Thoughts on the Vioxx Settlement

We know, we know: The parties announced the Vioxx settlement on Friday, and it's already Sunday, and we haven't yet chimed in.

We have two excuses. First, Bexis's tongue is tied. His firm is involved in the Vioxx litigation, so he can't comment on the settlement. He, of course, played no role in drafting this post.

Second, Herrmann was busy. Sorry about that, guys, but work comes first, and recreational blogging comes second. ("Recreational blogging." I bet you don't often see those words in that order, huh?)

Anyway, we're not surprised by the Vioxx settlement. We think it was almost predictable. Here's why.

Start with a product recall. That gets the drug off the market, and starts the statute of limitations ticking (except for claims of latent injuries, which we'll address momentarily). The recall makes the defense strategy easy: Fight like hell until the statute of limitations expires; then, settle.

You can't start settling right away. If you throw big bucks at the early plaintiffs, you're just chumming the waters. You'll attract many more lawsuits, and the mass tort will get worse. Instead, you must announce that you'll defend every case until the last cert is denied, to discourage the filing of new cases.

(There's one exception to that rule: If there's a narrowly defined subcategory of claims that are very hard to defend -- maybe mesothelioma in the case of asbestos or rhabdomyolysis for Baycol -- you can announce that you'll settle those cases only. Although you'll pick up more meso or rhabdo cases, that's only a small piece of the overall masss tort. And you're better off settling those tough cases than trying and losing them -- big jury verdicts chum the waters, too.)

Okay. Announce that you'll pay billions for defense and not a penny for tribute. Then, fight like the dickens for three years.

The average state statute of limitations for a product liability case is two years; after three years, the statute has expired in 42 of the 50 states. You'd like to fight for six years -- until the statute has expired everywhere -- but that's expensive and exhausting. So fight for a minimum of two years, and three years if you can afford it.

Then, settle. After the statute of limitations has expired, you can safely spend a lot of money to settle the mass tort, because potential new plaintiffs will be time-barred.

Not only that, you've already proved that you're tough. New plaintiffs will be discouraged from suing you in one of the eight states that permit products cases to be filed more than three years after the date of injury, because you've proved to those potential new plaintiffs that you're willing and able to defend yourself.

(It's also a good idea to keep the amount that you pay in settlement as low as reasonably possible. You'll attract fewer new lawsuits if you minimize the likely payday for new plaintiffs.)

Finally, solve the latency problem. Sometimes, it solves itself. If, for example, your mass tort involves a medical implant that either cures the plaintiff or breaks within two years, there's no latency. Everyone was either cured or hurt by a specified time. If, however, your drug may be associated with a disease that manifests itself years after the drug is ingested, there's no closing date to the mass tort. The exposure runs for the length of the latency period.

We frankly don't know enough about the science underlying Vioxx to have a sense of whether claims for latent injuries -- heart attacks or strokes suffered years after ingesting Vioxx -- are viable. In the Vioxx settlement, however, the parties agreed to terms that minimize any claims for latent injury: Plaintiffs' counsel agree to withdraw from representing any client who declines the settlement. Thus, plaintiffs can pursue claims for latent injuries, but they'll lose their present lawyer and may have to proceed with a lawyer who wasn't previously involved in the litigation and so is less likely to be able to win at trial.

The Vioxx settlement is, notably, not a class action settlement. AmChem and Ortiz make it awfully hard to design a class action settlement these days, so the Vioxx parties negotiated an inventory settlement. It's not clear that inventory settlements protect plaintiffs more effectively than class action settlements do, but the Supreme Court has clearly pushed mass tort settlements into that mode.

After this settlement, Merck faces the not insignificant challenge of wrapping it up. The settlement is conditioned on 85 percent of certain specified plaintiff groups accepting it. That provision is likely to be satisfied -- when the plaintiffs' lawyers recommend settlement to their clients and threaten to withdraw if the clients don't accept the settlement, the clients will fall in line. A scant few clients may realize that they have exceptionally strong cases and so will reject the settlement and retain new counsel, but those people will be the rare exception to the general rule.

(We'll watch with interest to see whether the Vioxx settlement generates a new species of plaintiffs' lawyer -- a lawyer offering to represent Vioxx plaintiffs as neutral counsel to advise plaintiffs whether (1) to accept the settlement or (2) to reject it and hire the neutral advisor as replacement counsel. If you see ads for those services springing up on the internet, it's the first sign of trouble for Merck. It portends a 15 percent opt-out rate (which will be nearly 7500 plaintiffs), consisting primarily of the toughest lawsuits.)

Finally, Merck has to avoid late-filed cases -- new lawsuits filed more than three years after the Vioxx recall. That hinges on a few different things. First, judges must actually enforce statutes of limitations. If Minnesota judges, for example, apply a six-year limitations period to product liability claims, and apply Minnesota law to the claims of all plaintiffs who file in Minnesota, then Merck will face a resurrected mass tort in Minnesota. People from all over the country will be drawn to Minnesota, as moths are drawn to light, to file lawsuits there.

For mass tort settlements to work in the post-AmChem and Ortiz era, courts must enforce statutes of limitations rigorously.

Will the Vioxx settlement be a model for the future? The original Breast Implant settlement collapsed because too many plaintiffs opted out the class action settlement. Other mass tort settlements have been hamstrung when a multitude of plaintiffs submitted weak (or frivolous) claims that nonetheless had to be processed or paid. If the Vioxx settlement indeed manages to capture 85 percent of claimants and to avoid paying frivolous claims, then later defendants will follow this model. If the Vioxx settlement does not capture claims effectively, later litigants will tweak this model to try to do better next time.

One last thing: How do you settle a mass tort if you haven't recalled your product, so there's no definitive date on which the statute of limitations begins to run (and, later, expires)?

You need an alternative to a recall to act as the statute-triggering event: a re-designed product that eliminates the alleged defect about which plaintiffs complain, or a new and stark warning that eliminates any possible failure-to-warn claims. To end a mass tort, you need an end to potential claims. For Vioxx, it was a recall; for mass torts of the future, it will predictably be other types of events.

For those interested in reading more about the Vioxx settlement, start with the Mass Tort Litigation Blog and Point of Law (here and here, among others); those posts will, in turn, lead you to others. Happy reading.