Mass Tort Litigation Blog

Issacharoff & Klonoff on the Mass Tort Settlements

Samuel Issacharoff (NYU) & Robert Klonoff (Lewis & Clark) have just posted "The Public Value of Settlement" on SSRN.  Here is the abstract:

This article, part of a symposium honoring the 25th anniversary of Owen Fiss’s Against Settlement, takes issue with the basic premise that settlement indicates defeat of the weak by the powerful, the poor by the rich, the injured by the wrongdoers. The argument is both empirical and normative. On the empirical side, this article challenges the basic claim advanced by Fiss and Marc Galanter that repeat players in the courts of justice are more likely to prevail because they will marshal and deploy greater resources. Over the past quarter century, the emergence of the well-heeled plaintiffs’ firm together with referral and other market organizing practices have allowed plaintiffs to fight and defeat institutional defendants across all sorts of mass harm cases. Normatively, this article challenges the assumption that the driving organizational framework of the court system should be derived from the structural injunction that characterized an episodic phase of the civil rights movement. Instead, resolution of mass harms has been and continues to be one of the great challenges of the judicial system, a process for which settlement is a critical and likely inescapable component.

ADL

The Trouble with All-or-Nothing Settlements

My new paper, The Trouble with All-or-Nothing Settlements, is now available on SSRN.  I presented it at last week's symposium in Kansas on "Aggregate Justice: Perspectives Ten Years After Amchem and Ortiz."  The theme of the conference got me thinking about the shift in mass dispute resolution.  The failed settlements in Amchem and Ortiz were driven by defendants' insistence on peace, and defendants today often demand similar comprehensiveness.  Much of the action, however, has shifted from settlement class actions to non-class aggregate settlements.  Rather than peace through Rule 23, defendants try to obtain peace by negotiating settlements with all-or-nothing clauses, mandatory withdrawal provisions, or other terms to ensure comprehensiveness.  Too often, however, such all-or-nothing settlements lead to ethical problems.  This paper is my attempt to unpack the various problems engendered by such deals.  Here's the abstract:

When defendants settle litigation involving multiple plaintiffs, they often insist that they will settle only if they obtain releases from all or nearly all of the plaintiffs in the group. Judges, lawyers, and academics largely accept the drive for comprehensive settlements as a given, and many embrace such settlements as a positive goal. All-or-nothing settlements, however, create uncommon pressures and opportunities for abuse. Exploring a number of recent mass settlements that have led to disciplinary proceedings, civil litigation, and criminal prosecutions, this article shows the pressures and opportunities that arise out of defendants' insistence on bringing all claimants into a deal.

The article describes seven types of ethical problems created by demands for fully inclusive settlements. First, all-or-nothing settlements create client-client and lawyer-client conflicts of interest. Second, such settlements exacerbate problems concerning the allocation of settlement funds, including incentives to misallocate. Third, they create a risk of strategic hold-outs as savvy clients may attempt to extort additional money by withholding consent. Fourth, they create an incentive for lawyers to keep settlement money in reserve as a slush fund to ensure full participation, leading to problems of misallocation and client deception. Fifth, they generate loyalty problems by pressuring lawyers to withdraw from representing non-settling clients. Sixth, they create special problems concerning clients’ informed consent to aggregate settlements. And seventh, they introduce a risk of collusion as the interest of plaintiffs’ counsel aligns with the defendant’s interest in getting every plaintiff to sign on to the deal. Although all-or-nothing settlements provide peace for defendants and value for claimants, the troubles they engender suggest that the current love affair with comprehensive settlements - evident in academic writings, judicial pronouncements, and defendant demands - should be tempered by a realistic appreciation of the ethical downside.

I'd be very interested in any comments readers may have.  If you have thoughts or suggestions either about the overall analysis or about any of the specific settlements discussed in the paper, please feel free to e-mail me directly or to comment on the blog.

HME

Passing of David I. Shapiro

Litigator David I. Shapiro, founding partner of the firm Dickstein Shapiro, has died.  In a career that spanned many areas of litigation, Mr. Shapiro also was active in several prominent mass tort litigations, and came to focus on mediation as a case management method.  Here's an excerpt from the Wall Street Journal's obituary:

Mr. Shapiro branched out into class-action suits in the late 1960s. He handled the states' cases in a complex federal price-fixing lawsuit against manufacturers of the antibiotic tetracycline, winning a $100 million verdict for the states.

Later, Mr. Shapiro took on cases related to breast implants, asbestos and the Exxon Valdez oil spill. In 1984, he was assigned as a special master to handle a $180 million settlement resulting from the Agent Orange case, then among the largest class-actions suits to date.

But Mr. Shapiro came to feel that much of class-action litigation was driven by greed, and that cases could be better settled by other means. He developed an expertise in negotiations, and was chairman of the American Bar Association's National Institute on New Techniques for Resolving Complex Legislation.

"It's possible to get justice and recompense for consumers without the greed of the few that plagues the U.S. system," he told the Telegraph of London in 2007.

He taught mediation at the London School of Economics, and created a mediation practice at SJ Berwin. 

BGS

Fifth Circuit Ruling for State Farm in Hurricane Katrina Insurance Dispute

More from AmLaw Litigation Daily.  The opinion is here.  Congratulations to my former Skadden colleagues Sheila Birnbaum, Doug Dunham, and Ellen Quackenbos, who represented State Farm.

BGS

Ford Settles New Jersey Toxic Tort Case

According to this report in The Record, Ford Motor Co. yesterday reached a settlement in which Ford agreed to pay millions of dollars to settle the claims of 600 residents of Upper Ringwood, NJ.  Although the settlement amount is confidential, the article mentions $10 million as an amount stated by sources.  The claims involved allegations of asthma, cancer, and other illnesses that residents claimed were attributable to Ford's 1960s-1970s dumping of paint sludge in a former mining area of Ringwood.

HME

Jackpot Justice: Verdict Variability and the Mass Tort Class Action

I posted to SSRN my article, Jackpot Justice: Verdict Variability and the Mass Tort Class Action, 80 Temple Rev. 1013 (2007).  Notwithstanding the 2007 formal publication date, the article was published this year.  Here's the abstract:

Mass tort scholars, practitioners, and judges struggle with determining the most efficient approach to adjudicate sometimes tens of thousands of cases. Favoring class actions, mass tort scholars and judges have assumed that litigating any issue once is best. But while litigating any one issue could conceivably save attorneys' fees and court resources, a single adjudication of thousands of mass tort claims is unlikely to further tort goals of corrective justice, efficiency, or compensation in a reliable way. That is because, as recent empirical research on jury behavior shows, any one jury's verdict may be an outlier on a potential bell curve of responses applying the law to the facts before it. Indeed, one aberrational, high jury claim valuation, if extrapolated to thousands of claims through a class action, may inappropriately bankrupt an entire industry. Similarly, one unusually low jury verdict might deny legions of plaintiffs the compensation that they deserve. To illustrate the problems of attempting to resolve a mass tort with a single jury, this Article discusses the Engle tobacco class action of Florida smokers, where the application of a single jury verdict to approximately 700,000 smokers appears to be an outlier verdict in light of prior juries' verdicts in Florida tobacco cases. In contrast, this Article argues that the use of multiple juries in individual cases is a superior method of resolving a mass tort. While the use of multiple juries in class actions to create statistically cobbled claim values has been rejected as violating due process and state tort law, no such problems accompany the approach espoused here: that individual-plaintiff lawsuits, each with its own jury, be tried and that the jury verdicts be used by mass tort litigants to develop claim values for broad mass tort settlement. In addition to remaining within the strictures of constitutional and tort law, this clustering of multiple juries around an accurate valuation of mass tort claims and the resulting likely settlement furthers both the procedural goal of litigant autonomy and the tort aims of efficiency, corrective justice, and compensation.

BGS

Community, Network, Class Action

The most recent BNA Class Action Reporter describes a privacy lawsuit filed by Facebook users alleging that Facebook "a data mining company disguised as a social network, and has repeatedly violated users' privacy, engaged in illegal advertising, and misappropriated users' names and likenesses as a routine part of its business."  The suit, Melkonian v. Facebook Inc., was filed in California on August 17 (see Cal. Super. Ct., No. 30-2009 00293755, 8/17/09). 

This reminds me of the work of two of my fellow bloggers.  Byron Stier has written about mass tort litigation as network (see his paper on SSRN) and Elizabeth Burch has written on the concept of "community" in aggregate litigation (see her paper on SSRN as well).  I think Burch's work in particular speaks to a larger desire to create community in an increasingly atomized world and is in the same vein as the "third place" literature in sociology -- that is, the idea that people need a place beyond work and home to connect with one another: the bowling alley, the soccer field, the Starbucks.   We Americans are torn between a strong tradition of individualism and a desire to find our place in a community and we see the same themes and tensions repeated in the context of litigation.  Yes, there is the tradition of the day in court ideal.  But at the same time we have a very robust class action regime - probably the most robust in the world - and increasingly the use of aggregate litigation serves the same function in areas where the possibility of class treatment has been cut off.  What do we make of this desire? 

It seems to me that litigation is more about speech than connection, and that is what makes these latest class actions that are directly about speech, publicity and privacy (such as this Facebook suit or the Google settlement) so interesting.  The power of creating a collective lawsuit is really the power of voice, but its an anemic type of participation in the deep sense of the term.  That's why non-utilitarians have such a hard time with it.  (This struggle is set forth in a very good article by Lawrence Solum,  Procedural Justice, available on SSRN).  That is also what bothers ethicists about settlements like that in the Vioxx litigation, for similar reasons.  That is, the value of the individual in his own right rather than looking only to the collective good.  A closer look at our history demonstrates that participation has always been a bit more ideal than real.  For a discussion of this history in the academic literature see Robert Bone, Rethinking the Day in Court Ideal and Non Party Preclusion, 67 New York University Law Review 193 (1992) (unfortunately not available on SSRN) and Issacharoff & Witt, The Inevitability of Aggregate Settlement (available on SSRN).  

ADL

Replacement of Defense Billable Hour with Flat Fee

The Wall Street Journal has an article today discussing the trend, accelerated by the recession, of replacing billable hours with flat fees.  Amy Schulman, general counsel for Pfizer, is quoted in the article, and the Journal also provides a video of Amy Schulman discussing Pfizer's new flat-fee approach with their law firms. Prior to joining Pfizer, Schulman lead the mass tort/class action practice at DLA Piper.  (For more on Schulman, see my prior post.)  

Neither the article nor video specifically mention whether Pfizer will use flat fees to pay defense lawyers in mass torts, though it is suggested since Schulman says all of the Pfizer Legal Alliance firms (all 16 of them) will be paid by flat fees.  Are mass torts sufficiently predictable that flat-fee arrangements can be negotiated? If so, it supports the notion that the initial Wild West mass torts era has settled into a more orderly approach.  One way to make flat fees more viable for mass torts would be to peg flat fees to each procedural stage of a mass tort, with an additional exit price attached to negotiating a far-reaching settlement; of course, given the many variables of a mass tort, flat fees for any procedural stage would likely need to be separately negotiated for each mass tort -- which would also have the benefit of forcing client and lawyer to think early about their overarching mass tort strategy.

BGS 

Elizabeth Nowicki on Apologies and Good Lawyering

Elizabeth Nowicki (Tulane) has posted to SSRN her article, Apologies and Good Lawyering.  Here's the abstract:

In everyday life, apologies are common. For example, if one shopper bumps into another in a crowded grocery store, apologies abound. Or if a child on the playground accidentally crashes into another child, the crashing child will apologize. If the crashing child does not apologize, a teacher, playground monitor, or parent will instruct the child to apologize, because apologizing for hurting someone is the 'right' thing to do. This apology norm largely disappears if the crashing child grows up and becomes a lawyer, however. Despite empirical research showing that apologies have value in settlement, facilitate cost-effective dispute resolution, and are important to injured parties, it appears that lawyers do not regularly either suggest that a client ask for or suggest that a client offer an apology as part of a conflict resolution. Why does the instinct to facilitate dispute resolution with a sincere apology disappear when students enter law school or when law students become lawyers? Some suggest that lawyers – and consequently the clients they advise – disavow apologies as a matter of defense because apologies are viewed as costly admissions of liability. Others suggest that attorneys for injured parties have no obvious incentives to suggest apologies since quick dispute resolution results in smaller legal fees. Still others suggest that those who become lawyers tend to be logical and analytical, and tend to eschew conduct viewed as purely emotive, such as apologizing. This paper shows that a good lawyer must recognize the value of apologies in conflict resolution, litigation, and settlement, and this paper provides guidance for offering apologies.

BGS

Art Hinshaw and Jess Alberts on Attorney Negotiation Ethics

Art Hinshaw (Arizona State) and Jess Alberts have posted their article, Doing the Right Thing: An Empirical Study of Attorney Negotiation Ethics.  Here's the abstract:

The code of ethical conduct for lawyers -- the American Bar Association’s Model Rules of Professional Conduct (the “Model Rules”) -- legitimizes a certain amount of dissembling and misdirection in the negotiation realm, only prohibiting legal negotiators from making fraudulent misrepresentations about material matters. To determine if attorneys are meeting this low standard, the authors surveyed practicing lawyers and asked them if they would agree to engage in a fraudulent pre-litigation settlement scheme if a client requested them to do so. Nearly one-third of the respondents indicated they would agree to the client’s overtures, and only half indicated that they would refuse the client’s overtures, thereby following the Model Rules. Follow-up questioning suggested several reasons for these results: there appears to be substantial misunderstanding as to what constitutes a fraudulent misrepresentation, there seems to be considerable confusion surrounding the rule’s operative term “material fact,” and it appears that some of the attorneys believe that other legal rules, including other portions of the Model Rules, either gave them permission or required them to engage in the fraudulent negotiation scheme. To rectify these apparent misunderstandings among practicing lawyers, the article offers three interdependent means for improving lawyer negotiation ethics – rule clarification, education, and increased rule enforcement.

BGS 

Federal Judicial Center Management Guides for MDL

The Federal Judicial Center has posted two guides for management of a multidistrict litigation: (1) Ten Steps to Better Case Management: A Guide for Multidistrict Litigation Transferee Judges; and (2) Ten Steps to Better Case Management: A Guide for Multidistrict Litigation Transferee Court Cerks.  (H/t to Drug and Device Law.)

BGS

Vytorin and Zetia Settlement

The New York Times reported yesterday that Merck and Schering-Plough have agreed to pay $41.5 million to settle class claims that they withheld the results of an unfavorable clinical trial.  The clinical trial apparently linked Vytorin and Zetia to harmful side effects that included cancer.  Of course, this news comes as both companies are in merger talks, which would make Merck the second largest pharmaceutical company in the world.  The New York Times article is available here.

ECB

Weinstein: Some Pessimism About Aggregate Litigation

Judge Weinstein has published a short essay on the administration of complex litigations in a new on-line publication of the Cardozo Law Review called De Novo.  The essay, entitled "Preliminary Reflections on the Administration of Complex Litigations" describes a few litigations in which the Judge acted as architecht of a large-scale settlement (what has been described as a quasi-administrative agency).

Judge Weinstein closes on a pessimistic note, arguing that the appellate courts have been so inhospitable to class actions and aggregations that it will now fall to regulators to prevent mass claims rather than the courts to adjudicate them.  He writes: "There is a general hostility, I believe, particularly at the appellate level, to class actions and other devices for efficient administration of mass litigation."  And he ends by writing "In the end, I must reluctantly conclude that the law—and certainly I—have failed to rise sufficiently to meet the challenges of modern litigation.  We have not served the people as well as we should have."

The model for adjudication of mass torts was initially individual litigation, which gave way in the 1980's and 1990's to an administrative model.  (For a great article making this argument see Richard Negareda, From Tort to Adminsitration in the Michigan Law Review - which for some reason the author has not put on SSRN, but when he does I shall link to it).   Today the adminsitrative model still has some traction, but it seems that things are shifting.  Zyprexia and Vioxx are far different than Agent Orange was.  We're seeing a different type of judicial involvement which is geared more towards information gathering than actual adjudication, more private control over settlements, the total failure of the class action device to offer closer and the mechanism for an administrative regime.  So what is next for mass torts?  Can the current developments still be described as an "administrative" regime or is this something closer to an insurance model?

ADL

Richard Nagareda on The Law of Class Actions and Other Aggregate Litigation

Professor Richard Nagareda (Vanderbilt) has published The Law of Class Actions and Other Aggregate Litigation (Foundation Press 2009).  Here's the book description from Foundation Press:

Nagareda’s new casebook is the first to situate as a cohesive whole the ways in which U.S. law seeks to resolve related civil claims on an aggregate basis, integrating the study of class actions with emerging devices such as aggregate settlements, arbitration, and reorganizations in bankruptcy.

This book fills three gaps in the market for teaching materials on the U.S. civil justice system. First, the casebook establishes “aggregate litigation” as a cohesive field of procedural law, one that encompasses not only class actions but also related devices such as aggregate settlements, reorganizations in bankruptcy, private arbitration, and aspects of litigation by the government. Second, the casebook confronts forthrightly the reality of our civil justice system as one geared toward settlement, not the rare event of trial. From this vantage point, the casebook sees the processes for aggregate litigation as vehicles through which the law seeks to achieve proper preclusion – that is, comprehensive, or broadly encompassing, resolution of related civil claims. The hard questions surrounding aggregate litigation concern how the law may legitimize this binding effect. Third, the casebook frames the binding effect sought for settlements in aggregate litigation as drawing upon aspects of both private contracts and public legislation. In so doing, the framework of the casebook encourages students to see cross-cutting connections to their other courses on such topics as contracts, corporations, and administrative law.

BGS

Symposium on "Against Settlement"

The Fordham Law Review presents a one-day symposium, "Against Settlement: Twenty-Five Years Later," looking back at Owen Fiss's classic argument in favor of adjudication -- Against Settlement, 93 Yale L.J. 1073 (1984) -- from the perspective of 2009.  For those of us who believe that mass tort litigation can and often should be resolved by settlement rather than adjudication, the Fiss argument presents a serious challenge.  If mass tort settlements create a form of governance, should we be concerned that the governance is delivered by negotiating parties and their lawyers rather than by a public official?

The symposium speakers include many notables from the fields of ADR, complex litigation, and public interest litigation:  John Bronsteen, Amy Cohen, Kenneth Feinberg, Owen Fiss, Samuel Issacharoff, Pamela Karlan, Michael Moffitt, Jackie Nolan-Haley, Susan Sturm, and the Hon. Jack Weinstein.  The symposium, which is free and open to the public, will take place on Friday, April 3, 2009 at Fordham Law School in New York City.  I'm looking forward to it.

HME

Southwestern University Law Review Asbestos Symposium Issue

The Southwestern University Law Review has published its issue in connection with the symposium, Perspectives on Asbestos Litigation, which Professor Alan Calnan and I co-chaired here at Southwestern Law School on Friday, January 18, 2008.  Here are the articles contained in the issue:

Alan Calnan & Byron Stier, Perspectives on Asbestos Litigation: Overview and Preview, 37 Sw. U. L. Rev. 459 (2008).  Download calnan_stier_introduction_final_pdf.pdf

Mark A. Behrens & William L. Anderson, The "Any Exposure" Theory: An Unsound Basis for Asbestos Causation and Expert Testimony, 37 Sw. U. L. Rev. 479 (2008).  Download behrens_anderson_article_final_pdf_121808.pdf

Helen E. Freedman, Selected Issues in Asbestos Litigation, 37 Sw. U. L. Rev. 511 (2008).  Download freedman_article_final_pdf_121808.pdf

Michael D. Green, Second Thoughts About Apportionment in Asbestos Litigation, 37 Sw. U. L. Rev. 531 (2008).  Download green_article_final_pdf_121808.pdf

Phil Harley, Judicial and Practical Perspectives: Transcript of Phil Harley, 37 Sw. U. L. Rev. 533 (2008).  Download harley_transcript_final_pdf_121808.pdf

David G. Owen, Against Priority, 37 Sw. U. L. Rev. 557 (2008).  Download owen_article_final_pdf_121808.pdf

Keith N. Hylton, Asbestos and Mass Torts with Fraudulent Victims, 37 Sw. U. L. Rev. 575 (2008).  Download hylton_article_final_pdf_121808.pdf

James A. Henderson, Sellers of Safe Products Should Not Be Required to Rescue Users From Risks Presented by Other, More Dangerous Products, 37 Sw. U. L. Rev. 595 (2008).  Download henderson_article_final_pdf_121808.pdf

Gregory C. Keating, The Heroic Enterprise of the Asbestos Cases, 37 Sw. U. L. Rev. 623 (2008).  Download keating_article_final_pdf_121808.pdf

Richard Nagareda, Public and Private Law Perspectives: Transcript of Professor Richard Nagareda, 37 Sw. U. L. Rev. 659 (2008).  Download nagareda_transcript_final_pdf_121808.pdf

Howard Erichson, Public and Private Law Perspectives: Transcript of Professor Howard Erichson, 37 Sw. U. L. Rev. 665 (2008).  Download erichson_transcript_final_pdf_121808.pdf

Jospeh Sanders, Medical Criteria Acts: State Statutory Attempts to Control the Asbestos Litigation,  37 Sw. U. L. Rev. (2008).  Download sanders_article_final_pdf_121808.pdf

Anita Bernstein, Asbestos Achievements, 37 Sw. U. L. Rev. 691 (2008).  Download bernstein_article_final_pdf_121808.pdf  

Neil Vidmar, Social and Cultural Perspectives: Transcript of Professor Neil Vidmar, 37 Sw. U. L. Rev. 717 (2008).  Download vidmar_transcript_final_pdf_121808.pdf

Judy Sloan, Perspectives on Asbestos Litigation: Introduction to the Keynote Address, 37 Sw. U. L. Rev. 731 (2008).  Download sloan_transcript_final_pdf_121808.pdf

Barbara Rothstein, Perspectives on Asbestos Litigation: Keynote Address, 37 Sw. U. L. Rev. 733 (2008).  Download rothstein_transcript_final_pdf_121808.pdf

My many thanks again to all those who worked on the symposium and the issue, and of course to all of the speakers (including co-blogger Howard Erichson) who made for a fascinating day.

BGS

Jonathan Macey and Geoffrey Miller on Judicial Review of Class Action Settlements

Professors Jonathan Macey (Yale) and Geoffrey Miller (NYU) have co-authored Judicial Review of Class Action Settlements, which has been published in the new, on-line, peer-reviewed Journal of Legal Analysis.  Here's the abstract:

This article proposes a simple and coherent approach to judicial review of class action settlements. Specifically, we propose that for questions going to the adequacy of a settlement, where no warning signals of fraud or collusion are found, the court should act relatively deferentially by employing a lenient standard of scrutiny and approving a settlement if it has a rational basis. An intermediate level of scrutiny should apply when the settlement presents facial issues that implicate the fairness of the settlement. Such facial issues include the allocation of settlement proceeds among subgroups in a class, the presence of coupon-type relief, “shotgun” settlements occurring very early in the litigation, and settlements in overlapping class actions. In settlements with one or more of these characteristics, if the initial inquiry raises concerns, the court should demand a well-reasoned explanation for the choices made. Finally, where the components of a settlement present a direct conflict between the interests of class counsel and those of the class issues, such as issues related to attorneys’ fees, courts should employ exacting scrutiny and require convincing evidence that the proposal is reasonable.

BGS

Today's $1.4 billion Zyprexa deal

As expected, the Justice Department and Eli Lilly today announced that Lilly will pay $1.4 billion in a criminal plea deal and civil settlement.  The deal includes $615 million as a criminal penalty and $800 million to settle civil claims by the United States and over 30 states.  Speculation about the negotiations goes back nearly a year.

Here are some details from today's report on Bloomberg:

Eli Lilly & Co. will plead guilty to a criminal charge of promoting its antipsychotic drug Zyprexa for unapproved uses, pay $1.42 billion in fines and submit to U.S. monitoring against future lawbreaking.   ...

Lilly resolved federal and state probes into how it marketed the drug and will plead guilty in U.S. District Court in Philadelphia in the next few weeks, the Indianapolis-based drugmaker said in a statement. Lilly said it promoted Zyprexa in elderly people to treat dementia, a use not approved by the Food and Drug Administration, between September 1999 and March 2001, a criminal violation of the Food, Drug and Cosmetic Act. ...

As part of the settlement, Lilly agrees to operate under a federal monitor’s review for five years.

Twelve states' claims remain unresolved.

Two things strike me about the deal.  First, it is huge, and it had to be.  From the perspective of the Department of Justice, the U.S. Attorney's Office, and the state attorneys general, anything less than a billion would have seemed an ineffective deterrent given the revenues that Zyprexa generated.  In an era of multi-billion dollar revenues for blockbuster drugs, we are bound to see more 10-figure resolutions.

Second, today's deal drives home how multi-faceted mass tort litigation has become.  I used to think of "mass tort litigation" as, well, litigation involving massive numbers of tort claims.  The Zyprexa litigation is mass tort litigation, but "the Zyprexa litigation" includes wrongful death claims, personal injury claims, consumer fraud claims, securities claims, third-party payor claims, federal and state government civil claims, and federal criminal charges.

When Eli Lilly settled the bulk of the tort claims, it wasn't nearly done with the Zyprexa litigation.  Lilly settled tens of thousands of individual claims through mass aggregate settlements -- 8000 plaintiffs for about $700 million in 2006 and 18,000 plaintiffs for about $500 million in 2007.  Judge Jack Weinstein in the MDL treated the litigation and settlement as a "quasi-class action."  At the time, one might have thought that those gargantuan settlements resolved the bulk of the Zyprexa dispute.  With today's deal, we are reminded that the personal injury and wrongful death claims were only one piece of the Zyprexa litigation.

Over a billion dollars in tort settlements.  Tens of millions more for state consumer protection claims.  Over a billion dollars today for the government criminal and civil claims.  A billion here, a billion there, and pretty soon we're talking about real money. 

HME

Zyprexa -- Possible Settlement of Criminal and Civil Claims

Eli Lilly Co. is expected to pay $1.4 billion to settle the government's criminal and civil claims against the company in connection with its marketing of Zyprexa, according to this article in the New York Times, which notes the record-breaking size of the deal:

Eli Lilly, the drug company, is expected to agree as soon as Thursday to pay $1.4 billion to settle criminal and civil charges that it illegally marketed its blockbuster antipsychotic drug Zyprexa for unauthorized use in patients particularly vulnerable to its risky side effects.  The amount of the settlement is a record sum for so-called corporate whistle-blower cases, which are federal lawsuits prompted by tips from company employees or former employees.

Zyprexa is approved for schizophrenia and bipolar disorder.  Lilly is charged with pushing doctors to prescribe the drug for unruly children and nursing home patients, despite the increased risks attendant to use of the drug by the young and the elderly.  The Times article points out that a $1.4 billion fine, while substantial, may represent as little as one year's worth of off-label-use Zyprexa revenues, as Zyprexa has generated over $39 billion in revenues since 1996.

According to the article, more information may come out Thursday:

The government’s case will remain sealed until at least Thursday, when a judge is expected to approve the settlement. People involved in the negotiations say that prosecutors pressed for a resolution in the waning days of the Bush administration to avoid having to get another set of approvals from new bosses at the Justice Department in Washington.

While the settlement is intended to resolve all pending government claims, it is unclear whether all states, which are parties to the case through the federal-state Medicaid program, have agreed to terms.

HME

Lawyer's Conviction Affirmed for Fen-Phen Settlement Fraud

Article in the Clarion Ledger -- Fen-Phen conviction upheld: Vicksburg lawyer bilked company out of $6.7M, by Jerry Mitchell. (H/t to Pharmalot.)  Here's an excerpt:

The 5th U.S. Circuit Court of Appeals on Monday upheld the conviction of Vicksburg lawyer Robert Arledge, convicted of bilking the drug company Wyeth of more than $6.7 million over the diet drug Fen-Phen.

"We find that there was sufficient evidence to support the jury's verdict as to all counts," the court wrote.

U.S. District Judge David Bramlette sentenced Arledge to six years in prison for knowingly allowing clients to make claims of about $250,000 each for health complications although they had no legitimate reason.

Arledge was the sole lawyer charged in the joint Internal Revenue Service-FBI investigation of fraudulent claims in a $400 million settlement fund and subsequent settlement funds involving the use of Fen-Phen - a prescription diet drug pulled from the market in 1997 after research revealed it could cause heart problems.

BGS