Lawyer's Weekly USA
One
of the most contentious proposed class-action settlements in recent
memory came to a peaceful resolution on May 31 when manufacturer Suizer
Medica agreed to a $1.1 billion payout to plaintiffs who claimed they
were injured by defective hip implants.
The long-awaited
decision had plaintiffs’ attorneys amund the country biting their
nails. The federal judge overseeing the case had extended the deadline
twice, as Suizer attempted to persuade reluctant plaintiffs to sign on
to the deal.
As of mid-May, 132 people were ready to opt-out, a
number sufficiently high to throw the proposed settlement into
uncertainty. SuIzer feared that many of these plaintiffs would pursue
individual claims, thereby jeopardizing the company’s ability to make
payouts to class members.
But in the last week of May, the
number of opt-outs droppe4 to 87. Attorneys for Sulzer estimated that
only l6to 20 of those opt-outs will pursue litigation in state courts.
Lawyers
on both sides of the case hailed the settlement as a fair compromise
and a signal example of cooperation in their profession.
“Plaintiffs’
attorneys who were up in arms at the original proposal - inc1uding
me-have come full circle,” said Luke Ellis, a small-firm attorney in
Orinda, Calif., who had 35 cases resting on the outcome and was on the
state management committee handling 550 California cases.
Ellis
said that “the lawyers around the country and their clients looking at
this deal. made an almost universal decision that given all the facts
and the company’s resources, this was the best way to fairly treat the
greatest number of people."
Terms Of The Settlement
In
December 2000, Sulzer issued a recall of its artificial hip and knee
prostheses because residue from an industrial lubricant that remained
on the devices was causing them to loosen. Under the terms of the
settlement, each of the approximately 30,000 patients who had the
contaminated joints implanted will receive $l,000, plus a spousal
benefit for loss of consortium.
The 3,800 patients who required additional surgeries (or will,
within a specified time frame) will receive $206,000 for each surgery
including $46,000 in attorney fees. Sulzer will also pay medical bills
and indemnify the client and the attorney for any claims brought by
third parties seeking reimbursement.
Sulzer has also established
a $100,000,000 Extraordinary Injury Fund,” that will provide
compensation for serious complications arising from the defective
implants.
Ellis said that “because the average age is over 60 in
these cases, there were some pretty serious complications: dislocations
or fractures as a result of the defective part, stroke, heart attack -
all those things happened, which isn't suprising, given the age group.
People with these extraordinary injuries are eligible for up to one
million.”
Sulzer, he added, “estimates that maybe a quarter of
the 3,800 [who required additional surgery] might be eligible for the
fund."
The settlement promises quick distrlbution of the money - more than half of the total will be paid out this year.
From Near-Mutiny To Love-In
This deal is a far cry from the one hammered out in preliminary form
last August, which plaintiffs’ attorneys criticized as a shut-out
settlement in all but name. And – when it became clear that one of
their own – Richard Scruggs, the small firm Missisippi lawyer who led
the crusade against the asbestos and tobacco companies - was crafting
the deal for Suizer, anger turned to indignation.
Scruggs has
steadfastly defended himself against charges of being a “defector” or
“turncoat,” arguing that a medical device company that makes
life-saving products like hip implants was in a different category from
t6bacco or asbestos companies.
He still defends his position, and is gratified that other attorneys now see it his way.
“It
was fun doing this for a deserving company,” he said. “Sulzer made
life-saving and life-enhancing products generally. They made a mistake,
admitted it, and now they’ve paid for it. It was sort of a different
endeavor than what I’d engaged in before, but it was very rewarding
professionally.”
A number of attorneys suggested, however that Scruggs has also come around.
"There
were a lot of bitter pills in the first announced settlement,” said
Andres Pereira an attorney with Houston’s Fleming & Associates,
which is handling l8O hip implant cases.
One big stumbling block
was a provision that placed all assets of Sulzer Medica, including its
insurance and US subsidiaries, outside of the reach of individual
plaintiffs, thus making opt-out rights illusory, many plaintiffs’
attorneys argued.
“The first deal was a phony opt-out because
all the assets were tied up,” said Ellis. “It pretended to be an
opt-out, but it wasn’t. One of [our] conditions was that there had to be
an absolute opt-out right, a righteous opt-out, in the revised
settlement.”
Plaintiffs’ attorneys also strenuously objected to
an injunction issued by U.S. District Court Judge Kathleen O’Malley
that froze all the state cases, which constituted the bulk of the
claims that were filed, during negotiations over the preliminary
settlement. Extensive negotiations resulted in a revised settlement
that was given final approval on May 8.
In her approval of the
final deal, O’Malley state& “Attorneys who represent hundreds of
class members and who had objected strongly to an earlier proposed
settlement agreement joined in a chorus of support for the current
proposed settlement agreement.”
Pereira called the agreement
“the best deal we can get [our clients] under the circumstances,”
expressing what seems to be a consensus among the dozens of attorneys
involved in these cases over the last year.
But some suggested that the Sulzer deal came together for reasons unique to these cases.
San
Francisco attorney Richard Heimann noted that “here we had a company
whose product had done signiflcant damage to significant numbers of
people, but whose insurance and assets were insufficient to compensate
those people. A way had to be found to resolve the case without having
to resort to bankruptcy.” Hermann was one of the principal negotiators
of the settlement.
And what may also have been unique is the role played by Richard Scruggs.
"To
his credit,” said Ellis, “he sat down with all the lawyers to figure
out how to pay what is fair and still allow the company to do business.
His relationships and credibility in the plaintiffs’ bar had a lot to
do with getting the deal done.”
Ellis said that “having a lawyer
at Sulzer who really understood what injured people go through was a
huge help. Dickie was absolutely pivotal.”
