A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.
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Money-hungry Vioxx lawyers leave many clients in the lurch.
28 January 2008
Trial lawyer Andy Birchfield is suing for peace. He is colead counsel of the Plaintiffs Steering Committee for the federal Vioxx litigation, a select group of trial lawyers who have negotiated a Settlement Agreement with pharmaceutical giant Merck, Inc. The agreement is meant to end between 50,000 and 60,000 lawsuits alleging that VioxxMercks bestselling pain reliever for arthritis suffererscaused unwitting users to suffer heart attacks and strokes. Though it may be a good deal for Birchfield and for Merck, its not good for every Vioxx plaintiff. Like many mass tortslawsuits alleging that a single defendant harmed many people in a similar waythe Vioxx litigation includes a small core of relatively strong cases and a huge infestation of nuisance suits filed by plaintiffs hoping to cash in on an eventual settlement. If the Settlement Agreement works as intended, it will pay off the nuisance plaintiffsand their lawyersby pressing plaintiffs with stronger suits to settle for much less than their claims may be worth.
Even the relatively strong Vioxx cases are no walk in the park for plaintiffs lawyers. The trickiest part is proving that the drug actually caused a stroke or heart attack; arthritis sufferers are generally not young, and while evidence suggests that prolonged use of Vioxx can double the risk of heart attack, everyone agrees that many of the heart attacks in cases now pending in state and federal trial courts would have occurred anyway. Indeed, Merck has won 10 of the 14 Vioxx trials that have reached final judgment so far, according to the website On Point. In the other four cases, however, the plaintiffs were awarded an average of $24 million eachmeaning an average payout for all 14 cases of almost $7 million, sufficient reason for Merck to come to the negotiating table, where the Settlement Agreement was born.
The Settlement Agreement is not, as its name suggests, an agreement between Merck and the plaintiffs to settle their suits. Rather, it is an agreement between Merck and many of the plaintiffs lawyers: Merck agrees to offer take-it-or-leave-it settlements to the lawyers Vioxx clients only if the lawyers agree to advise all their clients to accept Mercks offer and to drop any clients who dont take that advice. Moreover, the lawyers must forfeit any payment from plaintiffs who choose to walka provision designed to prevent participating lawyers from, in effect, selling highly valuable clients to lawyers operating outside the settlement (in such cases, the old and new lawyers ordinarily split the eventual fee). These terms are intended to prevent trial lawyers from trying the strongest cases while settling the hundreds or thousands of nuisance claims.
But lawyers are ethically bound to offer candid, independent advice to each client about whether or not to settle. So Vioxx lawyers, most of whom handle many such cases, shouldnt settle a single case under the Settlement Agreement unless they honestly believe that every Vioxx client ought to accept Mercks offer. Birchfield claims that the agreement really is in the individual best interest of each and every individual client. But the agreement cant possibly offer each claimant a similar percentage of the expected value of his claim, because it ignores differences in the substantive law of each state. Under the agreement, plaintiffs in West Virginia, which does not limit punitive damages, will find themselves advised to settle so that otherwise similar plaintiffs in Michigan, whose claims are actually barred by law, can recover just as much as they do. Because the agreement is redistributive between these groups, it cant be an equally good deal for everyone.
Is the Settlement Agreement nonetheless so generous that well-situated plaintiffs with strong cases cant reasonably refuse? I entered basic demographic and medical information about the 14 Vioxx users whose cases have already been tried into the online Vioxx settlement calculator provided by the Plaintiffs Steering Committee, which yielded offers ranging from almost nothing to a maximum of $1.3 million, with most offers clustering in the $100,000 to $400,000 range. (Final amounts will depend to some extent on how many claims settle.) These sums dont impress. True, most people would gladly take much less than the $7 million average of the 14 cases already litigated if doing so would settle their cases quickly, eliminate their chance of losing an appeal, and thus avoid the very large risk of getting nothing at all. But some claimants are being offered less than 10 percent of what experience suggests their cases are worth.
The agreement is, however, a good deal for Merck and for the trial lawyers suing it. Merck needs to limit its risk to a sum certain in order to pacify the equities markets, and the $4.85 billion that it commits in this settlement is dwarfed by the estimated $15 billion that it would spend to litigate every Vioxx case. The lawyers, for their part, have never intended to take most of their cases to trial. Anticipating a settlement, they gorged their portfolios with claims so weak that they would cost much more to litigate individually than they would yield in fees. To get a positive return on these nuisance suits, lawyers are now flocking to an agreement that sells out the interests of those clients who actually have viable claims.
Lawyers like Birchfield, whose firm represents about 7,000 Vioxx plaintiffs, have supersized the lawyer-client conflict that is always potentially present when the two parties undertake a contingent-fee agreement. Lawyers are more interested in settlement than their clients because trials cost clients very little additional moneydirect costs are fronted by attorneys and customarily are not collected from unsuccessful clientswhile they cost lawyers a great deal of time. Though lawyers have an ethical obligation to resist the incentive to settle cases against their clients interests, lawyers who file money-losing nuisance suits must settle them to remain in business. Mass-tort defendants like Merck are learning how to take advantage of this need by offering to settle the nuisance suits only if the trial lawyers also deliver up their strongest cases at bargain rates. The plaintiffs with strong cases lose out, while the trial lawyers and the dubiously injured benefit.
There are two kinds of cases in every mass tort: the ones that are strong enough to justify the cost of trying them, and the ones that arent. A loser-pays rule in American civil litigationrequiring the loser of a lawsuit to pay the winners legal feeswould eliminate lawyers incentive to clutter dockets with cases of the second kind. This sensible reform would free lawyers and courts to focus attention on the parties most likely to have been seriously harmed, and could head off a burgeoning ethical crisis among mass-tort lawyers who are selling out clients with strong cases in order to settle suits that they should never have filed in the first place.
Marie Gryphon is a senior fellow at the Manhattan Institutes Center for Legal Policy.