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 1.2.8.1 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 1.2.8.2) .  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.

HME