon in Alameda County, Calif. [The Recorder; earlier]

Accused of defrauding their clients of $200 million, plaintiffs' lawyers' defense is that they "may not have been able to grasp the complexities of the class action", and that one should be excused because of "severe alcoholism" "that made him unable to think rationally", reports AP.

Fen-phen, wrapping it up - PointOfLaw Forum

Concluding arguments in the Kentucky fen-phen trial are set for today in a Covington federal courtroom, the issue being whether three attorneys who won a class-action case ripped off their clients when they took $51 million out of the $200 million settlement.

The Cincinnati Enquirer has a wrap-up story, Fen-phen case nears climax," with all its strange elements: The lawyers buying a race horse, the machinations of Cincinnati class-action guru Stan Chesley - granted immunity - and the pain suffered by the clients. (The Enquirer has published a special section: "Prescription for Scandal" featuring all the coverage so far.)

Meanwhile, Florida A&M Law School defends a $1 million contribution from one of the accused, Shirley Cunningham, endowing a chair for himself. Horsehide?

Around the web, June 3 - PointOfLaw Forum

  • Don't miss Roger Parloff's article on William Simon, whistleblower extraordinaire of the academic ethics-opinion-for-hire industry [Fortune; earlier]
  • Here come the bisphenol-in-baby-bottles class actions [WaPo; Poked and Prodded]
  • Legal assistant in Kentucky fen-phen trial says her boss told her to destroy documents, and other dramatic testimony [Ted at OL, ABA Journal]
  • George Mason lawprof (and friend of this site) David Bernstein calls for extending Daubert principles further into realm of criminal forensics, while making them slightly less stringent on the civil toxic-tort side [Volokh Conspiracy]
  • Asbestos action in Japan on behalf of 178 construction workers and others demands $6.6 billion yen ($64 million) from government and building materials firms [Mainichi Daily News]
  • Clean energy innovators like others in tech sector are cowed by IPO suits [Nick d'Arbeloff, Boston Globe]

New at Overlawyered - PointOfLaw Forum

If you're not reading Ted's and my other blog, you're missing commentary on a terrific new Stuart Taylor Jr. column on the South Africa corporate reparations suit, global warming, lead paint, etc; my own roundup on the Kivalina Eskimo climate-change suit, also discussed by Taylor, and spearheaded by class-actioneers Steve Berman and Steve Susman; the piquantly named Kentucky Fund for Healthy Living, funded from the fen-phen settlement (and more); Congress votes to authorize antitrust suits against OPEC; metal baseball bat maker sued; D.C. Circuit panel rules paper money discriminates against blind; new round in Seidel subpoena controversy; why California's Prop 99 isn't effective eminent domain reform; and much more. And that's aside from a complete new design and navigation.

The Kentucky Enquirer reports that the judge who approved a $200 million class action settlement in a fen-phen diet drug lawsuit for which plaintiffs' lawyers are accused of looting from the "victim" class has testified he is embarrassed by the way he handled the case.

Retired Circuit Court Judge Joseph "Jay" Bamberger was on the stand in U.S. District Court in Covington, Ky., on Wednesday in the fraud trial of three Lexington attorneys accused of keeping $45 million dollars that should have gone to plaintiffs they represented, and of putting $20 million more into a "charity" that all three, as well as the judge himself, were paid $5000 each month to administer.

Bamberger told the court he had never presided over a class action lawsuit before and depended on the advice of Cincinnati class action attorney Stan Chesley.

Lawyers Shirley Cunningham Jr., William Gallion and Melbourne Mills Jr. are being tried on charges of conspiracy to commit wire fraud.

Jurors at their trial watched a videotape of a May 2001 hearing in which Bamberger approved the multimillion-dollar settlement. In the video, Bamberger seeks advice from Chesley on the proper way to proceed with the case. Chesley is heard on the tape making a self-deprecating joke about his qualifications as a class-action expert. Over the laughs that follow, Bamberger said Chesley was "taking the role" of the expert in the fen-phen litigation.

Bamberger stepped down from the bench in February 2006 to avoid being removed by Kentucky's judicial conduct commission for his actions.

Kentucky fen-phen fraud trial underway - PointOfLaw Forum

We've been covering this story for some time -- April 2007 and much earlier -- and the criminal trial of three of the Kentucky fen-phen attorneys who stole tens of millions from their clients begins today. (Andrew Wolfson, "Fen-phen trial gets under way", Louisville Courier-Journal, May 13). Andrew Wolfson has an overview at the Louisville Courier-Journal. The strategy of Gallion, Cunningham and Mills appears to be to blame their co-counsel Stan Chesley. The question arises why he hasn't also been indicted, as he took millions of dollars more than he was contractually entitled to on his own. Judge Joseph "Jay" F. Bamberger, who received at least tens of thousands of dollars directly from the settlement after approving it, will testify, but has not been indicted. Also not indicted: Bamberger's former law partner, Mark Modlin, who received millions of dollars from the fen-phen lawyers, helped negotiate the judicial approval of the settlement, and then bought a house in Florida with the judge.

Fen-Phen Lawyers Go on Trial in Kentucky - PointOfLaw Forum

A high-profile criminal trial of three class-action attorneys charged with cheating their clients out of some of the $200 million Fen-Phen settlement money begins today in Covington, Ky. The Lexington Herald-Leader looks like it will have continuing coverage:

William Gallion, Shirley Allen Cunningham Jr. and Melbourne Mills Jr. go on trial in Covington on Monday before U.S. District Judge William O. Bertelsman.

Bertelsman perhaps set the tone himself in a comment during a hearing last year: "Not only these three gentlemen are on trial, but the whole legal profession is on trial."

The Herald Leader notes that the case has attracted national attention and has prompted a reconsideration of how class-action lawsuits are conducted in Kentucky. In February, Chief Justice Joseph E. Lambert appointed 12 attorneys to serve on the nearly created Mass Tort and Class Action Litigation Committee. (News release.) The AP had a story that framed the issues in February.

UPDATE (10:30 a.m. Tuesday): Good summary in the WSJ's Law Blog. We'd forgotten that two of the lawyers used the gains to purchase Preakness winner Curlin. Hope that doesn't make the current legal proceedings a win-place-or-show trial.

Leave It to the FDA - PointOfLaw Columns

By James Copland

This piece was originally published by the The Washington Post, 3-15-08.

To preempt or not to preempt: that is the question with which the U.S. Supreme Court is wrestling in 2008. In a series of cases—two recently decided and one scheduled for argument this fall—the court has been looking at whether state lawsuits, filed on behalf of individuals allegedly injured by pharmaceutical drugs and medical devices, interfere with the Food and Drug Administration's federal regulatory scheme. To the extent the answer is "yes," many tort claims against drugs and devices could be preempted, since federal law is supreme over that of that states.

The court's first FDA preemption decision of 2008, last month's Riegel v. Medtronic, was called "the most momentous Supreme Court product liability decision in some time" by law professor Michael Krauss of George Mason University. Charles Riegel and his wife had sued medical manufacturer Medtronic, claiming that a Medtronic-made catheter that ruptured during Mr. Riegel's heart surgery was defectively designed and labeled under New York law.

Medtronic argued that whatever the law of New York, the FDA had approved the device's design and labeling—the very question at issue—under its extensive premarket approval process. And the Medical Device Amendments of 1976 specifically states that once a device has gone through that approval process, states may not "establish or continue in effect ... any requirement ... which is different from, or in addition to, any requirement applicable under [federal law] to the device."

With such explicit preemption language, the Supreme Court found it easy to determine, by a viote of 8 to 1, that the Riegels' state tort claim was barred by federal law. The decision will not apply to all medical devices but rather only those that, like the catheter, are "Class III" devices subject to the FDA's most rigorous testing procedures. Also, individuals can still sue if they can show that the device was manufactured in noncompliance with the design approved by the FDA, or if the FDA determines that the company committed fraud in the application process.

In its second major preemption case, Warner Lambert v. Kent, the Supreme Court last week deadlocked 4 to 4 (Chief Justice John Roberts had recused himself). The court simply let the lower court decision stand without any written decision or even an indication of where each justice stood.

Court watchers interested in preemption are therefore anxiously awaiting a case scheduled for this fall, Wyeth v. Levine, which promises to define the scope of preemption doctrine for FDA-approved products apart from the medical devices covered in Riegel. Levine involves a state "failure-to-warn" claim: Wyeth's FDA-approved label noted the risk of Levine's injury, but the plaintiff argues that the label could have been stronger or more specific and that the FDA's label was merely a "floor."

Thus, the court must decide whether Levine's claim is preempted by the FDA's extensive review and approval of pharmaceutical labeling. The case is more difficult than Riegel in part because the Food, Drug and Cosmetic Act contains no express preemption provision, so the court can reject Levine's failure-to-warn claim only if it determines that the federal regulatory scheme preempts such lawsuits. How the justices will rule in Levine is anyone's guess.

The so-called "presumption against preemption" is rooted in concerns over federalism, but in this context, such concerns are misplaced. The marketing and sale of pharmaceuticals and medical devices clearly is a part of interstate commerce, the core object of the federal regulatory power, and Congress has established an exhaustive regulatory process through the FDA. It's hardly news that state courts could interfere with such a scheme: In the 81st Federalist Paper, Alexander Hamilton observed that "the prevalency of a local spirit" could bias state courts in national commercial cases, a prediction since amply confirmed by academic empirical research.

The Supreme Court should also resist the temptation to follow the lead of Justice Ruth Bader Ginsburg, who in her dissent in Riegel argued that Congress never intended to override state tort law, the Medical Device Amendments' preemption language notwithstanding. Ginsburg may actually be right, but a focus on "legislative history" misses the point, as NYU law professor Catherine Sharkey noted at an American Enterprise Institute forum last month: Congress is intentionally vague in passing such laws, as a necessary precondition for logrolling the votes needed for the statutes' passage. The statute's language and structure should govern, and if Congress truly has an interest in weakening the FDA's regime by permitting state-level tort lawsuits, it can still do so by changing the law—as trial-lawyer-allied Democrats like Sen. Edward M. Kennedy (D-Mass.) and Rep. Henry A. Waxman (D-Calif.) are, alarmingly, threatening.

However the court rules in Levine, the implications for business, the lawsuit industry and the American consumer are huge. Consider that Merck spent upwards of $1 billion defending against Vioxx claims before recently reaching a partial settlement agreement for more than $5 billion, while the estimated tab for Wyeth over its recalled diet drug combination Fen-Phen is $21 billion. Although business's gain in Levine would obviously be the lawyers' loss, it should be the average consumer's gain as well, since eliminating massive tort exposure would encourage companies to develop more life-saving products. The FDA carefully weighs not only the costs and benefits of new drugs, but also overwarning vs. underwarning in its label approval process, since overwarning about drug dangers can obfuscate the most significant risks and deter life-saving pharmaceutical uses.

As Justice Stephen Breyer suggested during oral argument in Kent, it makes little sense that a jury of 12 lay people, looking only at the costs to an injured individual, could override the FDA's considered judgment. Any sensible federalist would agree.

James Copland is the director of the Center for Legal Policy at the Manhattan Institute. He owns shares in pharmaceutical companies.

$568 million to fen-phen trial lawyers - PointOfLaw Forum

After receiving "interim fees" of $156 million in 2002, trial lawyers received another $412 million in In re Diet Drugs Monday, just short of $1000/hour for the 578,000 hours billed to the case—assuming that that latter number wasn't as inflated as the number of claims of heart-valve problems from "echo mills." (Shannon P. Duffy, "$412 Million in Attorney Fees Awarded to Plaintiffs Lawyers in Fen-Phen Litigation", The Legal Intelligencer/, Apr. 10). That $568 million figure doesn't include the contingent fees for the billions stolen from Wyeth in opt-out litigation.

NY Times on Ground Zero dust lawyer - PointOfLaw Forum

In Sunday's Times reporter Anthony DePalma takes a much-needed look at attorney Paul Napoli and his Napoli Bern law firm, which is now representing thousands of plaintiffs claiming injury from 9/11 dust inhalation and before that made its name in the fen-phen litigation. Among the controversies that have trailed it to the present day from that affair: charges that it divvied up settlements in a way favorable to its own fee interests, and that it used unreliable "echo mill" expert reports from echocardiologists attesting injury to fen-phen claimants. Prof. Lester Brickman, friend of this site, is quoted extensively. See our extensive earlier coverage at Overlawyered: Dec. 16, 2002, Sept. 21, 2003, etc. (echo mills); Dec. 28, 2001, Feb. 14, 2005, and Mar. 29, 2007 (settlement practices); Feb. 25, 2008 (broad net cast in 9/11 suits).

I'm quoted in today's Mother Jones about the nomination of trial lawyer Richard H. Honaker, the former president of the Wyoming Trial Lawyers Association, to the District Court in Wyoming; the nomination was in March, and the Judiciary Committee hearing is tomorrow.

Being a trial lawyer doesn't inherently disqualify one from a lifetime appointment to the district court, but one hopes that the White House vetted Mr. Honaker for more than just Senator Craig Thomas's say-so before being nominated for the District Court of Wyoming, especially when the administration has been so slow to fill other open seats. It's not encouraging that Mr. Honaker wrote an article (titled "Tort Reform") in the April 2003 Wyoming Lawyer that repeated the fictional trial-lawyer talking point claiming that caps don't reduce insurance rates. Honaker has represented plaintiffs in fen-phen and Vioxx litigation; fen-phen litigation in particular has been riddled with fraud by the trial bar, and I wonder if a senator has the courage to ask at the February 12 hearing how Honaker's client submissions have performed in the fen-phen litigation audits.

On the plus-side, Honaker is being attacked by leftist groups for being a member of the Federalist Society; so long as Honaker subscribes to that organization's principle that "the province and duty of the judiciary to say what the law is, not what it should be," then what matters is his legal acumen and his willingness to adhere to binding precedent, rather than his personal opinions or the clients he represented. To that extent, the groups that are criticizing Honaker for his legislative record drastically misunderstand the role of the judiciary. As Victor Schwartz notes in the Mother Jones article,

"The Supreme Court has laid down the law on abortion. District court judges have no power to change that," Schwartz says. Opposing a judge because of his views on abortion, he says, "would be like objecting to a painter because he opposes Roe v. Wade. What matters whether he can paint a wall."

Meanwhile, Peter Keisler's nomination, first made over 590 days ago, has yet to be scheduled for a Senate Judiciary Committee hearing, despite his "well qualified" rating from the ABA. Senator Arlen Specter comments at the WSJ. The 51-49 Senate has confirmed only 6 Bush nominees to the appellate courts in the last thirteen months, compared to 15 Clinton nominees confirmed in the last two years of Clinton's term with a 55-45 Republican Senate, with a 16th Clinton choice renominated by President Bush to the Fourth Circuit in 2001.

Magistrate upholds Ky. fen-phen indictments - PointOfLaw Forum

The three lawyers accused of stealing more than $65 million from clients had argued that federal investigators violated confidentiality rules when they sent law firm employee Rebecca Phipps into private meetings to gather evidence of the scheme. "U.S. Magistrate Judge Gregory Wehrman declined to dismiss the indictment but agreed to hear more information about evidence gathered during the course of the investigation," per the Lexington paper. Judge Bertelsman imposed unusually heavy bond requirements: $52 million for William Gallion; $45 million for Shirley Cunningham, Jr.; and $5 million for Melbourne Mills, Jr. (earlier).

January 7: Vioxx Settlement panel at AEI - PointOfLaw Forum

Please register for this event online at

The AEI Legal Center for the Public Interest and the Federalist Society present:

The Vioxx Settlement

Monday, January 7, 2008, 12:00 p.m.�2:00 p.m.
Wohlstetter Conference Center, Twelfth Floor, AEI
1150 Seventeenth Street, N.W., Washington, D.C. 20036

In 2004, Merck withdrew its pain reliever Vioxx from the market because of new studies showing increased cardiovascular risk. Merck announced that it would not settle any of the tens of thousands of Vioxx lawsuits filed, and set aside over a billion dollars to litigate cases without reserving a penny for damages. After a $254 million verdict in the first Vioxx trial in 2005, some observers predicted over $25 billion in liability for the company. Fifteen trials later, Merck and the plaintiffs� attorneys announced a settlement of the outstanding personal injury litigation�for under $5 billion. Merck stock rose after the announcement, and is now higher than before it withdrew Vioxx from the market. But some law professors are arguing that a new and unusual provision in the settlement raises ethical concerns.

Why did Merck settle? And why was the settlement for so much less than originally anticipated? Is the Merck settlement different from the Wyeth fen-phen settlement, which was originally announced as a $3.75 billion settlement, but has so far cost more than $20 billion? Will the settlement stand up under legal challenge, and what will remain of the Vioxx litigation if it does?

At this event cosponsored by AEI and the Federalist Society, a panel of experts will explore these and other questions. Speakers include Vanderbilt law professor Richard Nagareda, author of Mass Torts in a World of Settlement; Virginia legal ethics professor George Cohen; author and leading pharmaceutical mass torts defense attorney Mark Herrmann; Andy Birchfield, a member of the Vioxx Plaintiffs� Steering Committee; and Ted Frank, director of the AEI Legal Center for the Public Interest. AEI resident scholar John E. Calfee will moderate.

11:45 a.m.
Registration and Lunch

12:00 p.m.
Andy Birchfield, Beasley Allen
George Cohen, University of Virginia School of Law
Ted Frank, AEI
Mark Herrmann, Jones Day
Richard Nagareda, Vanderbilt University Law School

John E. Calfee, AEI

2:00 p.m.

Cincinnati Enquirer on fen-phen scandal - PointOfLaw Forum

Last month the Cincinnati Enquirer published a special section laying out what's known about the Kentucky fen-phen scandal in which lawyers covertly pocketed $125 million of a $200 million settlement over the diet drug, leaving $75 million for their clients. We've covered the scandal extensively at this site and at Overlawyered. Somewhat relatedly, it appears that attorney Angela Ford, who has been representing victimized clients in the affair, is going after at least some other lawyers in other parts of the country who worked with the Kentucky lawyers. Forty-nine plaintiffs represented by Ford "allege J. Brent Austin of Lexington, the defunct Mississippi law firm of Langston, Sweet and Freese, and the Alabama firm of Beasley, Allen, Crow, Methvin, Portis & Miles bilked them of the money." Beasley Allen says it did not take any improper fees and suggests that if there were any shortfalls in what its clients received, the problem was at the Kentucky lawyers' end.

First cracks appear in Vioxx settlement - PointOfLaw Forum

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.

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