Saturday, June 02, 2007

Anatomy of a Mass Tort

We're stepping back for a second. Instead of analyzing specific doctrines or new cases, we're going to analyze the whole enchilada: a mass tort, start to finish.

We thought it would be fun (we have an odd sense of humor) to create this post without ever typing these words: "the product was defective" or "someone was hurt." Remarkably, those words are unnecessary to describe the anatomy of a mass tort.

A mass tort does need a trigger. We'll bet the mortgage that one of these five events started the avalanche: (1) bad press -- Connie Chung or Mike Wallace said something nasty, (2) regulatory action -- the FDA added a black box warning to a drug or the National Highway Traffic Safety Administration recalled a car, (3) a voluntary recall -- although no government agency demanded it, a manufacturer took its product off the market, (4) a big jury verdict -- nothing catches the eye of the plaintiff's' bar like money, or (5) a critical article in the scientific literature -- historically, we didn't see this trigger too often, but it's becoming increasingly common.

Pundits, pause: There's policy to be made already. We're hesitant to muzzle the media, so we won't say much about the first trigger. But how about the second and third? If we know that mandatory or voluntary product recalls often trigger mass torts, then you can bet that companies know it, too. Which means that fear of litigation may deter companies from voluntarily undertaking (or acquiescing in a regulatory agency's request for) a product recall.

The law and economics gang says that fear of strict liability causes companies to internalize risks and thus protects the public health; the Beck and Herrmann gang says that fear of mass tort litigation can also influence corporate decision-making, in ways that hurt the public health.

But we digress.

First, the trigger; then, the deluge. After the televised hit piece, product recall, or big verdict, the tort system springs into action. How does the law reveal its majesty?

Advertisements.

Within hours after the triggering event, law firm websites will invite product users to sign on as potential clients. Ads in traditional media follow.

Sadly, by this point, the die has been cast. Once the plaintiffs' bar has signed up clients, it cannot lightly let them go. No matter where the truth lies, the litigation process has now taken on a life of its own.

Here's how the litigation plays out: Plaintiffs' counsel who specialize in aggregate litigation typically strike first; they file class action complaints promptly. Being first to file makes it more likely that a law firm will be appointed class counsel, or to a steering committee, where the money lies.

A relatively few plaintiffs' firms will immediately file complaints on behalf of individual plaintiffs. Individual complaints often move to trial more quickly than class actions, so counsel who file individual complaints may find themselves on the leading edge of the litigation. A select few plaintiffs' lawyers like this position: They're itching to do some work, try a case, and establish their reputations in the field.

Most plaintiffs' lawyers do not pursue this path, because it would require, well, work. It's far easier to sign up clients, do nothing, watch how the litigation plays out, and then spring into action only after the parties announce a global settlement. No muss; no fuss; big bucks.

We've just described the core litigation. Don't forget the peripheral litigation. The target company (or industry) will probably be served with a 10b-5 complaint or two, pleading that the company knew in advance the alleged problems with its product, and the failure to disclose those problems deceived the securities markets. Other peripheral litigation may include complaints filed by third party payors (insurance companies who were allegedly deceived into paying for the product), employee pension plans (that hold corporate stock), or the like.

It's the American legal system at its finest: All of the lawyers' kids are going to college.

The litigation proceeds. Plaintiffs petition the MDL Panel to create a coordinated proceeding. As we've noted in an earlier post, these days the defendant can either unsuccessfully oppose coordination (click here) or acquiesce and seek to aggregate the federal cases in its preferred forum. Plaintiffs' counsel, meanwhile, will scratch each other's eyes out to have the coordinated proceeding located in their respective home towns (where they're more likely to land on the steering committee or serve a major role).

Depending on the size of the mass tort, the parties may also battle over whether to create coordinated proceedings in state court systems. With large populations and well-developed "mini-MDL" processes, California, New Jersey, Pennsylvania, and Texas are the likely hot spots.

In the MDL proceeding, the corporation searches for a silver-bullet defense -- one that can eliminate thousands of cases at once, avoiding the burden of individualized discovery of each plaintiff. What does the corporation find in its bag of tricks? Preemption and Daubert. (We're being too flip, of course; cases do vary, and creative counsel often locate product-specific defenses. But we get lots of e-mails asking us why everyone's so focused on preemption and Daubert. Because those doctrines can win cases wholesale, not retail -- that's why.)

With a preemption victory, plaintiffs are barred from recovery because of the scope of federal regulation of the product. With a win on the (general causation) Daubert ground, plaintiffs are barred from recovery because no legitimate scientific evidence links the defendant's product to the plaintiffs' alleged injury.

Suppose the defendant loses on the wholesale level. -- no luck with preemption or Daubert. The litigation continues. Twenty-three months pass. The defendant is then startled to see new lawsuits arriving by the mailbag-full. What happened? Another TV show? More bad news about the product? New scientific data?

No, no, and no. The statute of limitations for product liability claims in many (perhaps even most) states is two years. With that deadline about to expire, plaintiffs' counsel must either (1) file complaints on behalf of the many plaintiffs who they solicited by advertisements or (2) engage in malpractice by permitting the claims to become time-barred. Since there's no alternative, plaintiffs' counsel file complaints.

The two-year anniversary of the triggering event passes. The defendant breathes a sigh of relief. At long last, the magnitude of the litigation is known; all of the cases have been filed. And, since potential new cases are now time-barred, the defendant can begin to think about negotiating a global settlement, without fear of generating new litigation by offering to pay money to settle cases. The company's stock price inches back up.

Not so fast. The litigation now shifts to the states that have longer statutes of limitations. Huge fights ensue about whether a plaintiff who lives (and was injured) in a state with a two-year limitations period can take advantage of some other state's six-year statute. Plaintiffs' counsel aren't stupid; they file complaints in states where they think this argument might win. Those are states that arguably apply local state law -- where the lawsuit was filed -- rather than the law of the state where the plaintiff lived and was injured. (As defense lawyers, we don't think there's any state where that argument should, or does, work. But one day you just might see a post on this blog titled, "Minnesota, Heal Thyself!")

What next? The parties try a few cases. The safety of the product is largely irrelevant. Plaintiff's counsel tells the jury in opening statement that, "This is the case of a company that put profits before safety!" or "This is the case of a company that stuck its head in the sand and refused to admit the truth!"

Defense counsel responds: "This is the case of Mr. Smith, who is:
  • pond scum;
  • a [heart attack] waiting to happen; or
  • a reckless nutcase."

(We're sorry we can't be more precise, but we haven't specified the product involved in our hypothetical mass tort, so we can't give you the exact theme of the case.)

The jury -- six to twelve people with an average of about a high school education -- hears from the epidemiologists, the pharmacologists, the biostatisticians, and the bioethicists. And the jury then wrestles with the critical issue: Is the defendant more evil than the plaintiff is blameworthy? (We told you that we'd write this whole post without worrying about whether the product was defective.)

If the defendant wins the first dozen trials, the mass tort withers on the vine.

If the plaintiffs score big in a few of the early cases, the litigation continues for a while.

Eventually, everyone's exhausted. Counsel wrestle with Amchem and Ortiz and find some way to settle the mess. Everyone goes home for the first decent night's sleep in four years. But, before going to sleep, they flip on the TV.

What's on tonight?

60 Minutes? Dateline? 20/20?

3 comments:

Andrew Oh-Willeke said...

One notable point missing from this analysis is that less worthy cases usually end up with trivial coupon settlements fairly early with a decent payout to the Plaintiffs firm, while more worthy cases usually result in big bucks for the winning Plaintiffs.

Also, the summary judgment motion analysis often does go to the merits, arguably quite a bit more aggresively than in non-class action suits.

Code said...

You might want to define your acronyms and abbreviations.
For example MDL is multiple-district litigation, if I'm not mistaken.
Just a tip.

Beck/Herrmann said...

We'll try to keep that in mind, but we're lawyers - to us jargon is second nature.

MDL = multidistrict litigation