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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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1. Introduction

In 2004, Merck & Co, Inc, one of the biggest pharmaceutical companies in the United States , had to recall its pain relief drug Vioxx after a study showed that it could cause a higher risk of heart attacks or strokes among its users. Pulling the drugs from the shelves sparked a worldwide flood of lawsuits against Merck. There were several differences in claims and accusations made against Merck, ranging from personal injury, to wrongful death and economic damage to securities claims. One of the outcomes of the widespread litigation was a multi-district litigation based in the US District Court for the Eastern District of Louisiana. With this paper, I will be analysing a number of aspects of the litigation, putting my main focus on the multi-district litigation in the United States.

2. The Vioxx Product Liability Litigation

2.1 Background

In 1999, a prescription drug was put on the market by Merck & Co, Inc, that promised to relieve pain and inflammation in the cases of rheumatoid arthritis, osteoarthritis, migraine and menstrual pain.  This was a non-steroidal, anti-inflammatory drug (NSAID) that was dubbed Vioxx. What made this drug different from other NSAIDs, was that it had a lower level of complications regarding gastrointestinal toxicity.  This was shown in a study initiated by Merck in 1999 and published in 2000 named the Vioxx Gastrointestinal Outcomes Research (VIGOR). It was designed to determine the difference between Vioxx and Naproxen, another NSAID. Besides showing a lower risk of the gastrointestinal issues, it also showed that users of Vioxx had an increased risk of cardiovascular events, such as heart attack or stroke. This was then said to be caused by the cardioprotective character of Naproxen, rather than the possibility that Vioxx might be cardiotoxic.  This outcome gave rise to concern at the Food and Drug Administration (FDA), which had approved the drug in 1999.  The FDA then requested Merck to change the labels for Vioxx to state the increased risk of heart attacks and other cardiovascular risks, which the company complied to 3 years later, in 2002.  The drug was eventually pulled from all shelves worldwide following a new study , named the Adenomatous Polyp Prevention on Vioxx (APPROVe), that revealed once more that the NSAID showed an increased risk of cardiovascular events.  

2.2 The beginning of the litigation

As a reaction to the drug being discontinued due to the defect that the drug had shown, a vast number of lawsuits from around the world came Merck's way. These suits came in different types, including individual personal injury suits, class actions regarding personal injury as well as securities, and suits issued by state and federal governments. The plaintiffs were mainly suing for products liability, tort, fraud, and warranty claims.  

The suit regarding the shareholders, that was brought as a class action alleging that the company had made statements that were false and misleading, ended in a $830 million settlement to be paid by Merck.  The case brought against Merck by the US Department of Justice concerning the illegal promotion and off-label marketing of Vioxx resulted in a criminal fine of a little under $322 million, after pleading guilty to a misdemeanour charge, and a $628 million civil settlement to be divided between the United States, and participating Medicaid states. This totalled another $950 million to be paid by Merck.

While these all seemed to establish Merck as being liable and thus at the losing hand, the personal injury lawsuits did not quite show the same outcome. A notable case was that of Ernst v Merck, tried in a Texas court and the first lawsuit of many in regard to personal injury. Carol Ernst, who claimed that her husband died as a result of him taking Vioxx, was initially awarded $253 million in damages. However, this was later overturned by the Court of Appeals as they felt that Ernst did not provide sufficient evidence that her husband's death was the cause of the ingestion of Vioxx.  Some individual cases after this mainly had the same outcome in Merck's favour. Until, on 16 February 2005, the Judicial Panel on Multi-District Litigation gave MDL status to the different lawsuits issued in the federal courts of the United States, meaning that these cases would be consolidated and heard in the US District Court for the Eastern District of Louisiana situated in New Orleans. This was decided to coordinate the process. The presiding judge would be Eldon E. Fallon.  With all federal cases consolidated, judge Fallon requested the state courts of California, New Jersey and Texas to coordinate their proceedings to the MDL Court.  I will be focussing on this case throughout the next part of the paper.

The plaintiffs in this multi-district litigation were the patients and the representatives of the patients who used Vioxx and had suffered increased health risks, now seeking damages for personal injury. These plaintiffs were domiciled in different states within the United States as well as some cases from foreign countries, but to eliminate duplicate discovery all actions which focussed on the same allegations had been centralised to Louisiana. Merck & Co., Inc., the defendant in these suits, has its headquarters in Kenilworth, New Jersey.

Judge Fallon of the MDL Court appointed twelve attorneys to the Plaintiff Steering Committee (PSC), that was set up to ease the process of discovery and be a representative for the numerous plaintiffs and their counsels.  A Plaintiff Liaison Counsel (PLC) was also set up to fulfil the administrative matters surrounding the plaintiffs. The lead counsels of the PSC were Andy Birchfield of Beasley, Allen, Crow, Methvin, Portis & Miles, PC and Christopher Seeger of Seeger Weiss, LLP.  Beasley, Allen has firms in both Atlanta, Georgia and Montgomery, Alabama.  Seeger Weiss has its firms situated in New York City, New York, Ridgefield Park, New Jersey and Philadelphia, Pennsylvania.  The PLC appointed was Russ Herman of Herman, Herman, Katz & Cotlar, LLP , which has its firm in New Orleans, Louisiana.

The PSC worked together with the Defendant's Steering Committee (DSC), consisting of five attorneys, and the Defendant's Liaison Counsel (DLC). These had similar tasks to the PSC, participating in the process of discovery and serve as representative for the defendant. The DSC's lead counsel was appointed to be Douglas Marvin of Williams & Connolly, LLP.  Williams & Connolly, LLP is based in Washington, D.C.  The position of DLC was appointed to Phillip Wittmann of Stone Pigman Walther Wittmann, LLC , which has its firms in New Orleans and Baton Rouge, Louisiana, and in Houston, Texas.  These attorneys together made up the Plaintiff's Executive Committee, and the Defendant's Executive Committee.

Any actions that had the same nature, but were filed in after the establishment of the multi-district litigation, would automatically be consolidated in the MDL without need for a motion.  Thus, these cases and similar actions fell under the jurisdiction of the US District Court for the Eastern District of Louisiana, which is a federal trial court in the United States.

2.3 The funding of the litigation

In the United States, litigation funding has a rather unique form. There, litigation usually requires that every party bears their own costs, unlike in other jurisdictions where it is often the case that the one who loses the suit also pays the costs of the winning party.  This is to encourage individuals as much as possible to seek out, pursue and rectify injustices, as they are more likely to do this when there is no risk of them having to bear the costs in case of a lost trial.  Another way that funding is often regulated is through contingency fees. This means that the lawyer will be paid through a certain percentage of the recovered damages.  This system of payment is helpful particularly in the Vioxx case, because there are so many seeking justice. It is easy to believe for an individual that they would not be able to win from such a large company, but because of these funding mechanisms they are offered a light consolation that the load of the legal fees will not turn out too high if this case would be in fact lost by them. This could be seen as a form of insurance to the claimant that the lawyer will strive to be successful.

2.4 The conclusion of the litigation

After discovery had run for a period, six bellwether trials were held. This constituted as a test run for the MDL to make out what the result of the similar Vioxx cases would be. Of the bellwether trials, one resulted in favour of the plaintiff, one resulted in a hung jury and the remaining four favoured the defendant. Soon after completing the bellwether trials, a Negotiating Plaintiff's Counsel was appointed by the Court and was instructed to explore options for settlement with Merck.

The litigation eventually found its end in a Settlement Agreement with an amount of $4.85 billion to be paid by Merck.  The Settlement Agreement was conditional upon a certain number of claimants that were required to participate in the Agreement.

With the Settlement Agreement, the Vioxx Products Liability Litigation has been resolved. Furthermore, with the guilty plea to the Department of Justice, and the shareholder settlement, most cases have now been settled and the largest part of the litigation surrounding Vioxx is no longer active. Some individual securities cases remain, as they opted out of the settlement.

Fee arrangements were also stated in the Settlement Agreement. Under Article 9 of the Agreement, Attorneys' Fees will be seen to by the Claims Administrator, judge Fallon. Merck would not be responsible for this payment, nor would any other party.  The Court ordered the individual attorneys' fees for all of the counsel to represent a claimant to be capped at 32% of the recovery, plus reasonable costs.  Attorneys who participated in common benefit work were to be compensated as well for their great contribution to the litigation. This was decided to be 6.5% of the $4.85 billion, which equals $315,250,000.  This amount, as stated in the Settlement Agreement, would be deducted from the attorneys' fees.

3 The position of the plaintiffs in United States jurisdiction

The United States as arena for this debacle was of course convenient for Merck, as the defendant is subject to US law because it finds its headquarters there. For the plaintiffs, it can be speculated whether this actually proved to be convenient or not. It was favourable for the plaintiffs because of the availability of establishing a multi-district litigation on a federal level. In a majority of the lawsuits brought by claimants, they were themselves domiciled in the United States.  Widely dispersed in a number of states, yes, but the federal government of the US made it possible to consolidate the cases to one District Court, situated in Louisiana. Now, for the foreign claimants participating in this litigation, the US was less convenient. In 2006, a Motion to Dismiss was filed by Merck, requesting the foreign class actions to be removed from the litigation in the MDL Court.  This Motion was granted, stating that the use of a foreign forum to resolve the case would be most adequate. The MDL Court did not see itself suitable as they would not have easy access to the documents of the foreign case.  

The United States is a part of the common law system. However, within this legal family the US system can be seen as a form of exceptionalism. While finding its origins in the English legal system, the father of common law, the US system differs on various aspects.  For instance, jury trials, contrary to England, are also held in cases of civil disputes.  In the Vioxx cases, the jury trials were as much a pro as a con. As seen in the Ernst v Merck case, a jury trial initially felt for the widow and awarded her with a sizeable amount of damages. The judges of the Court of Appeals however, found the presented evidence less convincing and reversed the judgment. Therefore, jury trials can be helpful when empathy is in play. As much as the jury has to be professional, empathy often plays a large role.  However, as seen in Humeston v Merck, the jury took a different path and after little deliberation found for the defendant.  An important aspect of the common law tradition is the less active role of the judge. However, in the US the federal judges have increasingly involved themselves in the suits and the preparation thereof.  This can be seen in the Vioxx litigation as well, where judge Fallon takes an active part in organising the litigation and ordering and setting up the Committees that further lead the trial. I find that this can be seen as positive, as this brings structure to the widely spread litigation. This more active role of the judge also takes part in the increased use of alternative dispute resolution (ADR), as an adversarial judge would not immediately intervene and call for a settlement outside of court.  In my opinion, the use of ADR in this litigation was in fact helpful to the plaintiffs. Even though Merck was expected to come out of the litigation much more mauled than it did , solely looking at the number of cases in favour of the defendant suggest that the plaintiffs could have been worse off. An aspect that I believe was positive for the plaintiffs as well was that in the common law systems, the importance of discovery is great.  By enabling the lawyers to collect a great amount of discovery, a more wholesome case against Merck could be completed.

The legal fee regime in the United States generally states that each party pays their own legal representation, regardless whether the case is won or not.  An available option as alternative to this is third party funding, where insurance is the most common.  Legal Aid, used in many countries, is often not used in the United States in other forms than lawyers taking on cases pro bono The reason for this, is usually that legal aid is made unnecessary with the availability of contingency fees.  For the plaintiff, this regime is rather helpful, as they would not bear the expensive costs of the defendant, should they have lost the case and, maybe more importantly, have spent too much money on an unsuccessful lawsuit. I believe that this also facilitated the step towards litigation itself.

The United States has its availability of class actions defined in Rule 23 of the Federal Rules of Civil Procedure.  The prerequisites, disclosed in Rule 23(a), state that class action is possible if: “the class is so numerous that joinder of all members is impracticable”, “there are questions of law or fact common to the class”, “the claims or defences of the representative parties are typical of the claims or defences of the class”, and “the representative parties will fairly and adequately protect the interests of the class”.  Once these are met, Rule 23(b) provides the types of class actions that can be filed. The possibility of a class action may be there, and very often it is also used, but in this case, it was not fit for the litigation to apply a class action as defined by Rule 23. As Sherman states it, amendments to the requirements by federal courts have made it increasingly unattractive to start proceedings as a class action, especially in litigation in multiple states.  Because of the divergences in personal claims and how state laws usually deal with these issues, this litigation would likely not have been classified as a class action. The multi-district litigation was a good solution for the plaintiffs to this. It allowed a large number of claimants to have their cases resolved as quickly as possible. With an individual court hearing per claimant, or class actions per state, the litigation could take many more years if they were to wait for their court date.

3 “Centralising the Vioxx Litigation”

The Vioxx litigation has been subject to many issues over the period of the first lawsuits to be filed until the Settlement Agreement. One procedural issue that was of particular interest to me, is how they eventually came to a multi-district litigation that resulted in a global settlement. Merck had announced that initially they wanted to approach the lawsuits case by case, and showed their dedication by investing in fighting them.  However, as expected in these types of cases, a consolidation of the suits was sought and a multi-district litigation was established. Upon this, the MDL court had coordinated their federal proceedings in Louisiana with the state court proceedings in New Jersey, California and Texas. These cases combined eventually settled in the Settlement Agreement. All this together was a rather unique approach to the proceedings of such a case.  At the beginning of the individual lawsuits, an outcome was hard to predict. Initially, Merck was expected to have to pay thousands of claimants damages, but when the majority of first lawsuits were found in favour of Merck, it was uncertain how this litigation would end. The establishment of the MDL was significant, because it provided structure to the clutter. The cases that were first divided over jurisdictional matters between states, now found themselves tried in one place. The MDL also found itself, in combination with the bellwether trials, to be an adequate fit for a settlement that would satisfy both parties. Within these proceedings, a great deal of the negotiation work was done by plaintiffs' attorneys, who cooperated to achieve an appropriate solution.

4 Conclusion

The way how this litigation was handled shows a creative approach to the procedures given by the jurisdiction, and that is also what makes the Vioxx litigation so interesting. The Settlement was a result of well organised consolidation and coordination. Not only was it important for Merck and the US judicial system to not be overburdened, a well-negotiated proceeding was certainly owed to the plaintiffs. Eventually, all parties walked out of the litigation having gained something. Merck did not lose its head while trying to fight the extensive number of lawsuits, and those who fell victim to Vioxx received damages while their legal counsels received their fees. Hopefully in the future, Merck & Co., Inc. will consider the repercussions that follow when putting a drug on the market that they know has significant health risks.

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