December 22, 2007
Plaintiffs' Emergency Motion Regarding the Vioxx Settlement
As an interesting follow-up to Howie’s November 10th post on the Vioxx Settlement, on December 17, 2007, some plaintiff’s lawyers filed an emergency motion requesting freedom to keep some of their clients outside the settlement. The settlement currently requires plaintiffs’ attorneys to recommend the settlement to 100% of their eligible clients and for 85% of plaintiffs to accept the deal.
The New York Times reports:
In an emergency motion to Judge Eldon E. Fallon of Federal District Court in New Orleans, the plaintiffs’ lawyers said the provision would prevent them from offering the best independent judgment for each client. Agreeing to the provision might open them to future lawsuits from disgruntled clients, they said.
"The settlement agreement, which allows Merck to dictate the advice a lawyer will offer, is improper in all states," the lawyers wrote in the motion, which was filed Monday.
Grant Kaiser, a Houston lawyer who represents about 1,800 plaintiffs, filed the motion. It was signed by 11 other firms that collectively represent another 4,200 plaintiffs — about 10 percent of all the people who have sued Merck over Vioxx. Mr. Kaiser declined to comment on the motion.
Merck and several large plaintiffs’ law firms agreed to the settlement last month as a way to resolve more than 50,000 claims from people who assert that Vioxx, a painkiller withdrawn from the market in 2004, caused them to suffer heart attacks and strokes. Merck had won most of the 18 suits that reached juries in both state and federal court.
The requirement that lawyers agree to recommend the deal to all their clients — and withdraw from representing those who do not agree — is a crucial part of the agreement.
Plaintiffs’ attorneys contend in their motion that:
Section 188.8.131.52 of the Settlement Agreement sets out one of these responsibilities. It requires each Enrolling Counsel to advise 100% of the lawyer’s eligible clients to participate in the Program and to affirm that the lawyer has done so in the Enrollment Form. No states’ law allows a lawyer to make a contractual commitment like this. Rule 2.1 of the ABA Model Rules of Professional Responsibility, a version of which is in force in every jurisdiction, requires every lawyer to give every client the benefit of the lawyer’s independent professional judgment and to render candid advice. The Restatement (Third) of the Law Governing Lawyers also recognizes his duty. The essence of independent professional judgment is that each client must be counseled accordingly. As the ABA comment to Rule 2.1 puts it: "A client is entitled to straightforward advice expressing the lawyer’s honest assessment." ABA Annotated Model Rules of Professional Conduct, Rule 2.1, Comment  (Fifth Ed.).
Accordingly, the emergency motion requests the following relief:
1. A declaration that the Settlement Agreement empowers the Court to modify provisions that are prohibited or unenforceable because they conflict with state bar rules in Texas and other states.
2. A revision of PTO 31 excising the affirmation relating to settlement participation from the Registration Affidavit and agreement to all terms of the settlement;
3. A declaration that § 184.108.40.206 is prohibited and unenforceable under the state bar rules of all states because it prevents lawyers from giving clients the benefit of their independent professional judgment and candid advice, as required by Rule 2.1 of the Model Rules of Professional Conduct.
4. A declaration that § 220.127.116.11 is prohibited and unenforceable under the state bar rules of all states because it impermissibly restricts the right to practice law, in violation of Rule 5.6 of the Model Rules of Professional Conduct.
5. To set a date certain by which final settlement payments shall be made and/or make other similar equitable provisions.
6. To declare that notwithstanding any provision of the Settlement Agreement purporting to require an assessment of "up to 8%," that as to counsel that entered contracts in compliance with PTO 19, those contracts shall be honored, binding, and controlling as to any assessment.
The docket number is 2:05-md-01657-EEF-DEK and the motion is document number 13105-2.
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» BREAKING: Challenge to Vioxx settlement withdrawn from PointOfLaw Forum
The challenge to the Vioxx settlement made on ethical grounds (which got substantial publicity in the New York Times and Wall Street Journal when it was filed last week) was voluntarily withdrawn and will not be argued on January 7... [Read More]
Tracked on Dec 27, 2007 9:23:19 AM
Vioxx Plaintiffs: Attention
If you're a plaintiff in the Vioxx litigation and have questions or concerns about the recent settlement offer, visit our group. The group was started by a plaintiff for the sole use of plaintiffs to exchange information. Tell your story or just observe. If you're not a plaintiff, but know someone who is, please pass this information along.
WILL VIOXX PLAINTIFFS SWALLOW MORE MERCK MEDICINE?
As soon as the Vioxx settlement was announced, it was described as a
"victory" for Merck that was "welcomed" by plaintiffs. Wondering why a
victory for Merck should be welcomed by them, some doubtful plaintiffs
began discussing its pros and cons at a Yahoo Groups forum called
"MerckSettlement". Ever since, the group has buzzed with members who
find much of what has been offered them "unsettling".
While Merck won more early trials than it lost, it was also hit with
large jury awards, and as the trials proceeded new revelations
continued to appear about the company's attempts to keep the pain
drug's potentially fatal side effects hidden. Although far less than
the early liability estimates of $19-50 billion, $4.8 billion still
sounded like a good thing for anyone who had a heart attack or stroke.
Then some began to consider the details.
A very large portion would not end up in plaintiffs' pockets. Eight
percent would be diverted to pay Steering Committee lawyers who
negotiated the deal. Then contingency fees and expenses,
conservatively estimated at $1.7 billion, would be deducted. Divide
what's left by 46,000 claimants and you get sums averaging from under
$30,000 to under $80,000, with individual amounts depending on
variables such as type of injury and other "points". Then come liens
from government and private insurers seeking to recover medical
payments. In the end, that may leave some who suffered
life-threatening injuries with little or nothing. An official
"calculator" was put online to help plaintiffs figure out what they
might receive, but provides only an "estimate". In fact, nobody can
know beforehand what amount they would receive even though they are
required to give up future legal rights once they sign on.
In addition, certain provisions of the settlement raise serious
ethical questions. Although it states that "nothing in this Agreement
is intended to operate as a 'restriction' on the right of any
Claimant's counsel to practice law" it still requires attorneys to
recommend it to all eligible clients. As Seton Hall Prof. Howard M.
Erichson put it "A lawyer's duty of loyalty to each client cannot be
bargained away to an adverse party. ...[E]ven if the lawyer thinks the
settlement's terms are generally fair, that does not necessarily mean
that acceptance is the right decision for each individual client."
Quoting Stanford Law School's Deborah Rhode, the Wall Street Journal's
Nathan Koppel reports it may also conflict with Supreme Court holdings
that an individual's interests should not be sacrificed "for the good
of the whole". Another provision requires attorneys to cease
representing clients who refuse the settlement terms, which Prof.
Erichson thinks is even worse. Those who refuse could be left without
Wondering whether the required 85% of eligible claimants will agree to
these terms or not, the online forum continues to seek out other
plaintiffs to find out what they think. It does not provide legal
advice or referral, but is acting as a clearinghouse for news and
discussion. Interested plaintiffs can join the online discussion at
Yahoo Groups "MerckSettlement", or by going to
Posted by: Henry Smith | Dec 22, 2007 10:28:06 PM
Version 1.0 – later estimates much higher!
If offer rejected – what is next MRK step?
The answer seems to be in what would be Mercks' future cost to litigate!
It seems increasingly apparent that Merck has chosen the question of what their next step would be should the agreement be declined, as leverage to stimulate the inherent fear that this question brings up.
As can be seen in VPEG, I feel, quite strongly also - that it is very likley Merck will re-negotiate. Why in the world not? They have been negotiating for over a year - sure they were encouraged by Judge Fallon, but if they did not want to, I think that would have been known by now.
I have details in POSTING about 7-10 days ago about WHY I feel there would have been negotiation. I can provide more detail in this POST if anyone is interested. Basically it comes down to 2008, in my view, would have been a REALLY tough year for MERCK. There would have been about 300 more cases at least in trial in 2008 and the TRIAL PACKAGE would have provide plenty of evidence for the trial attorneys as the cases were sent back (remanded) to the states in which they came. Merck was about to face a major crisis.
The timing of the agreement seems very suspicious. JUST when the cases were to begin remanding back to the states, JUST when the TRIAL PACKAGE was available (after 3 years of a major effort by the PSC), and JUST when there may have been more PUBLIC AWARENESS of other issues (this last thought is more of a thought than a fact).
There would seem to be NO WAY that MERCK would want the above cases to proceed. Merck was about to be hit really hard. They almost had to attempt a settlement now - BEFORE the you know what hit the fan!
It is a bit surprising, however, that the PSC did not do better in negotiations. I kind of feel that they were, as people, really tired and wary and wanted to get on to the next thing in their own personal lives. I don't like where those thoughts would lead, so I'll stop here on that thought. However, also remember that the MERCK lawyers were not as likely motivated to move on. With Merck as their employer, they did not have to worry about moving on to the nesxt thing - one case is as good as another.
My gosh, I can't see the argument that Merck would drag this on as being valid, at all. Maybe their lawyers (above paragraph) didn't care too much personally speaking (which works to Merck's benefit), but Merck as a company (the business aspect of these settlements) would not want the really bad publicity that was about to come slamming down on them to really have happened. In general the 2008 cases (in my view, which is what I would call an "educated" view) in 2008 likely would have led to an ever increasing amount of public opinion shifting towards the Plaintiff side. I believe 2008 would have been a year in CRISIS for MERCK - do you seriously think MERCK would want that?! This very likelywould have been acknowledged (if not by now).
What an absolute shame and pity - about 3 years of hard work resulting in the TRIAL PACKAGE, which was JUST NOW becoming available - then POOF!, gone - never to be used if the "agreement" is reached.
The FORM letter approach that is becoming increasingly obvious, and annoying, to Plaintiffs states several reasons WHY a Plaintiff should "agree". WHAT IS NOT SAID often means even more. It was not said how good or bad the TRIAL PACKAGE was. Surely, that would have been well known by the PSC (the authors), but as the FORM LETTER authors they DID NOT indicate something like this ----> early evidence analysis indicates that Merck may have some problems in its legal stance....
If I had a weak case (for whatever reason - including the CAUSATION issue - I WOULD (this is MY feelings, it is not advice) probably take the agreement. If I felt my case was strong, I WOULD NOT. Why should a strong case accept this, when it is likely to do much better in a court trial (remember, it is a strong case)? If a strong case does not accept the agreement, either it will go to trial or it won't. It probably won't, Merck would likely want to settle it as it (Merck) continues to clear out its books and whittle down the number of outstanding cases.
Merck seems to be every bit as motivated as the Plaintiffs as whole, and maybe even more so. The damage has mostly been done to the Plaintiffs, they are looking for a fair settlement. Merck has not really felt the impact yet (although they did for a while when VIOXX was withdrawn. It is very logical that Merck would work on a new agreement. It just seems unreasonable that they would stop negotiations now. It is NOT a question of pride, it is dollars and cents (I almost typed "sense"). The dollars and cents would seem to say AGREE TO A SETTLEMENT WHERE THE COSTS OF A SETTLEMENT DO NOT EXCEED THE COSTS OF PROSECUTING ONE BY ONE.
REMEMBER - if Merck doesn't clear there books, the litigation becomes a MAJOR uncertainity to its business. That results in a lower stock valuation for what would be a LONG time if Merck really went to trial for each case.
So, just speaking subjectively - what are the potential costs Merck faces should the agreement not to proceed? That is where the answer to the question (of new agreement versus individual case by case trial.
1: the costs of prosecuting. Using $200,000 to $300,000 to prosecute (on average) each case that part would be between $6B to $9B. OK, that may be high (the $200k to $300k; let's use $150,000 as the litigation costs (only), that would be (using this logic) about 4.5B - maybe a bit high yet, but let's use it as the difference as will be shown becomes relatively not meaningful.
2: the costs to its Business Operations. This is not considered by the average person. There are definitive costs. The bond rating of the company is based upon how the rating agencies feel the company will be able to meets its debt. If major costs are projected well into the future (i.e. the cases go to trial one by one) their interest rates on bonds, etc. would be higher. There are many other business costs also. Rather than even estimating them (at this point), a simple surrogate to use would be the impact of future litigation hovering over Merck on its STOCK PRICE. Using a 10-15% penalty to the price (NOT unreasonable at all based upon past market reactions), this can be used ot estimate a BUSINESS COST of about $15 billion (this is a quick, back of the envelope estimate and is subject to more refinement of course.
So, what would the total costs be under this scenario (cases in trial one by one)?
Cost of prosecuting: ok, let's lower them again to be more conservative so it now = about $2.5B; now add the approximation of the impact on business operations of $15 billion.
Using this logic, and it seems to be in the right direction to me! - a cost, of litigation AND the impact to Business Operations would be about $17.5B. Divide that by approximately 30,000 and a per case average cost would be estimated to be close to $600,000 per litigant on average.
So, to remain conservative, which strengthen the assumptions - let's cut the estimated cost in 1/2. Merck will not wish to settle if the amount is as high as $17.5B, as at that point, either option is about the same (in COSTS - the real measure on how to evaluate the issue of renegotiation vs one-by-one litigation).
So, being conservative at several points here (even the 10 - 15% impact on stock price may be underestimated, and now we are cutting the estimated costs again, by 50% this time!) we can now derive a total cost estimate to conservatively be $10B. That is 2x the current cost to Merck estimate. This approach would suggest that Merck would rather readily accept approximately a doubling in costs.
The bottom line to individuals - this would suggest that up to a doubling of the current (average) Plaintiff cost could be readily obtained. If one were to buy in to this methodology of "predicting" if there would be re-negotiations (versus one by one litigation dragging this out - for MERCK as well as Plaintiffs.
I have not seen anybody taking this kind of approach to understanding the issue of re-negotiating or going one by one in litigation used yet. That is surprising, it is (to me ) so intuitive.
It would suggest what also seems to be intuitive, that Merck has much more headroom to go using its current estimate as a baseline, and up to a 2x increase seems to be obtainable somewhat easily. There is also a reasonable argument that it could be much higher than 2x. It would say to me, if my case was strong enough, to vote no.
Why not ask your attorney's to help you understand the chances of a re-negotiation. Bring this to stimulate your thoughts (and the attorney's if applicable). It is meant to stimulate thoughts and a way of thinking (though there is nothing in this approach that is new, it is just a common cost/benefit kind of analysis - something that we feel Merck has a good handle on by the way!
Please note that this is another, more quantitative way of looking at the issue. It is what I feel to be the case. IT IS NOT advice - your individual situation needs to be taken into account.
NOTE: this type of analysis is not new, it is not magic. It is a relatively straight forward way of looking at the issue. I used to do this kind of thing very, very often. Consistently it led to good decisions. But as they say.... past performance is not a guarantee...
Posted by: Dennis Harrison | Jan 17, 2008 2:48:29 AM