Mass Tort Litigation Blog

WSJ Editorial on FASB Proposed Rule Requiring Disclosure of Estimate of Lawsuit Cost

Editorial in the Wall Street Journal -- FASB's Lawyer Bonanza.  Here's an excerpt:

Under the proposed change, a company facing a lawsuit would have to list on its financial statement its best-guess estimate of what that litigation could end up costing -- not just in attorney fees, but in any potential payout. For a company in high-stakes litigation, that means showing its hand to plaintiffs' attorneys, allowing them to gauge management's upper estimate of what the case is worth.

The effect will be to force corporate defendants to fight lawsuits with one hand tied behind their backs -- assuming the company can even figure the "fair value" of a lawsuit it has no idea if it will win or lose. Predicting the trajectory of complex, often multiyear litigation is inherently unscientific. As we saw with Merck and Vioxx, a company's stock price can jump or fall depending on jury verdicts whose results are impossible to predict.

BGS

Krueger and Serotta on Cy Pres Class Distributions

Editorial in the Wall Street Journal -- Our Class-Action System Is Unconstitutional, by George Krueger and Judd Serotta (both of Blank Rome).  The editorial criticizes the cy pres method of distribution of class proceeds.  Here's an excerpt:

In our view, this as-near-as-possible remedy in class actions is defective. The Constitution provides for the resolution of "cases" and "controversies" between aggrieved parties. Courts are empowered to resolve those specific disputes, and not to transfer a corporate defendant's assets to an outside organization that has not appeared before the court. The Constitution does not give courts the authority to satisfy notions of "deterrence" by giving institutions like legal aid societies or universities windfalls when those entities are not even parties to the lawsuit.

The best solution would be to give the remainder of the uncollected funds back to the defendant; to those class members who have already collected their initial portion; or even to the government, thereby at least allowing society to benefit in some way, while still serving as a deterrent. Another solution would be to come up with a less arbitrary -- and more objective and disinterested -- mechanism for finding an appropriate beneficiary organization that shares the plaintiffs' common interests.

We also recommend a new wave of class-action reform, following up on certain successful elements of the Class Action Fairness Act of 2005. In our view, class-action attorneys should be compensated only based on the reward actually recovered by class members, as opposed to the total claimed "value" of the settlement. The claimed value is often calculated by including monies paid to these third parties who benefit from the settlement even though they did not participate in the litigation and are thus not even aggrieved.

BGS

WSJ Editorial on Milberg

Editorial in the Wall Street Journal -- Justice and Milberg.  Here's an excerpt:

Poor Bernie Ebbers, the former WorldCom boss now serving a 25-year prison sentence. If he'd been a class-action lawyer, the former CEO might have ended up with a fat payout from his employer despite his felony rap. At least that's one way to look at the Justice Department's recent nonprosecution agreement with the notorious Milberg law firm.

We criticized the deal last month for letting the law firm pay Melvyn Weiss -- its former lead partner and now admitted felon -- a share of the firm's future lawsuit winnings. Milberg also picked up his legal fees and expenses. We've since learned that all of this was fine with prosecutors at Justice. Thom Mrozek, spokesman for the U.S. Attorney's office in the Central District of California, confirmed the contents of last week's letter to us from five Milberg partners saying Justice had given them the green light to keep Weiss in the financial style to which he had become accustomed

BGS

Bauer on Secret Settlements

Jon Bauer (Connecticut) has recently posted an important article on SSRN on the ethics of settlements that impede other parties' access to evidence entitled "Buying Witness Silence: Evidence Suppressing Settlements and Lawyers' Ethics."  This issue is relevant to the civil rights context and products liability.  Here is the abstract:

Lawyers frequently draft settlements that impede other parties' access to relevant evidence, through clauses that prohibit the plaintiff from making voluntary disclosures to anyone with a claim against the defendant, or forbid all uncompelled disclosures concerning the facts underlying the dispute. This Article argues that lawyers who negotiate these "noncooperation" agreements violate Rule 3.4(f) of the Model Rules of Professional Conduct, which prohibits requesting someone other than the lawyer's own client to withhold relevant information from another party, and Model Rule 8.4(d), which prohibits "conduct that is prejudicial to the administration of justice."

The conventional wisdom among practitioners and legal ethics scholars has been that lawyers may ethically negotiate any settlement terms that serve their clients' interests and are not criminal or fraudulent. (Some recent critics of settlement secrecy have argued that noncooperation settlements violate obstruction of justice statutes or other criminal laws, but the illegality argument is largely unconvincing.) This Article argues that the conventional view has looked at the problem through the wrong lens. In the ethos of the ethics codes, third party and societal interests generally take a back seat to client service, but certain types of conduct deemed especially harmful to the justice system have long been placed off-limits to lawyers because of their special role as "officers of the court."

This Article traces the history of one such duty, the principle that lawyers must not ask nonclients to refrain from voluntarily disclosing relevant information to other parties or their attorneys, and shows the important function that it plays in safeguarding the integrity of adversary adjudication. After providing a theoretical justification for liberally construing ethics rules that limit client advocacy for the sake of the adversary system's effective functioning, this Article explores what the rules mean for settlement practices. The Article examines how far the duty to allow disclosures of relevant information to other parties extends; the scope of the exception allowing noncooperation requests to be made to a client's employees; whether it is permissible to require that certain types of information, such as settlement amounts, discovery materials, privileged information, and trade secrets, not be disclosed; and what limits may be placed on the manner of disclosure. The conclusion addresses the critique that prohibiting lawyers from negotiating agreements that their clients could lawfully enter into on their own is either futile or paternalistic, and shows that it is neither.

ADL

Effron on Disaster Specific Mechanisms for Consolidation

Robin Effron (Brooklyn Law) recently posted an article entitled "Disaster-Specific Mechanisms for Consolidation" on SSRN (and forthcoming in the Tulane L. Rev.).  Here is the abstract:

Within the past decade, two large scale catastrophes - the terrorist attacks of September 11, 2001 and Hurricanes Katrina and Rita - have been the recent laboratories of new congressional provisions for the federalization and aggregation of mass tort claims. In the case of September 11, the litigation has been shaped by the Air Transportation Safety and System Stabilization Act (ATSSSA) an aggregation device that Congress devised specifically to address that particular catastrophe.

The Hurricane Katrina litigation has seen the use (and attempted use) of the Multiparty, Multiforum Trial Jurisdiction Act (MMTJA), an event jurisdiction device of general application that Congress established in 2002. This article explores three aspects of post-catastrophe litigation where the consolidation of cases, or the statutes that govern the consolidation of such cases, raise issues about how to think about disaster litigation as a singular category. After providing a brief summary of the paths of the September 11th and Canal Breach litigations, this article demonstrates that when the boundaries of federal jurisdiction are shaped by reference to events, this affects how cases may be consolidated, particularly with respect to Congress's degree of specificity in naming an event as the organizing principle of jurisdiction. These two federal statutes challenge courts to consider how closely, as a matter of law, federal jurisdiction based on the ATSSSA and the MMTJA and the consolidation of cases must be linked under these respective statutes. The article then turns to a discussion of the role that courts of appeals play in determining the boundaries of federal jurisdiction and consolidation for disaster litigation. The article ends with a discussion of the practical and administrative concerns of consolidated disaster litigation. I argue that the September 11th and Canal Breach litigations show that there can be a problem for judges and litigants of sorting common from uncommon issues in the context of a district-wide consolidation organized around an event.

ADL

July 2008 Issue of Skadden's Class Action Chronicle

Skadden has posted the July 2008 issue of Class Action Chronicle, which includes several interesting, brief comments by Skadden lawyers, including Communicating Ethically with Class Members, by David Clancy; an interview with Raoul Kennedy on defending class action trials; and an editor's note by Russell Jackson on trends in consumer class actions.

BGS

Anti-Tobacco Activist Dr. Richmond Dies at 91

Bruce Weber of the New York Times reports that Dr. Jules B. Richmond, known for founding Project Head Start and campaigning against the tobacco industry, died Sunday. Here's an excerpt:

In his 80s, [Dr. Richmond] testified in two trials involving flight attendants that secondhand smoke was responsible for their ill health.

One of those cases, a class-action suit involving a flight attendant who developed lung cancer though she had never smoked, led to a $300 million settlement in 1997 that included starting a research institute to study tobacco-related diseases. In the second case, a class action on behalf of Florida smokers, a court awarded $145 billion in punitive damages against six tobacco companies, the largest such award in history until it was overturned by an appeals court.

ECB

Ninth Circuit Overturns Sua Sponte Class Certification

Last week the Ninth Circuit overturned a district court judge's sua sponte class certification in Bonlender v. American Honda Motor Co., Inc., 2008 WL 2873264 (9th Cir. July 22, 2008). Apparently the district court failed to make any Rule 23(a) or (b) findings and did not analyze whether variations in laws of the four states involved defeated Rule 23(b)(3)'s predominance requirement. The Ninth Circuit also reassigned the case to a different district court judge on remand. This is the first time I've heard of a sua sponte class certification and would be interested to know of other instances and their outcomes.

ECB

Part II of Catherine Sharkey on FDA Preemption of State Law Products Liability Claims

Part II of Professor Catherine Sharkey's essay, What Riegel Portends for FDA Preemption of State Law Products Liability Claims, has been posted on Northwestern Colloquy.

BGS

Catherine Sharkey on FDA Preemption of State Law Products Liability Claims

Professor Catherine Sharkey (NYU) has published part I of her essay, What Riegel Portends for FDA Preemption of State Law Products Liability Claims, on Northwestern Colloquy, an extension of the Northwestern University Law Review.  Here's an excerpt:

When such policy predilections undergird preemption decisions—even, as in Riegel, in the narrowest realm of express preemption based upon clear statutory text, let alone in the comparatively unbounded realm of implied preemption—it is time to consider alternative models to that of courts’ being left to their own devices under the guise of imputing congressional motives.

This Essay presents that alternative, building upon my previously articulated “agency reference model,” which provides a framework for courts to decide implied conflict preemption cases by seeking guidance from the relevant federal regulatory agency.  The basic question at the core of implied conflict preemption inquiries is whether or not state common law actions are irreconcilable with, or would stand as an obstacle to, or frustrate, the command of federal regulatory directives and goals. To answer this question, courts need a fine-grained account of the precise regulatory review conducted by the agency and evidence as to its compatibility with state law tort claims.  The agency reference model aims, as a general matter, to facilitate input from federal agencies on these issues.

As the Court moves beyond Riegel and the realm of express preemption to tackle implied conflict preemption in the pharmaceutical context in the upcoming Wyeth v. Levine case,  the time is ripe to consider such a model.  Indeed, where, by definition, statutory text alone will not resolutely decide the implied conflicts in products liability cases, articulation of an analytic framework for where the courts should turn is a pragmatic necessity. Drawing upon some suggestive gestures toward agency input in Riegel, this Essay applies the agency reference model to the concrete setting of the regulation of pharmaceutical drugs and extends the model by specifying searching judicial review of evidence taken from the FDA’s regulatory record (record evidence) to substantiate FDA findings of implied conflicts between state common law failure-to-warn claims and the federal regulation of the safety and efficacy of drugs.

BGS

Kevin Clermont on Litigation Realities

Professor Kevin Clermont (Cornell) has posted his forthcoming article, Litigation Realities Redux, on NELLCO/Bepress.  Here's the abstract:

Both summarizing recent empirical work and presenting new observations on each of the six phases of a civil lawsuit (forum, pretrial, settlement, trial, judgment, and appeal), the author stresses the needs for and benefits from understanding and using empirical methods in the study of the adjudicatory system's operation.

BGS

FDA Focuses on Hot Peppers in Salmonella Investigation, Lifts Tomato Warning

Article in the Wall Street Journal -- Hot Peppers Are Focus Of Salmonella Probe, by Jane Zhang.  Here's an excerpt:

The Food and Drug Administration declared tomatoes safe to eat, saying it is focusing on hot peppers in its hunt for the source of a salmonella outbreak that has sickened more than 1,200 people in the U.S. and Canada.

The agency has sent investigators to look into a Mexico packer of jalapeño and Serrano peppers, though it can't say that facility is the source of the contamination, said David Acheson, the FDA's associate commissioner for foods, in a conference call with reporters Thursday.

The FDA, which originally blamed tomatoes for the outbreak that started April 10, says it is focusing on jalapeño peppers, which it said have caused illnesses, as well as Serrano peppers, which can be confused with jalapeños.

BGS

Climate Change and the Tort Paradigm

Can notions of corrective justice or distributive justice inform discussions of global warming?  Is tort law helpful as a paradigm in which to resolve global warming concerns?  Professors Eric Posner (Chicago; picture left) and Cass Sunstein (Harvard; picture right) probe these questions and others in a brief, informative article, Global Warming and Social Justice, in the Cato Institute's Regulation (Spring 2008).

BGS

Russell Jackson on Lead Paint Litigation

J. Russell Jackson (Skadden, Arps) has published Products Liability: Lead Paint Litigation in the National Law Journal.  The article discusses the state of lead paint litigation after the Rhode Island Supreme Court's recent reversal of lead-paint nuisance claims.

BGS

Increase in Use of Drug-Coated Stents, Despite Past Safety Concerns

Article in the Wall Street Journal -- Use of Coated Stents on the Rise, by Keith J. Winstein.  Here's an excerpt:

Drug-coated heart stents, whose U.S. sales were hard hit over safety concerns in the past two years, appear to be mounting a comeback.

In June, 73% of stent procedures in the U.S. used a coated stent, according to the Goodroe Data Warehouse unit of VHA Inc., of Irving, Texas, based on a survey of 60 U.S. hospitals. That is up from 62% in December -- which was the lowest level in several years -- and puts coated stents' popularity at levels not seen since February 2007, when a scientific firestorm raged over the devices' safety.

Coronary stents are tiny scaffolds that relieve chest pains by propping open clogged arteries that feed the heart. About a million Americans a year receive stents. The fanciest models are coated with drugs that prevent scar tissue from reclogging an artery and cost about $2,000, making them far more profitable than uncoated, bare-metal stents, which sell for less than half the price.

BGS