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Hundreds of plaintiffs’ lawyers around the country are holding their breath as they wait to learn the fate of a billion dollar settlement in a class action over faulty artificial joints. The unusual deal was pulled together by Richard Scruggs, who has made a national reputation battling — and beating — big tobacco, asbestos companies and HMOs. He has switched sides to try to save the manufacturer of the artificial joints, Texas-based Sulzer Orthopedics Inc. The estimated 30,000 plaintiffs had until last Wednesday to opt out of the settlement, which was approved by U.S. District Judge Kate O’Malley in Cleveland on May 9. In re Inter-Op Hip Prosthesis Product Liability Litigation, No. 01-4039. May 22 is the key date, says Scruggs. That’s the day that Sulzer will decide if so many plaintiffs have opted out of the deal that it’s economically unfeasible. If that happens, he says, Sulzer might declare bankruptcy rather than try to fight individual suits. “This one’s going to go down to the wire,” predicts Scruggs of the Scruggs Law Firm in Pascagoula, Miss. About 120 plaintiffs had opted out of the deal as of Friday, say Scruggs and Eric Kennedy of Cleveland’s Weisman, Goldberg & Weisman, who were among a small group of trial lawyers who hammered out the settlement. But the number of opt-outs has been continually changing. Both attorneys say they have been talking to the lawyers for the opt-outs to try to get their clients to change their minds. Once the number of opt-outs is settled, Sulzer will do a risk-benefit analysis of those cases to see how much it might cost the company to fight each one in court. At a time when many companies face huge liability problems, lawyers have been watching the Sulzer deal closely all over the country. Richard Heimann of San Francisco’s Lieff, Cabraser, Heimann & Bernstein, another attorney who helped hammer out the new settlement, says the key to the analysis for Sulzer will not be the number of cases necessarily but rather the severity of injuries and complications to the plaintiffs who opt to go to trial instead. In addition, the company has to look at the likelihood that courts in different parts of the country would come up with widely different verdicts and damage awards, perhaps in the millions of dollars. About 30,000 people make up the class that received Sulzer’s artificial implants. Of those, about 3,500 suffered complications and had to have the implants replaced. Scruggs defended the deal, calling it a “paradigm for a company willing to do it.” However, the amount that plaintiffs would receive are far less than what some individual suits might yield. One Texas case ended in a $15 million judgment for three women. Under the deal, those who got implants but did not have complications would get about $200,000. Those who had complications would receive up to $800,000, according to Scruggs. About $40,000 of each plaintiff’s share would go for legal fees. Heimann, who represents about 150 people who had to have knee or hip surgery again because of the faulty devices, says that the “only alternative to the deal is to declare bankruptcy,” and that he was “not aware of any other settlement like this.” “It’s a highly unusual deal,” Scruggs agrees. “But I think this is one of the finest hours for the trial bar. We’re working together to maximize the benefits to clients instead of bankrupting a company.” Kennedy says it was “unprecedented” how federal and state cases were negotiated together and discovery was speeded up, doing away with a lot of waste and duplication of efforts. “There’s never been such harmony in the plaintiffs’ bar,” Kennedy adds. “You’d think we’d all work together like this in the future.” Under the deal, Sulzer’s Swiss-based corporate parent, Sulzer Medica Ltd., would pay about $725 million. The rest would come from insurance, sale of stock, assets and borrowing. The problem began in December 2000, when Sulzer recalled 40,000 of its implants, called Inter-Op acetabular shells. They are designed to be attached to the pelvis during hip replacement surgery. They were recalled after reports that not all the implants were binding properly to the bone, causing pain and the likelihood that the implant could fail. The problem was blamed on oil left on the implants during manufacture. Sulzer estimated that 4,500 people would need new implants. As hundreds of lawsuits were being filed, Scruggs came up with a plan on behalf of Sulzer to reach an initial deal to prevent trials. Last October, however, the 6th U.S. Circuit Court of Appeals, raising questions about limitations on plaintiffs who didn’t go along with the deal, temporarily reversed a lower-court ruling that would have avoided trials. The initial deal was based on a class action filed before O’Malley in Cleveland on behalf of all U.S. residents who had the recalled devices implanted. That deal would have set up a table of payments based on severity of injury and allowed individual plaintiffs to sue on their own if they wanted. But the plaintiffs, many of them elderly, would not have been able to collect anything for six years, or until 2008. The case went back and forth between O’Malley and the 6th Circuit. Meanwhile, Scruggs began meeting with a group of plaintiffs’ lawyers in September to work out the current deal, which was completed in March and finally approved this month. $15 MILLION IN TEXAS Kevin Liles and Mikal Watts of Watts & Heard in Corpus Christi, Texas, won one of the few cases against Sulzer that have actually gone through the courts. Their clients, three women who had implants replaced, were consolidated into one case and they chose not to go along with any agreement. They won a total of $15 million from Sulzer last August, mostly in punitive damages. “In a perverse way it reinforces the notion that the company can’t survive more than 10 or 15 such verdicts,” Scruggs told The National Law Journal after the verdict. “The whole premise is a fair distribution of the assets while keeping the first hogs at the trough from getting it all.” The latest settlement was approved this month after a two-day fairness hearing in Cleveland before O’Malley.

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