November 10, 2007
The Vioxx Settlement
What does the Vioxx settlement tell us about mass tort strategy, procedure, and ethics? Merck's mass aggregate settlement, which weighs in at $4.85 billion and up to 47,000 plaintiffs, matters not only to its many participants, but also to anyone interested in understanding how mass tort litigation works.
THE PARTICIPANTS. Before turning to the deal's broader implications, let's talk about its significance to the five major sets of participants -- Merck, plaintiffs, plaintiffs' counsel, judges, and defense counsel. Assuming the settlement goes through (the deal is subject to several conditions, including an 85% walkaway clause), it's happy news for most of them.
- For Merck, the settlement allows the company to take its hit, slash its litigation expenses, limit its remaining exposure, and get back to business. That's why Merck's stock was up sharply yesterday despite a down day in the market. The first time I saw a stock price go up after a company announced a massive settlement, I found it odd (this is, after all, a multi-billion dollar expense); now I expect it.
- For most plaintiffs, the settlement provides compensation rather than the delay and uncertainty of litigation. Many participating plaintiffs will be disappointed with the amount of compensation they receive, but that's the nature of settlement. It's a compromise.
- For participating plaintiffs' counsel, the settlement offers a signficant payday after several years of unpaid Vioxx work and significant expenditure of resources. It also offers lawyers the chance to get out of Vioxx and to move on to the next mass tort or other litigation opportunity. And for the lawyers involved in negotiating the deal, such as Russ Herman, Chris Seeger, Andy Birchfield, and Arnold Levin, yesterday's announcement represents a satisfying accomplishment and the sort of attention-generating event that cannot be bad for business.
- For the judges -- particularly Judges Eldon Fallon (overseeing the MDL in E.D. La.), Carol Higbee (NJ), Victoria Chaney (CA), and Randy Wilson (TX) -- the settlement clears away a huge number of docket-clogging cases. For some of the judges, the settlement also reflect a personal victory, a professional accomplishment, and, one hopes, a sense of getting justice done. Judge Fallon, in particular, had announced early on in the litigation his desire to drive the parties toward a large-scale settlement. To whatever extent he may have experienced Merck's ongoing refusal to settle as a source of frustration and embarrassment, yesterday's announcement surely brought relief, satisfaction, and some vindication of his handling of the litigation.
- Of the major participants, the only apparent losers are Merck's outside counsel, who lose an important revenue stream. But that's taking an unnecessarily grudging view of defense counsel's position. For lead counsel Theodore Mayer of Hughes Hubbard & Reed, a settlement like this caps an overall successful defense strategy, and for other lawyers involved in negotiating the deal, including Doug Marvin of Williams & Connolly, John Beisner of O'Melveny & Myers, and Adam Hoeflich of Bartlitt Beck, the deal represents a professional accomplishment and a business-generating news event. A satisfied client is always good news. Except perhaps for local defense counsel, who experience a loss in revenue from upcoming trials that won't happen, but who may get little attention or client gratitude.
STRATEGY. Nearly all the commentary on the settlement emphasizes the success of Merck's defense strategy in the VIoxx litigation, with lots of comments suggesting that future mass tort defendants should take a page from Merck's playbook. I agree that the settlement reflects the culmination of a successful strategy for Merck, but before assuming the same thing will work for other defendants, you have to look at the confluence of factors that made the strategy work in Vioxx.
Merck took an aggressive approach, fighting each case individually. This strategy had three main components: refusing to settle either wholesale or retail, opposing trial aggregation, and pouring resources into litigating each individual case on the merits. Although early on Merck suggested that it would settle cases involving over 18 months exposure, it quickly backed off and pursued a strong no-settlement strategy. On aggregation, Merck accepted and even embraced aggregated pretrial handling (MDL and statewide consolidations), but staunchly resisted class certification and any form of joint trial. And in each plaintiff's case, Merck fought hard on specific causation and every other contestable issue. Merck could have settled many of those cases more cheaply than going to trial, but by refusing to settle Merck sent a powerful message to plaintiffs' counsel: there's no easy money to be had here.
The no-settlement, individual-trial strategy worked in the Vioxx litigation because several critical factors came together:
- First, Vioxx was off the market. This is often the case, as product recalls are a common triggering event for mass tort litigation, but not always. Plenty of mass tort litigation involves products that remain available. Think Zyprexa, Oxycontin, tobacco, guns. And lots of other mass tort litigation involves products that, while no longer on the market, present an ongoing risk of exposure -- lead paint, asbestos, certain medical devices. Because Vioxx was no longer available, Merck did not have to worry about a never-ending stream of potential plaintiffs, and could get some finality with a mass aggregate settlement. Also, with the product off the market, Merck could focus on litigation strategy without worrying about protecting the Vioxx brand and its ongoing prescribability by physicians, in contrast with, for example, Eli Lilly's position on Zyprexa.
- Second, Vioxx did not raise significant problems of latent disease. In some mass torts, such as asbestos and tobacco, latency creates enormous settlement difficulties. How can a defendant get peace without binding future claimants? This was the driving factor behind the Amchem and Ortiz asbestos settlement class actions, and an important cause of their failure. It was the primary reason for the multiple back-end opt-outs in the fen-phen nationwide settlement class action, which later proved so problematic. When I worked on the American College of Trial Lawyers Mass Tort Litigation Manual, asbestos and fen-phen were front and center, and we took time-dispersed disease manifestation as a defining characteristic of mass torts. So did Richard Nagareda in Mass Torts in a World of Settlement. Vioxx, by contrast, did not involve such significant latency problems. Latency was a disputed issue in the litigation, but the settlement reflects a willingness on the part of plaintiffs' counsel to let go of claims by persons who experience heart attacks or strokes long after their exposure to Vioxx. This, combined with the fact that Vioxx was off the market, and the statute of limitations, allowed Merck to seek peace in the litigation without worrying much about future claimants.
- Third, Merck had stronger individual defenses than general defenses. Like tobacco defendants, who always try to focus attention on the individual smoker, Merck focused on each individual plaintiff. In the case of tobacco, it's more about personal responsibility; with Vioxx, it's all about individual causation. Compare this with Bendectin, silicone gel breast implants, or Agent Orange, where the defendants had strong scientific defenses on general causation. In Bendectin, Merrell favored (and won) a mass aggregated trial in which it could present its scientific argument on general causation without the jury hearing from individual plaintiffs. Merck did not think it had a strong enough chance to defeat liability on a wholesale basis to be worth the risk, so it preferred to take a series of wins and losses in individual trials.
- Fourth, the issues were sufficiently individualized that Merck was able to defeat efforts at class certification and mass trials. On class certification, Vioxx is no different from most other mass tort personal injury cases (and post-CAFA, defendants have even greater confidence that mass tort class cert will usually be denied), but it differs markedly from other types of mass litigation. Aside from class cert, Merck was able to avoid large-scale joint trials. Even Judge Higbee's relatively modest effort at a ten-plaintiff consolidated trial in New Jersey fizzled. In other mass torts, even if defendants defeat class cert, they won't always have Merck's success at avoiding large multi-plaintiff trials.
- Fifth, and most important, Merck mostly won. That's because individual causation was hard for Vioxx plaintiffs to prove. Heart attacks and strokes are common. They are especially common among older people, who were Vioxx's primary consumers. So it's hard to show by a preponderance of the evidence that a particular person's heart attack or stroke was caused by Vioxx. Compare this with mesothelioma and asbestos, or PPH and fen-phen, or lung cancer and tobacco, or rhabdo and Baycol. Because of the difficulty establishing specific causation, Merck was able to win most of the individual cases that went to trial. Defense wins drive down settlement values, pure and simple. Had Merck lost several more of the individual trials, it would have cost a lot more than $4.85 billion to settle this.
Without this confluence of factors, Merck's no-settlement, no-aggregation, try-every-case strategy could easily have backfired. That's why in the future some mass tort defendants will continue to settle cases individually, others will seek early wholesale settlements whether by settlement class action or by non-class aggregate settlement, and others may even seek mass adjudication.
PROCEDURE. The Vioxx litigation shows the successful use of informal bellwether trials to drive a mass aggregate settlement. As a matter of procedural policy, the Vioxx litigation and settlement show mass tort litigation functioning reasonably well, as Byron Stier points out. There have, of course, been enormous litigation costs, unpredictable and inconsistent results along the way, and a fair amount of unseemly forum-shopping and forum-fighting, but that's par for the course in mass tort litigation. More significantly, look at what worked. The vast majority of cases were consolidated, at least for pretrial handling, in a small number of courts. Most of the cases were before Judge Higbee in New Jersey (cases were filed disproportionately in Merck's home state to make them non-removable under 28 U.S.C. 1441(b)); many others were before Judge Fallon in the multidistrict litigation, as well as in large statewide consolidations in California and Texas. Class certification was appropriately rejected; these cases are too individualized to be suitable for representative litigation that binds non-parties. Nor did courts employ formal bellwethers, in the sense of trials from which binding results could be extrapolated for other parties. Rather, Judges Fallon, Higbee and others used informal bellwether trials. That is, they scheduled cases for trial on steady basis, trying to get a range of representative cases, with the goal not only of resolving those particular actions but of providing enough data points to allow the parties to reach a widespread settlement. It worked.
ETHICS. Despite viewing the settlement mostly as good news for the participants and the litigation system, I have some concerns. Mass aggregate settlements always raise troubling ethical issues, and this one is no exception.
Here's the good news, ethically speaking. The parties seem to understand clearly that acceptance of the settlement is up to the clients, not the lawyers, and that any participating plaintiff must give informed consent after adequate disclosure. Also, the parties were wise to include a walkaway provision. The deal is conditioned upon acceptance by 85% of the plaintiffs (actually, 85% of each of a number of plaintiff groups). This provides Merck with adequate assurance of peace, while providing a safety valve so that not every plaintiff need accept the deal. As I've commented before, all-or-nothing settlements are much more troubling than those with walkaway provisions.
Now the bad news. The deal contains a term that requires each participating lawyer to recommend the settlement to 100% of the lawyer's eligible clients (paragraph 184.108.40.206 of the Settlement Agreement). That's troubling. A lawyer's duty of loyalty to each client cannot be bargained away to an adverse party. Some Vioxx plaintiffs' lawyers represent hundreds or thousands of clients, and even 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.
Worse, the deal requires that any participating lawyer withdraw from representing any client who declines the settlement (paragraph 220.127.116.11) . That's really troubling. It makes it nearly impossible for a client to say no. The paragraph tries to avoid ethical impropriety by adding "to the extent permitted by the equivalents to Rules 1.16 and 5.6 of the ABA Model Rules of Professional Conduct." Withdrawing from the representation of clients under these circumstances may well violate both RPC 1.16 and RPC 5.6, but with this term in the Settlement Agreement, it is unrealistic to expect any of the plaintiffs' lawyers to continue representing Vioxx claimants.
In a mass settlement, lawyers ideally should be able to say to their clients: "Here's the settlement we negotiated with the defendant. Here are all the terms and conditions of the deal, and here's where you fit in. I think it's a good deal, and I recommend that you accept it. But you're the client, and it's your call. And if you decide not to accept the settlement, I'll be right by your side and continue to represent you."
Compromise is one thing. The lawyer-client relationship is another. The problem, of course, is that in mass aggregate settlements, the interests of the defendant, plaintiffs' counsel, and judges align, and don't necessarily correspond with the interests of individual plaintiffs. Merck, with its $4.85 billion, expects to buy not only peace from tens of thousands of plaintiffs, but also peace from the law firms that have been the biggest thorns in its side. The challenge, which the Vioxx settlement only partly surmounts, is to craft a settlement that accommodates the interests of the parties without unduly interfering with the lawyer's core duty of loyalty.
November 9, 2007
Merck Vioxx Settlement Press Release
MERCK VIOXX SETTLEMENT
According to an article by Aaron Smith on cnn.com, Merck has agreed to settle pending Vioxx claims for a total of $4.85 billion. The settlement is being accomplished not as a class action, but as merely an offer of settlement to individual plaintiffs, provided they can show "1) objective medical proof of either a heart attack of ischemic stroke; (2) documented receipt of at least 30 Vioxx pills; and (3) receipt of pills in sufficient number and proximity to the event to support a presumption that the patient was still taking the pills within 14 days before the heart attack or stroke." See Legal Pad with Roger Parloff. If 85% of the plaintiffs in each of the strongest categories do not accept the settlement, then the offer is void.
In my opinion, this is how mass tort litigation should work. Science triggers the lawsuits. The litigants fight individual cases and in so doing establish a market for the value of claims. That narrows litigants expectations about how much their claims are worth, and makes easier the resolution of claims by far-reaching settlement. Along the way, tort and procedural goals are satisfied -- multiple juries provide a better assessment of claim value than any one potentially outlier jury in a class action could do; both plaintiffs and defendants are able to present all of their individualized arguments in cases (unlike a class action); litigants retain their autonomy to either press to trial (day in court) or seek settlement; and ultimately the far-reaching settlement leads to vastly reduced transaction costs for society and a lessening of the burdens for courts.
Here, Merck's $4.85 billion settlement, large as it seems, is far less than the threat of bankruptcy that was discussed when Vioxx was taken off the market. (Cnn.com reports that some analysts put the Vioxx damages at $30 billion.) Indeed, Merck's shares rose today. All of this is because Merck went to the individual cases and was successful in winning, thus driving down the value of all pending claims. It also waited to settle until the statute of limitations had run after its withdrawal of Vioxx (there is no long latency period alleged for the injuries), thus avoiding the flood of claims that can be triggered when word gets around that a defendant is settling.
Of course, we'll have to see if 85% of plaintiffs do in fact sign up for this settlement. But likely Merck negotiated this settlement behind the scenes with the top plaintiffs lawyers who represent the majority of claimants. (The difficult ethics of the plaintiffs' lawyers in negotiating such mass settlements for differently situated Vioxx clients is a topic for another day.)
It appears to be a tour de force performance for Merck throughout the litigation, which Merck seemed to recognize in July when it promoted its general counsel Ken Frazier to president for global human health.
Simon on the Market for Bad Legal Advice
William Simon (Columbia Law) recently posted an article critiquing academic expert opinions in aggregate litigation (h/t: Leiter). The litigation he discusses is an employment discrimination case, but his point has relevance for mass torts. The paper is available on SSRN here and the abstract follows.
Clients demand bad legal advice when legal advice can favorably influence third-party conduct or attitudes even when it is wrong. Lawyers supply bad legal advice most readily when they are substantially immunized from accountability to the people it is intended to influence. Both demand and supply conditions for a flourishing market are in place in several quarters of the legal system. The resulting practices, however, are in tension with basic professional and academic values. I demonstrate these tensions through critiques of the work of academic professional responsibility consultants in such matters as Enron, Lincoln Savings & Loan, and a heretofore undiscussed aggregate litigation settlement. I also suggest reforms to reduce the incentives and pressures for bad advice that now prevail.
November 7, 2007
Millions More Chinese-Manufactured Toys Recalled for Safety Issues
As reported by cnn.com, millions of packages of the hot-selling, Chinese-manufactured toy Aqua Dots have been recalled under order of the Consumer Products Safety Commission. If swallowed, the Aqua Dots convert into a date-rape-drug chemical lead that is especially hazardous for children. Two children in the United States and three in Australia have already been hospitalized. The cnn.com article also mentions additional recalls of Chinese -manufactured toys because of high lead content in the paint.
These recent developments will surely further push Congress into wide-reaching expansion of the CPSC and FDA in connection with product safety.
Class Action Suit Against Military Contractors Will Go to Trial
A federal district court ruled today that a class action lawsuit against CACI, a military contractor, brought by Iraqis detained at Abu Ghraib prison can go forward. Having lost this summary judgment motion, CACI will now have to face a jury trial (unless the suit settles). As I understand it, this is the first suit against a contractor to get this far. Claims against the firm providing translators, formerly known as Titan, were dismissed. The suit was brought by the Center for Constitutional Rights along with a private lawyer, Akeel Valentine PC, and more details can be found on the CCR website here.
I am very keen to see how this jury trial unfolds. The court has many procedural options before it and CACI can still present the combatant activities/government contractor defense to the jury.
Speir & Che on the "Divide and Conquer" Strategy in Multi-Plaintiff Litigation
Katheryn Speir (Harvard Law) and Yeon-Koo Che (Columbia) just posted an article on modeling the behavior of defendants and plaintiffs in multi-plaintiff litigation. The paper, called "Exploiting Plaintiffs Through Settlement: Divide and Conquer" is available on here on SSRN and the abstract is below.
This paper considers settlement negotiations between a single defendant and N plaintiffs when there are Fixed costs of litigation. When making simultaneous take-it-or-leave-it offers to the plaintiffs, the defendant adopts a divide and conquer strategy. Plaintiffs settle their claims for less than they are jointly worth. The problem is worse when N is larger, the offers are sequential, and the plaintiffs make offers instead. Although divide and conquer strategies dilute the defendant's incentives, they increase the settlement rate and reduce litigation spending. Plaintiffs can raise their joint payoff through transfer payments, voting rules, and covenants not to accept discriminatory offers.
Wall Street Journal Against Congress's Limiting Arbitration
The Wall Street Journal has an editorial today criticizing attempts by Ralph Nader, Public Citizen, and trial lawyers to take away the ability to arbitrate. According to the Journal, Congress is considering not only limiting the future ability to enter into arbitration agreements, but also possibly undoing various prior arbitration agreements, which could trigger new class actions. Here's an excerpt from the editorial -- Party at Ralph's:
We're old enough to remember when Naderite groups like Public Citizen were embarrassed by their ties to trial lawyers. No more. This week in Washington, the famous "consumer" group, which has long resisted efforts to identify the sources of its funding, is rolling out the red carpet for America's plaintiff attorneys. Attendees of the Consumer Rights Litigation Conference are cordially invited to Saturday night's cocktail reception at Public Citizen headquarters, which a conference brochure describes as "an elegant old Dupont Circle Victorian mansion . . . generously loaned to us for this special event."
No word yet on what the famously ascetic Ralph Nader thinks about standing up for the little guy by sipping cabernet at a Dupont Circle manse, but what's clear is that the trial lawyers will have plenty to celebrate. That's because they'll be visiting Congressional offices tomorrow and Friday to check on the progress of pro-lawsuit legislation, and they will not be disappointed. Bills gathering momentum in both houses are anything but subtle in their support for more class-action lawsuits. Tillinghast Towers Perrin estimates that litigation costs the U.S. more than $260 billion a year, and that figure is heading due north.
The Democratic strategy is to attach an anti-arbitration provision to nearly every new law in order to limit non-lawsuit dispute settlement. Thus a House lending bill this week bans pre-dispute arbitration agreements related to mortgages, another House bill bans them in cases involving whistleblowers, and the Senate farm bill bans them even in meatpacking contracts.
The mother of them all is a bill that lunges to fulfill the trial bar's long-cherished dream: prohibiting all Americans from voluntarily agreeing at the start of any business relationship to settle disputes without litigation. Arbitration, which avoids the cost and time of going to court, has proven to be a popular form of alternative dispute resolution. Even lawyers concede its virtues. In 2003, an American Bar Association survey found that 78% of lawyers "believe that arbitration is generally timelier than litigation, and 56% feel it is more cost effective."
I would argue that arbitration clauses can be an important check on the inadequacy of court processes. If individuals freely agree that an alternate dispute regime -- i.e., arbitration -- should govern their dispute, then the courts should honor their contractual choice. For me, the key issue is determining whether both parties actually agreed to arbitration -- whether there was a meeting of the minds on that issue. Indicia of acceptance might include prominent reference to arbitration in any contract, as well as oral discussion of arbitration prior to the transaction.
No RICO Claim for Church Sex Abuse Victims
The Third Circuit yesterday rejected a civil RICO claim alleging that the Catholic church had covered up incidents of sexual abuse by priests. Plaintiffs brought a class action against the archdiocese of Philadelphia. The district court dismissed on a 12(b)(6) motion, finding that the plaintiffs lacked RICO standing and failed to state a claim of RICO conspiracy. In Magnum v. Archdiocese of Philadelphia, the Third Circuit affirmed the dismissal, emphasizing the inapplicability of civil RICO to personal injury claims:
Appellants' allegation of a lost opportunity to bring state law personal injury claims against the Archdiocese is not cognizable as an injury to "business or property" in a civil RICO action. Because Appellants do not allege that the Archdiocese's conduct injured them in their "business" pursuits, their claim is viable only if their lost opportunity to bring state law personal injury claims is "property." We have held that "physical or emotional harm to a person" is not "property under civil RICO. Similarly, losses which "flow" from personal injuries are not "property" under RICO. (citations omitted)
In a Legal Intelligencer article, Shannon Duffy notes that "[m]any of the allegations in the suit were drawn from the 400-page report of a Philadelphia investigative grand jury that had probed the allegations of sexual abuse by priests," and that "[t]he plaintiffs sought to proceed as a class action, claiming there are up to 500 members of the plaintiff class and at least 63 priests who are known to have engaged in the sexual molestation of children." The allegations in the case call to mind Timothy Lytton's work on the important role tort litigation played in bringing the sexual abuse issue to light and framing the problem as one of institutional failure.
November 6, 2007
Product Liability MDLs
Beck and Herrmann have compiled a handy list of 2007 multidistrict litigation transfers involving product liability actions. Another useful resource for basic info about each MDL is the Judicial Panel on Multidistrict Litigation website, which keeps a list of every product liability MDL with links to each MDL webpage, as well as similar lists of MDLs involving air disasters, antitrust, common disasters, contract, employment practices, intellectual property, sales practices, securities, and miscellaneous.
November 5, 2007
State Farm Sues Mississippi Over Katrina Investigation
Here's an interesting twist on the complexities of handling parallel civil and criminal proceedings. State Farm Insurance filed a lawsuit against Mississippi's attorney general, claiming that the AG reopened a criminal investigation in violation of an agreement to drop the inquiry in exchange for the company's reconsideration of thousands of policyholder's claims after Hurricane Katrina.
Victoria Pynchon wrote a provocative post on this at the IP ADR Blog -- State Farm v. State of Mississippi: Withdrawing Criminal Charges to Settle a Civil Action? -- raising ethical questions about the underlying agreement. Pynchon, a copyright mediator, says that she often faces the question whether a plaintiff may agree to withdraw criminal charges in exchange for a settlement of civil claims. She refers to an AP news report in the New York Times describing State Farm's lawsuit:
State Farm Insurance is suing Mississippi's attorney general, accusing him of violating an agreement to end a criminal investigation of the insurer’s handling of claims on the Gulf Coast after Hurricane Katrina, according to court papers unsealed Friday.
State Farm’s lawsuit claims that the attorney general, Jim Hood, reopened a criminal investigation of the company and its employees “for the purpose of harassment” and to coerce the insurer into settling civil litigation spawned by the Aug. 29, 2005, hurricane.
State Farm says Mr. Hood agreed in January to end his office’s criminal inquiry as part of a settlement agreement that called for the company to reopen and possibly pay thousands of policyholder claims.
On Pynchon's reading, such an agreement would be unethical:
State Farm suing Mississippi for failing to honor an agreement to drop a criminal inquiry in exchange for the settlement of civil claims? I must be missing something because the settlement sounds unethical and the lawsuit without merit because civil claims were settled in exchange for the termination of a criminal investigation.
The law is far from uniform on the ethics of using criminal charges to civil settlement negotiations. In New York, following the Model Code of Professional Responsibility, DR 7-105 provides: "A lawyer shall not present, participate in presenting, or threaten to present criminal charges solely to obtain an advantage in a civil matter." The ABA abandoned this rule when it adopted the Model Rules of Professional Conduct. Pynchon cites ABA Ethics Op. 920-363 (1992) (allowing a lawyer to use a threat of a criminal referral to obtain advantage if the civil claim and criminal matter are related and well-founded). Some states that adopted the Model Rules chose to retain the prohibition. New Jersey's RPC 3.4(g), for example, provides: "A lawyer shall not ... present, participate in presenting, or threaten to present criminal charges to obtain an improper advantage in a civil matter."
I've always found this rule intriguing and a bit troubling. First, the language of both DR 7-105 and NJ RPC 3.4(g) leaves open a possible distinction between bringing or threatening criminal charges and withdrawing or offering to withdraw charges, although as a matter of legal ethics and public policy it is hard to see why that distinction should matter. Pynchon points to a California ethics opinion (Formal Op. 1991-124) extending the prohibition to dismissal of criminal charges.
More fundamentally, while the prohibition seems nice in theory, I wonder whether it really makes sense. The theory, as I understand it, is that citizens ought to report crimes (or not) as a matter of civic responsibility, not for personal gain. The criminal process, on this theory, should be reserved for its public purpose, not as a private tool in civil litigation. But I wonder whether that idea hold up. Criminal sanctions are supposed to encourage good behavior. If fear of criminal punishment persuades a wrongdoer to make right a wrong, isn't that a good thing? That, of course, assumes the legitimacy of the criminal charges and civil claims, but to the extent parties threaten illegitimate charges, couldn't we deal with that through the law of extortion or similar doctrines, rather than through an ethics rule that prohibits or chills consideration of criminal proceedings for civil advantage even in connection with legitimate claims?
Finally, even if we were to accept the theoretical justification for the prohibition, isn't it one of the least realistic rules in the book? Any civil defendant accused of serious wrongs understands the possibility of criminal proceedings. The implicit threat of such proceedings is present in the civil settlement dynamic, whether expressed openly or not. The defendant knows that one of the advantages of resolving civil claims to the satisfaction of those who have been harmed is that satisfied claimants are less anxious to pursue other avenues to obtain justice. Isn't that the reality, regardless of whether the ethics rules force lawyers to keep their mouths shut about it? And if it is the reality, what's so bad about it?
In the State Farm case, by the way, it is not clear to me whether Pynchon fairly characterizes the deal as "an agreement to drop a criminal inquiry in exchange for the settlement of civil claims." Did the company reopen policyholder claims as part of a civil settlement? Is there a difference between plaintiffs' attorneys using criminal charges to drive a settlement of their clients' claims, versus the state using criminal charges to drive a settlement of citizens' claims? The State Farm situation does not neatly fit the usual DR 7-105 scenario. Keep in mind, in any event, that we're talking about third-hand info: an agreement described in a lawsuit described in a newspaper article described in a blog. In January I blogged on a failed earlier attempt at an agreement between State Farm and Mississippi (Birnbaum, Scruggs and the Katrina Settlement), but until now I had not continued to follow the saga.
Update: Thanks to Ted Frank for pointing out David Rossmiller's post on the State Farm action at the Insurance Coverage Law Blog. Rossmiller has links to the complaint and other documents, as well as an extensive post on the suit. He also has a shorter post on the subject at Point of Law, calling this "the most unusual development yet" in Katrina litigation.
Cargill Recalls More Than 1 Million Pounds of Beef Because of E.Coli Risk
Article in the Wall Street Journal -- Cargill Recalls Beef Over Fears Of More E.Coli, by the Associated Press. The article notes that "Cargill Inc. said it was recalling more than one million pounds of ground beef that may be contaminated with E. coli bacteria, the second time in less than a month it has voluntarily recalled beef that may have been tainted."
California Wildfire Litigation
The National Law Journal has an article today predicting litigation in the wake of the California fires, and recalling the legal aftermath of the southern California wildfires of 2003, when "homeowners filed about 200 lawsuits against insurance companies, primarily for undervalued coverage or low-balled repair estimates." The story by Amanda Bronstad -- As California Wildfires Die Down, Lawsuits May Ignite -- is on law.com. The possibility of widespread insurance litigation by homeowners adds a dimension to Byron Stier's recent post here about the wildfires and arson as a mass tort.
Bayer Suspends Anti-Bleeding Drug Trasylol Amid Evidence of Higher Risk of Death
Article in the Wall Street Journal -- Bayer Suspends Sales of Trasylol, by Anna Wilde Mathews. Here's an excerpt:
Bayer AG said it was suspending sales of its antibleeding drug Trasylol world-wide after requests from regulators, amid growing evidence that the drug may be linked to a higher risk of death than that of competing drugs.
Bayer said its decision came in the wake of requests or orders from regulators in the U.S., Canada, Germany and other countries. Trasylol, which is supposed to reduce blood loss and allow patients undergoing heart-bypass surgery to avoid transfusions, is the third drug this year whose sale in the U.S. has been halted under scrutiny from the Food and Drug Administration, a signal of how the agency is weighing safety issues heavily in drug decisions.
Still, the history of Trasylol, which was approved in the U.S. in 1993 and has been tied to high-profile safety concerns at least since early 2006, is likely to draw questions from Congress and plaintiff attorneys.
The drug had world-wide sales of £230 million ($338 million) in 2005. Sales dropped by about a third last year.