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Lawyers’ fees and funding premiums under the spotlight — GPT, Storm and Vioxx settlement decisions discussed
23 September 2013
With the Vioxx class action gaining momentum, Lawyer 2B takes a look at multi-party actions and how they've boosted access to justice for millions on both sides of the Atlantic. On 19 August 2005, a Texas jury awarded $253m (143.3m) in damages to the widow of a man who had suffered a fatal heart attack after taking the painkiller Vioxx.
It was a stupendous verdict against Vioxx's maker Merck and it sparked the beginning of a rush of group and class actions across the world as Vioxx patients and families consulted lawyers in search of more compensation. Lawyers involved in some of the actions estimate that there could be as many as 50,000 claimants worldwide.
Vioxx is just the latest in a steady stream of multi-party actions against pharmaceutical companies, but it is a good example of the range of options open to claimants - and the hurdles they must overcome to win a case.
A group or a class?Litigation on behalf of a large number of claimants is often referred to as a 'class action'. Technically this is a term applicable only in the US, and the legally-recognised label in the UK is 'group action'. By and large, however, the principle behind the different names is the same. The litigation is carried out on behalf of a large number of people with a generic claim and similar issues.
Differences between the US and UK approach to multi-party litigation do exist, however. In the US, once a class action has been certified, it is assumed that every person who falls into the group of complainants will be a class member. Individuals can, if they wish, drop out of the action and render themselves ineligible for any compensation - otherwise, the action covers hundreds, or even thousands, of people across the US. Plaintiff (claimant) firms are allowed to advertise the fact that they are planning on launching a class action; the internet is increasingly the forum used for this.
In the UK, a group action is live when there are at least 10 claimants. Firms have to record the fact that they are working on a group action with the Law Society. This means there is a central register of lead solicitors - a useful aid for other firms which pick up claimants who could fit into an existing group.
Once there are 10 claimants, the firm can apply for a group litigation order (GLO) and legal aid funding. GLOs allow firms to publicise the case and allow for smoother and faster case management through the courts. Firms receive a cut-off date, set by the court, to add new claimants to the group.
If a GLO and legal aid funding are refused, it does not necessarily mean that the case will fail. Sometimes claimants can afford to pay their solicitors - although costs if they lose can be high. On occasion, a firm will take on the case with a conditional fee agreement (CFA), otherwise known as 'no-win, no-fee'. But this is risky for the firm, which could lose tens of thousands of pounds, and consequently few solicitors will chance it.
In the US, taking cases on CFAs is far more common because the damages won in class actions and in test cases are often worth millions of dollars. If a firm has an agreement with clients to take a percentage of the winnings, it can quickly build up a war-chest to fund future cases in the same manner. English damages are never high enough to allow for such a strategy.
The group action strategy is used in three types of disaster scenarios. The first English multi-party litigation, back in the 1960s, was against the UK distributors of the German drug Thalidomide - like Vioxx, a pharmaceutical product liability case. Such cases are known as 'creeping disasters' as they develop over a long period of time.
The next most common sort of disaster that causes group claims is a sudden one. Train crashes such as the Potters Bar incident, air crashes or incidents involving passenger ferries have all sparked claims.
A more recent addition to the roster of group actions is financial disasters. These range from claims on behalf of people who have lost money when pension funds collapse, to claims on behalf of companies which believe they have paid excess tax and are suing the Government to reclaim it.
UK multi-party litigation
The first few group actions in this country, starting with Thalidomide, were all product liability cases. Actions against Distillers Company, the UK distributor of Thalidomide, were launched in 1962, and it took six years of wrangling and exposure in the media - particularly in The Sunday Times - before a compromise settlement on behalf of 62 children was reached.
Pharmaceutical and chemicals giant ICI was the next target. Four UK law firms brought claims on behalf of patients who had taken ICI's heart disease drug Practolol (generically known as Eraldin), which caused side effects to users' eyes, brains and skin. Some patients died and others were blinded. However, because there was a clear 'fingerprint' of the drug in the patients' systems, ICI laid out a no-fault compensation scheme and victims were compensated according to the severity of their symptoms.
During this time, two firms were quickly building up a reputation for doing this product liability work: Sheffield's Irwin Mitchell and Manchester's Goldberg Blackburn & Howard. At Irwin Mitchell, the driving force was Michael Napier. Goldbergs' product liability leader was Rodger Pannone. Following their work on Eraldin, the two got together and formed Pannone Napier to deal specifically with multi-party litigation. The firm survived for nearly 10 years, acting on a number of product liability and disaster cases, and Pannone and Napier were among the first to produce written guides to acting in multi-party litigation.
Meanwhile, other firms were starting to work for the companies involved. One such firm was Davies Arnold Cooper (DAC), which acted for Eli Lilly in the mid-1980s on a claim concerned with the effects of arthritis drug Opren. Although the Opren case settled, it was important for the development of group action management because a Court of Appeal judgment, led by Lord Donaldson, decided that individuals in a group action would each have to take responsibility for a share of the costs. Napier, who handled some of the litigation, says: "It was really the beginning of what became case management."
After Opren things moved faster. Pannone Napier joined forces with a plaintiff firm in Vermont and filed a claim against the AH Robins Company after its contraceptive coil Dalkon [Shield] caused major health issues for thousands of women. The firms won a test case, and Pannone Napier's UK clients were allowed to bring their claim in the US in what was the first transatlantic class action.
But AH Robins was also pioneering in that it filed for Chapter 11 bankruptcy protection. Merck, the producer of Vioxx, could also choose this protective route if the number of claimants and class actions filed rises high enough. AH Robins was bought out and an agreement with the new owners ensured that, through mediation, all Dalkon claimants worldwide were compensated.
Disasters and financial actions
Pharmaceutical liability cases were proving the most common group actions, but 1985 saw the first major disaster litigation following the deaths of 55 people in an air crash in Manchester. Similar fights for compensation were then brought following fatal disasters such as the Lockerbie air crash, the Hillsborough stadium crush and the Clapham rail crash. Compensation was successfully recovered in most of the cases, as the litigation followed the examples and models set by the early pharmaceutical cases.
More recently, a fresh batch of group litigation involving financial services organisations has become more common. Such cases arise after the collapse of a pension or share scheme - one recent high-profile case being the Railtrack Shareholders Group litigation. That hit the headlines after the group was forced to raise its own multimillion-pound legal costs when legal aid was refused. In October the judge found for the Government, but the claimants celebrated a small victory this summer when their counsel, Keith Rowley QC, managed to obtain a confession from former transport minister Stephen Byers that he had lied over the events leading to Railtrack's collapse.
Group litigation on behalf of companies is also proving a new area for law firms, with US outfit Dorsey & Whitney leading the way in fighting UK tax laws on behalf of hundreds of European corporations. Dorsey has succeeded in getting a GLO for its cases, joining a list of 50 actions granted GLOs and involving the likes of child protection specialist Abney Garsden McDonald, Freeth Cartwright, Cardiff-based Hugh James, Irwin Mitchell and Leigh Day & Co.
All lawyers involved in group actions in the UK agree that the key to their survival is funding. Without legal aid, many claimants and law firms just cannot afford to bring a case. The Legal Services Commission (LSC) is the body responsible for allocating funds. As Hugh James partner Mark Harvey says: "It needs some issues to get home to encourage the LSC that these cases can be won."
Equally, though, group action lawyers on both sides of the Atlantic are convinced that this style of litigation benefits both clients and the justice system.
"They are the only pragmatic way of handling a problem that affects a large number of people," says Napier. "It's inefficient and not sustainable for a court to have to listen to arguments on the same point more than once."
Texan attorney Mark Lanier of the Lanier Law Firm, who acted for Vioxx litigant Carol Ernst, agrees. "It's the best measure of redress there is," he says. "It allows individuals to stand toe-to-toe with big companies."
As the Vioxx litigation continues, with neither side prepared to stand down quite yet, it is clear that group actions will be a feature of the worldwide legal landscape for some time.