Editor’s note: This article is the third in a series examining products liability law in Pennsylvania.

Defense counsel and their clients increasingly are focusing on developing settlement strategies earlier on in the process of products liability mass torts litigation, which has led to the growing use of separate settlement counsel and trial counsel, the use of niche firms to administer claims and liens and turning to alternative dispute resolution.

Settling mass torts has become an increasingly complicated affair, in part because plaintiffs counsel owe the same duty to every one of their dozens — even hundreds or thousands — of clients, and because settlement proceeds cannot be distributed to claimants until after liens asserted by the Medicaid and Medicare health insurance programs and private insurers are settled.

Class action settlements of personal injury claims in products liability cases are off the table after the U.S. Supreme Court ruled in a couple of asbestos class actions, including a case affirming the U.S. Court of Appeals for the Third Circuit, that using the class action device to settle mass torts did not meet standards of fairness.

The defense bar has been incredibly successful in getting courts to opine that individual physical injury issues do not qualify for class action treatment, said Stephen J. McConnell, a partner with Reed Smith in Philadelphia who specializes in products liability.

“But they still end up being mass actions,” he said.

As class actions have diminished, multidistrict litigation in which federal products liability claims from around the country are consolidated in federal court for pretrial proceedings has become a bigger part of products liability law, McConnell said. And there has been the development of mini-MDLs in various state courts, including Philadelphia, he said.

James Brogan, the managing partner of DLA Piper’s Philadelphia office, whose practice includes products liability, said the diminishment of class actions has pushed “less viable personal injury cases into the mass tort areas so the plaintiffs lawyers are lumping together their less strong mass tort cases to get some kind of group settlement.”

That happened with asbestos cases, and the first couple hundred cases brought to trial resulted in defense verdicts, said William F. Kiniry Jr., co-chair of DLA Piper’s product liability practice. But when insurance companies looked at the cost of going to trial, they decided to shift to settlement and offer money to make cases go away, Kiniry said.Garrett Brown, the former chief judge for the U.S. District Court for the District of New Jersey, who is now doing alternative dispute resolution for JAMS, said ADR with an eye toward reaching settlement is growing in products liability cases because there are “very high transactional costs in the system. A trial is a very expensive and uncertain process, so if you’re trying to compensate victims promptly, justly and efficiently, if you can come up with a settlement that does that you’re much better off.”

Ethical Dilemmas

The American Bar Association’s Model Rule 1.8(g) requires that plaintiffs counsel handling aggregate settlements must obtain the informed consent of each client before the settlement is finalized. Disclosure to the clients requires sharing the nature of all the claims involved and the participation of each person in the settlement.

Even “defendants have an interest in it because if they don’t do it within the ethical rule, it can void the whole agreement,” said Richard L. Berkman, a partner with Dechert in Philadelphia who practices in products liability and mass torts, which leads some defendants and their counsel to require that plaintiffs lawyers hold defendants harmless or promise to indemnify them.

The Vioxx global settlement introduced another ethical issue because, under that settlement, plaintiffs lawyers had to represent that 100 percent of their clients would settle or otherwise withdraw from representing them, McConnell said.

Plaintiffs attorney Sol H. Weiss, a shareholder with Anapol Schwartz who practices in products liability law, said when there is a potential resolution, clients “will get a spreadsheet with all the different factors that go into why payment is made. They’ll be able to be assured they’re being treated the same way and getting the same amount” as other claimants with similar injuries.

U.S. District Judge Cynthia Rufe of the Eastern District of Pennsylvania, who is overseeing the MDLs for diabetes drug Avandia and antidepressant Zoloft, said there are ethical considerations that “stare you in the face” when she has seen inventories of plaintiffs as large as 15,000.

“I react strongly to that when I believe an attorney really, really doesn’t know his clients. How can you know 15,000 clients?” Rufe asked.

Rufe said that in her court it must be established before settlement that each claimant used the product in the relevant time period and that they had symptoms result.

Rufe said she does think mass, aggregate settlements can be conducted in an ethical way, but “it’s fraught with problems,” because instead of settlement bringing finality and resolution, more litigation can be spawned if plaintiffs are dissatisfied.

Mass torts have become so massive that plaintiffs firms have to hire specialists to administer the claims, Rufe said.

Orran Brown is a principal of one of those such firms: BrownGreer, a Richmond, Va., law firm that specializes in mass claims resolution and claims administration.

Brown said some plaintiffs firms are very good at developing database systems to track their clients and ensure that they have all of the records, including five years of medical records and family medical history. But some firms have signed up people without very much information, including proof they took a defendant’s product, he said.

McConnell said “plaintiffs are trying to make the mass action procedure so painful … that it becomes the point of leverage for settlement. It’s not an unfair principle to say the procedural posture of the case should not work substantive differences.”

Because many of the cases in inventories can be frivolous, including cases in which plaintiffs didn’t use the product involved, plaintiffs had no injuries or plaintiffs had pre-existing injuries, defendants are less willing to settle inventories, McConnell said.

Plaintiffs counsel Weiss said a lot of companies are now “really hanging tough on minor injuries they just won’t pay for. It’s having the effect of the good plaintiffs lawyers [deciding] against aggregating the minor cases where people aren’t really injured that badly.”

Sean P. Brennan, a partner with Goldman Ismail Tomaselli Brennan & Baum in Dallas who specializes in settlement for pharmaceutical companies in products liability litigation, said the way frivolous cases are differentiated from meritorious cases is through the science behind the products.

Rufe, the district court judge, said settlement in mass torts only happens after cases have gotten through discovery and significant motions, including motions on the admission of expert witness testimony under the Daubert rule, have been decided so attorneys can assess their cases.

The models for settlement include case-by-case models in which certain categories of cases, such as those involving a signature injury, are settled out of each plaintiffs counsel inventory; program settlements like Vioxx in which the parties negotiate objective criteria under which claims will be deemed compensable or not and the program is administered by an objective third party; and inventory settlements in which all of the cases held by a particular plaintiffs lawyer are resolved, Brennan said.

Brown, the principal with the claims administration firm, said plaintiffs attorneys face ethical challenges when “dividing up money among their own clients.”

By hiring a third-party neutral special master, they get off the ethical hook, Brown said.

Settlement Counsel

It’s hard to start settling cases before the statute of limitations on claims has run, because black-box warnings have been issued on drug labels, recalls have been issued for products or some key study on the dangers of products has been released, Berkman said.

Settling before the statute of limitations is up would just put more blood in the water and entice more plaintiffs to file claims in the hopes “they’ll be profitable without a lot of work,” said Donald C. Le Gower, an associate with Dechert who works on products liability and mass tort cases.

But Berkman said as soon as lawsuits are filed, clients need to start thinking about settling.

There has been an increasing use by products manufacturers of settlement counsel separate from trial counsel.

Law firms now extract the best expertise out of each separate firm for their virtual law firms, McConnell said.

“As the virtual law firm world started to develop and became more and more prevalent, it seems like there was definitely a role within that virtual law firm for lawyers who specialize in developing end-game strategies, end-game programs and implementing those programs,” Brennan said.

It takes the gamesmanship out of negotiations, Brennan said, because when trial counsel can also settle cases, plaintiffs lawyers don’t know if the true purpose of conversations is to try to resolve cases or to obtain discovery that wasn’t obtained during the discovery period or to try to psych the other party into not preparing for trial as earnestly.

“There’s no need to tell me how great you’re going to be at the courthouse, because, to be quite honest, I don’t care,” Brennan said regarding when his job is to settle cases.

Berkman said clients sometimes want to send different messages to plaintiffs counsel: “If you want to talk peace, go talk to these people. If you want to talk war, go talk to these people.”

In next week’s installment, The Legal is set to examine the future of pharmaceutical and medical device litigation in the era of direct advertising and current rules under the federal Food and Drug Administration.

Amaris Elliott-Engel can be contacted at 215-557-2354 or aelliott-engel@alm.com. Follow her on Twitter @AmarisTLI.