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Businesses facing bankruptcy by lawsuit may have a new way to keep going — thanks to a deal devised by a plaintiffs’ lawyer. A plaintiffs’ lawyer? Enter Richard “Dickie” Scruggs, known for spearheading the legal assault on Big Tobacco that resulted in billions for states that sued the industry. (His interest wasn’t just altruistic — his firm is reported to have netted over a billion in fees.) Pascagoula, Miss.-based Scruggs has since moved on to his latest target, the HMO industry. His client (a doctor he met during HMO litigation acted as matchmaker) is Sulzer Orthopedics Inc. The company is a U.S. subsidiary of Sulzer Medica Ltd. of Wintherthur, Switzerland, and faces more than 1,000 lawsuits involving faulty hip replacements. The two sides reached the novel agreement in August. Ideally, the deal helps a troubled company stay alive, while giving plaintiffs the promise of some restitution. The arrangement — court approval was pending as of press time — calls for Sulzer to put a lien on all of its assets; plaintiffs who sign on to the deal get first dibs. Sulzer gets to pay out what it can, while maintaining operations. But there’s bad news for the plaintiffs who don’t sign onto the deal: They’ll have to wait in line, and quite possibly won’t see any money for years. Scruggs says the idea for the lien hit him as he ate breakfast in his Washington, D.C., hotel just before a negotiation meeting with the other side’s lawyers. After they signed onto the deal, Scruggs’ next task was to convince his client that the plan was going to save them. “Frankly, I didn’t think they’d have the balls to do it,” says Scruggs. “What Swiss company would allow a bunch of American plaintiffs’ lawyers and their clients to take out liens on all their assets?” But seeing that the unconventional proposal was a possible way to avoid the bankrupting effect of more than 1,000 lawsuits, the company’s top brass agreed. Other plaintiffs’ lawyers aren’t so pleased. Mikal Watts is one of them. He won $15.5 million, most of it in punitive damages, for three women whose defective implants, all made by Sulzer, had to be replaced. Watts, of the Houston law firm Watts & Heard, says the deal leaves some seriously injured victims adrift, while allowing Sulzer to get off the hook. “Through some very clever lawyering, he’s created an opt-out class action with a gun to the head of anyone who wants to opt out,” says Watts. Scruggs scoffs at such objections. “Good companies, profitable companies like Sulzer make mistakes,” says Scruggs. “This is a viable option for a company facing a crushing tort onslaught.”

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