Saturday, November 17, 2007

Duh! Another Vioxx Settlement Thought

Here's more proof (as if more were needed) that Herrmann's a step slow. (And it's again only Herrmann. This post relates to the Vioxx settlement, and Bexis is playing no role in drafting this.)

We posted last week about the Vioxx settlement. The aspect of the settlement that interested us most was finality: After AmChem and Ortiz, how can a defendant buy global peace?

The issue is slippage. If a defendant enters an opt-out class action settlement, plaintiffs with strong cases predictably opt out. No global peace there.

If a defendant permits new claims to be filed under the terms of a settlement agreement, thousands of new claimants can appear out of nowhere. No global peace there.

What's a defendant to do?

Merck's approach was to enter a settlement agreement that required plaintiffs' counsel to recommend that their clients accept, and the settlement is effective only if 85 percent of specific plaintiff groups agree to participate.

In last week's post, we noted three possibilities for slippage from this settlement. First, the non-participants. If a full 15 percent of the plaintiffs choose not to participate in the settlement, and those are plaintiffs with the strongest claims, then Merck would still be facing roughly 7500 comparatively tough lawsuits despite having entered the settlement. That's better than the current 47,000 claims, but it's nothing to sneeze at -- and it is, by hypothesis, selectively the toughest cases.

Second, latency claims. Later courts (despite, apparently strong science to the contrary) could decide that people who stopped taking Vioxx many years before they had heart attacks or strokes should be permitted to take their claims to trial. If claims for latent injuries are permitted, that's a huge bodies of claims not barred by the current settlement.

Third, statutes of limitations. Merck took Vioxx off the market three years ago. Eight states have statutes of limitations for product liability claims that are longer than three years. Plaintiffs in those states can still sue.

And plaintiffs from other states -- the 42 states where claims are time-barred -- may choose to file lawsuits in one of the eight states with more generous limitations periods. Merck is counting on those eight states acting properly -- applying the statute of limitations of the state of the plaintiff's residence, rather than the statute of limitations of the state where the complaint was filed -- to the lawsuit. If any one of the eight states makes the wrong choice, that could be bad news.

But here's the possibility for slippage that we completely overlooked: cross-jurisdictional class action tolling. On Thursday, we posted about the decisions from the Vioxx MDL court denying cross-jurisdictional tolling. That was Herrmann's "duh!" moment. It would be even harder to settle mass torts if courts accepted cross-jurisdictional class action tolling.

Here's why: Suppose, the day after a product recall, a plaintiff files a putative nationwide class action in any court anywhere -- let's say state court in North Dakota. Although there's occasional room for argument, the general rule is that the simple filing of that class action tolls the statute of limitations for every member of the putative class. The limitations period begins to run again only after the court denies a motion to certify the class.

So that class action is filed. Suppose the North Dakota court doesn't decide class certification for two or three years. If courts accept cross-jurisdictional tolling, later plaintiffs can file lawsuits in, say, Ohio, not just two years after the date of injury (as Ohio law would dictate) but two years after the date the North Dakota court denied class certification -- which could be four, five, or more years after the date of injury. Happily, as we noted on Thursday's post, most courts reject cross-jurisdictional class action tolling. But every court that accepts the doctrine makes it yet harder to settle mass torts.

That's yet another issue courts should consider when asked to adopt cross-jurisdictional class action tolling.

(Although we think the issue presented by this post is both true and important, it will almost never find its way into court. When parties are briefing and arguing cross-jurisdictional class action tolling, the distant policy implications -- upsetting the possibility of future mass tort settlements -- won't even make it onto the radar screen. Parties won't waste precious pages of their briefs explaining the issue, and courts won't address the issue. Decisions made in cross-jurisdictional tolling cases will thus unknowingly effect mass tort defendants in later cases.)

1 comment:

Butch said...

Another form of slippage might occur when disgruntled plaintiffs who think the PSC sold them out for peanuts get together on the net. They've already formed discussion groups on Yahoo like "MerckSettlement" and they aren't happy with this "deal".