Mass Tort Litigation Blog

Merck's Post-Vioxx Comeback

Article on cnn.com -- Merck's post-Vioxx comeback, by Aaron Smith.  Here's an excerpt:

When the Vioxx lawsuits started piling up, analysts projected, on average, some $30 billion in potential legal liabilities. But three years later, Merck hasn't paid a penny to anyone blaming Vioxx for their heart attacks.

The company has won 10 of the 15 lawsuits filed against it and has appealed all the cases it lost.

"They're winning 65 percent of the cases," said Joseph Tooley, analyst for A.G. Edwards. "When it's all said and done, I think the ultimate liability is going to be a much more manageable number than was originally anticipated."

But Merck still faces nearly 27,000 more cases. That hardly seems like cause for celebration.

Nonetheless, Ken Frazier, the company's lead counsel throughout the Vioxx debacle, has forged a simple legal strategy that analysts say has helped Merck escape major damage. He has refused, from the beginning, to consider any kind of mass settlement and has instead vowed to fight the cases one at a time.

"Their strategy in fighting every case and being very clear about it, and telling the whole world they were going to fight every case, was a brilliant strategy. Merck is, of course, in a much better position to defend itself than individual plaintiffs trying to take on this organized effort," said Bryan Liang, professor of health law studies at the California Western School of Law in San Diego.

Analysts believe this case-by-case strategy prevented some lawsuits from opportunists looking for an easy cash-out to ever make it to trial. So far, 4,650 plaintiffs have been dismissed, according to Kent Jarrell, the spokesman for Merck's outside counsel.

"Our core strategy has been examining individual cases," said Jarrell. "The approach is working. We've seen thousands of cases dismissed because the cases, on closer examination, weren't backed by facts."

The next Vioxx trial is scheduled for Sept. 17 in Florida Circuit Court in Hillsborough County.

A couple of thoughts in reaction -- First, the strategy of holding off settlement is only working for Merck because Merck is winning the individual cases.  If Merck continued to lose case after case, the number of cases filed would likely increase, and the jury awards would add significantly to Merck's already-burdensome defense costs.  Second, I would generally disagree with the implication of Professor Liang's comments about Merck being in a "much better position" to defend itself in individual cases, compared to plaintiffs.  In modern mass tort litigation, not only do most plaintiffs' law firms invest in hundreds or thousands of cases for a product, but the plaintiffs firms generally work with other firms and use information technology to share information, pool resources, and coordinate strategy.  As has been remarked, the situation is no longer "David versus Goliath" between the plaintiff and defense counsel in mass tort litigation, but "Goliath versus Goliath."  That is a good thing, because it means that representation is more likely to be equal in individual litigation.   

BGS

Altria Will Spin Off International Tobacco Unit

Article on cnn.com -- Altria to spin off international tobacco unit, by Reuters.  Here's an excerpt:

Altria Group Inc. said Wednesday it plans to spin off its international tobacco unit but will not give details on the timing on the much anticipated move until January.

The company also raised its quarterly dividend by 8.7 percent to 75 cents per share, less than the 10 percent increase some analysts had been expecting.

Altria (up $0.45 to $69.52, Charts, Fortune 500) shares gave up their early gains and were down 11 cents at $68.96 in mid-morning trade on the New York Stock Exchange. The stock traded as high as $70.98 earlier in the day.

The spinoff is the second in a corporate restructuring that has seen Altria spin off its Kraft Foods Inc. Holdings.

The Philip Morris International business is seen as having better growth opportunities, especially in emerging markets, than the Philip Morris USA business. U.S. cigarette consumption has fallen steadily since 1981.

BGS

Assessing the 9/11 Victim Compensation Fund

Article in the ABA Journal -- Accounting for Lives: The 9/11 Victim Compensation Fund Worked.  But What About Next Time?, by Jill Schachner Chanen and Margaret Graham Tebo.  The ABA is also hosting a teleconference -- Compensation Funds: Are They Enough?, on September 19.  Here's an excerpt from the article:

Mari-Rae Sopper thought she was embarking on a new stage in her life when she boarded American Airlines Flight 77 the morning of Sept. 11, 2001, at Washington Dulles International Airport. Sopper had decided to leave behind her law practice in Washington, D.C., and return to gymnastics, the passion of her youth. After the flight reached Los Angeles, Sopper would go to her new job as head coach of the women’s gymnastics team at the University of California at Santa Barbara.

Sopper never made it to that new life. Instead, she and everyone else on Flight 77 died when terrorists took over the plane and crashed it into the Pentagon.

Sopper’s griefstruck parents wanted answers. Her mother, Marion Kminek of Cape Coral, Fla., says her initial inclination was to file a lawsuit in efforts to get them. But after consulting with two leading plaintiffs lawyers in Chicago, Kminek says, she decided to heed their advice that she avoid the frustration and delays of litigation and seek compensation, if not resolution, through the September 11th Victim Compensation Fund of 2001. Congress created the fund to handle claims by victims of the terrorist attacks as part of leg­islation providing relief to the airline industry.

Going through the fund didn’t give Kminek all the answers she was looking for, but it did give her some measure of closure through a relatively simple administrative process that resulted in a compensation payment after a relatively short time. But after going through the process, Kminek knows she will never get the information she really wanted about the events that led to her daughter’s death, and she wonders what would have happened if victims and their families had banded together and sued the airlines and government bodies.

“The lawsuits serve a purpose in that you don’t get changes made or the discovery done without them,” Kminek says. “Look at the tobacco lawsuits. If that was not done, I don’t think a lot of that information would be out there. None of us were doing this for the money. We were doing it for the discovery. But none of us will get the answers.”

BGS

Lead Paint Litigation Downturn

According to an article in this week's National Law Journal, lead paint litigation is on the decline.  The article by Amanda Bronstad -- Lead Paint Litigation is Beginning to Fade -- points to recent rulings in New Jersey, Missouri, Wisconsin, and Ohio that have dimmed plaintiffs' hopes.  Here's an excerpt:

A series of recent rulings have stymied public nuisance claims made by dozens of cities and counties to recover damages related to lead paint, which has been found to cause learning disabilities in children.

In June, the New Jersey Supreme Court found that public nuisance claims could not be used in a lead paint case brought by more than 20 counties and cities. That same month, the Missouri Supreme Court ruled that the city of St. Louis failed to prove that the paint companies in its suit caused a public nuisance. Also, a Milwaukee jury in June concluded that lead paint was a public nuisance but that the defendant, NL Industries Inc., was not liable for the damages.

At the same time, a decision by the Ohio Supreme Court this month to uphold a law that limits damages in public nuisance claims could affect more than a half-dozen lead paint cases brought by several cities and the state's attorney general.

HME

Concurrent Vioxx trials and the Merck litigation strategy

According to an article in today's Star-Ledger, New Jersey Judge Carol Higbee has met with lawyers to propose a plan to move Vioxx trials more quickly.  Under her plan, four judges would preside over simultaneous trials, each involving multiple plaintiffs.  Here's an excerpt:

In an effort to move the sheer volume of lawsuits, Judge Carol Higbee is proposing four simultaneous trials at the courthouse. Each trial would involve multiple plaintiffs from New Jersey, New York and Pennsylvania.  Under the plan, which has been discussed in conference meetings between Higbee and lawyers involved in the cases, three other judges would be assigned to preside over the additional trials. All four trials are scheduled to begin Jan. 22 at the Atlantic City courthouse.

Merck has consistently opposed joint trials in the Vioxx litigation, insisting that the issues are too individualized to permit a fair trial with multiple plaintiffs.  Merck's defense attorney Theodore Mayer of Hughes Hubbard & Reed was quoted in the article as saying, "We feel very strongly that justice in each case should not be affected by the large number of cases."  Simultaneous separate trials presumably would not present the same problem, but the inclusion of multiple plaintiffs in each trial would.

This news comes on the heels of an article in the New York Times two days ago (see Byron Stier's prior post) pointing out that despite a number of plaintiff verdicts, no Vioxx plaintiff has yet been paid by Merck.  With tens of thousands of Vioxx suits in the pipeline and with lengthy appeals from every judgment, plaintiffs could wait years for trial and, if successful, much longer for payment.

In this light, it's interesting to think about Merck's strategy.  Merck steadfastly refuses to settle Vioxx cases, preferring to pay massive legal fees to litigate each case individually.  It is reminiscent of the litigation strategy of the tobacco industry from 1954 to 1994.  The tobacco defendants, however, knew that they could win virtually every case, in part by vastly outspending and outlawyering the opposition.  That's not the case with Vioxx.  Merck faces capable opposition with substantial resources to invest in the litigation.  Trial outcomes have gone both ways.  But that does not mean that Merck's strategy is wrong.  To the contrary, it appears to have been a highly successful strategy of lowering settlement values.

It still seems likely, despite Merck's avowed disinterest, that the endgame will be some form of collective settlement.  By avoiding class actions or joint trials, by declining to settle early, and by litigating each individual case to the hilt, Merck has improved its bargaining position.  Its strategy forces plaintiffs' lawyers to think hard about which prospective clients' cases are worth pursuing, and undoubtedly has discouraged some lawyers from investing their time and resources in the litigation.  When the hardball strategy reaches a point of diminishing returns, and as litigation costs continue to mount, it may make sense for Merck to seek a settlement or series of settlements.  When the cost of litigating exceeds the cost of settling, a defendant can justify the expense only as long as it reaps a substantial strategic benefit, such as discouraging plaintiffs from piling on early in the litigation.

In the meantime, the judicial system cannot work on the assumption that an aggregate settlement is in the offing.  The judges have to move forward with trying these cases, while respecting the individual issues.  Judge Higbee's reported plan of simultaneous trials seems to be a reasonable step in that direction.

HME

Plaintiffs Having Difficulty in Vioxx Litigation Against Merck

Interesting article in the New York Times -- Plaintiffs Find Payday Elusive in Vioxx Cases, by Alex Berenson.  Thanks to Evan Anziska for pointing the article out.  Here's an excerpt:

[N]one of the 45,000 people who have sued Merck, contending that they or their loved ones suffered heart attacks or strokes after taking Vioxx, have received payments from the company. The lawsuits continue, for now in a state of legal limbo, with little prospect of resolution.

In combating the litigation, Merck has made an aggressive, and so far successful, bet that forcing plaintiffs to trial will reduce the number of Vioxx lawsuits and, ultimately, its liability.

Promising to contest every case, Merck has spent more than $1 billion over the last three years in legal fees. It has refused, at least publicly, to consider even the possibility of an overall settlement to resolve all the lawsuits at once.

The strategy’s successes, from the view of Merck and its shareholders, are clear. In the last year, the company has won most of Vioxx cases that have reached juries. Though its stock plunged immediately after the Robert Ernst verdict, it has since risen 80 percent, easily outpacing those of other big drug makers. And estimates of Merck’s ultimate liability, once as high as $25 billion, are now closer to $5 billion, said C. Anthony Butler of Lehman Brothers.

The article also features several comments from Professor Peter Schuck of Yale Law School.

BGS

Black Box Warnings for Avandia and Actos

Article on cnn.com --  Avandia, Actos to include 'black box' warnings, by the Associated Press.  Here's an excerpt:

The diabetes drugs Avandia and Actos will be labeled with severe warnings about a risk of heart failure to some patients, health officials said Tuesday.

The makers of the drugs, GlaxoSmithKline Plc and Takeda Pharmaceutical Company Ltd., have agreed to add the "black-box" warnings, the Food and Drug Administration said. The warnings, the most severe that prescription drugs can bear, stress the medicines may cause or worsen heart failure and that patients should be closely monitored.

The warnings also apply to combination drugs that include the active ingredients in Avandia, made by Glaxo, or Takeda's Actos. The drugs help patients with Type 2 diabetes control their blood sugar levels.

BGS

Ford Recalls 3.6 Million Vehicles For Faulty Cruise Control Switch and Possible Fire Risk

Article on cnn.com --  Ford recalling millions of vehicles because of faulty switches.  Here's an excerpt:

Two years after his wife of 34 years died in a fire, an Iowa man continues to maintain the blaze was started by a faulty cruise control switch under the hood of her 1996 Ford F-150 pickup -- while it was parked in the garage attached to his home.

Although Ford has denied -- and continues to deny -- the switch started the fire that killed 74-year-old Dolly Mohlis in 2005, the company recently settled a lawsuit brought against it by Earl Mohlis. And last week, it issued a recall of an estimated 3.6 million vehicles -- bringing the total recalled over the past decade to more than 10 million -- every single car and truck built with a similar cruise control switch.

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FDA Accuses Pfizer of False Advertising for Anti-Psychotic Drug Geodon

Article on cnn.com -- FDA accuses Pfizer of false advertising: Pfizer's ad for anti-psychotic drug misleading, with health risk info missing, says FDA, by Aaron Smith.  Here's an excerpt:

The FDA on Monday accused Pfizer of false advertising for its anti-schizophrenia drug Geodon.

The Food and Drug Administration, in a letter posted on its Web site, said that a Pfizer (down $0.10 to $23.89, Charts, Fortune 500) advertisement appearing in a medical journal "is false or misleading because it omits important risk information and contains unsubstantiated superiority claims."

The FDA said that Pfizer omitted health risks that have been attributed to the injectable drug Geodon, including diabetes, high blood pressure and neurological disorders.

The FDA said that Pfizer used the term "movement disorders" to refer to a disorder called tardive dyskensia, a description that is "insufficient" to communicate its seriousness.

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Richard Epstein on the Williams Punitive Damages Case

As I've posted before, there is an upcoming symposium on September 7 at at Charleston Law School in South Carolina on Punitive Damages, Due Process, and Deterrence: the Debate After Philip Morris v. Williams Download charleston_law_school_conference_brochure.pdf.  In advance of that conference, I thought I'd link Richard Epstein's interesting February 2007 Federalist Society audio commentary on the Williams case.

BGS

Amgen Woes From Aranesp & Epogen Safety Concerns

Article in the Los Angeles Times -- Hometown feeling Amgen's pain: The biotech giant has been key to Thousand Oaks' economic boom, by Daniel Costello.  Here's an excerpt:

In Thousand Oaks, Amgen Inc. rules.

It's the biggest private employer in town. Its 8,300 local employees, known as "Amgenites," make an estimated average annual salary of $162,000. Its sleek corporate headquarters with sweeping views of the Santa Monica Mountains looks more like a college campus, and frequent late-afternoon "fermentation parties" offer free beer for all.

In this city of nearly 127,000, the biotech giant and its well-heeled workforce have kept the area's economy humming -- including a new Four Seasons hotel nearby that opened in November, gourmet restaurants and hip boutiques that sit among its rolling hills and 4,000 oak trees, some more than 300 years old.

But is the party ending? This summer, things are increasingly looking glum at the once go-go Amgen.

After studies have raised safety concerns about two of Amgen's bestselling drugs, U.S. sales of its most profitable product, Aranesp, fell almost 20% last quarter. Regulators are issuing new warnings and investors are pummeling the stock, which has lost nearly a quarter of its value since the start of the year and fallen to its lowest level in nearly four years.

Last week, the U.S. Centers for Medicare and Medicaid Services dealt an unexpected and serious blow to the company when the government announced plans to limit what dosages of anemia drugs it would pay for under Medicare. Included was Amgen's Epogen and Aranesp medications, which made up 60% of the company's profit last year.

BGS

FDA Regulation of Tobacco?

The Cato Institute has a podcast, entitled The Marlboro Man and the FDA, featuring Thomas Firey discussing FDA regulation of tobacco.

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Mass Torts and Legal Writing

All mass tort practitioners know that the intricate and unsettled issues in mass tort litigation often require the highest quality briefing.  My Southwestern Law School colleagues Professors Dennis Yokoyama and Austen Parrish have written an excellent and concise guide to legal writing, Effective Legal Writing: A Checklist Approach to Legal Writing and Oral Argument, which has just been published by Carolina Academic Press.  I read and commented on the book before its publication, and recommend it highly.

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NYU Law Discussion on Class Actions

Interesting class actions article from the the NYU Law School magazine (Autumn 06) -- Download heads_of_the_class.pdf .  The article provides a transcript of numerous civil procedure experts discussing class actions.  Among those whose comments are included are Arthur Miller (Harvard), Steven Bennett (Jones Day), Sheila Birnbaum (Skadden), Oscar Chase (NYU), Evan Chesler (Cravath), Ken Feinberg (Feinberg Group), Samual Issacharoff (NYU), Geoffrey Miller (NYU), Linda Silberman (NYU), Melvin Weiss (Milberg Weiss), and Bert Neuborne (NYU).

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Senate Panel Votes for FDA Regulation of Tobacco

Article on cnn.com -- Senate panel pushes FDA's tobacco powers: Bill would allow administration to regulate, not ban tobacco products, restrict ads, mandate labels, and control additives, by Reuters.  Here's an excerpt:

A U.S. Senate committee voted on Wednesday to let the Food and Drug Administration regulate but not ban tobacco products, a proposal supported by public health groups and the nation's largest cigarette maker.

The bill would allow the FDA to restrict tobacco advertising, prevent cigarette sales to minors, mandate stronger warning labels, bar misrepresentation of tobacco's dangers and order removal of dangerous ingredients from cigarettes.

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J&J Cuts Jobs Amid Safety Concerns for Stents and Anemia Drugs

Article in the Wall Street Journal -- J&J to Reduce Staff by 3% to 4%: Cuts Come Amid Slowdown In Stents and Expectation Of a Decline in Drug Sales, by Avery Johnson and Peter Loftus.  Here's an excerpt:

Johnson & Johnson is cutting costs and consolidating operations as the company braces for a downturn in drug sales and endures a sluggish market for drug-coated stents.

The company, based in New Brunswick, N.J., said it will reduce its global work force by 3% to 4%, or as many as 4,820 jobs. J&J pledged to consolidate some operations in its pharmaceutical group and combine medical-device businesses that make stents, the metal scaffolds that prop open arteries in the heart, legs and other parts of the body.

As of 4 p.m. composite trading on the New York Stock Exchange, J&J shares were at $60.50, up 43 cents.

The diversified health-products maker is in so many different businesses, from Band-Aids to biotech, that downturns in one area often are offset by gains in another. But J&J is now battling problems on an unusual number of fronts. The company faces patent expirations and safety concerns for some of its biggest sellers, ranging from anemia drugs to stents. Just two weeks ago, J&J tempered its 2007 sales outlook.

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FDA Announces Voluntary Food Standards, Looks to States

Article in the Wall Street Journal -- Strapped FDA Turns to States: Amid Food-Safety Scares, Agency Asks for Help With Inspections, by Jane Zhang.  Here's an excerpt:

For several months, amid food scares ranging from tainted pet food to canned chili with botulism, the Food and Drug Administration's cash-strapped food program has been struggling to demonstrate that it can police the nation's food supply. Now, it is taking steps to rely more heavily on the states for help.

Yesterday, the FDA announced new voluntary standards that it said would lead to uniform, high-quality state food-safety programs. Margaret Glavin, associate commissioner for regulatory affairs, called the shift a significant step toward "integrating our food-safety system."

The move amounted to an acknowledgment, increasingly discussed within the FDA in recent months, that federal and state officials need to combine forces to combat food-safety problems.

BGS