Friday, November 9, 2007
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.