The Litigation That Will Not Die

Background

In 1997, American Home Products (now Wyeth) pulled from the market Pondimin and Redux, drugs that contained fenfluramine, the “fen” that caused heart valve damage when combined with drugs containing the chemical phentermine. A flood of suits followed. The multidistrict settlement agreement, which took years to work out, was supposed to help claimants resolve cases quickly. It permitted people to opt out and sue or file a claim and change their minds. They were free to opt out later, as long as their suits adhered to agreed-on limitations.

Now the agreement is under fire from all sides. On the one hand, the trust that the settlement established has accused doctors and lawyers of “gaming the system” by fabricating phony claims. On the other, plaintiffs' lawyers complain that the settlement's terms have been changed after the fact and the trust consistently misses deadlines, leaving thousands of claims unpaid.

More Litigation

The disputes have led to more litigation. In September, the trust filed a suit alleging that Kansas City, MO, cardiologist Linda Crouse violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by reviewing an assembly line of thousands of plaintiffs' echocardiograms and “confirming” purported injuries, sometimes in just a few minutes. The judge overseeing the settlement called it “a mass production operation that would have been the envy of Henry Ford.” Crouse's lawyer denied the allegations.

In November, the trust filed a motion to disqualify all echocardiograms conducted by EchoMotion of Chapel Hill, NC. Dubbing the company an “echo mill,” the trust alleged that the 60,000 to 75,000 images it produced were taken in hotel rooms and law offices, unsupervised by a qualified doctor. The company could not be reached for comment.

As for the plaintiffs, most of the 50,000 who opted out immediately have settled. Wyeth will not disclose numbers or amounts of settlements, but only five were tried. Four resulted in plaintiffs' wins, with verdicts ranging from $23.4 million (Lovett v. Wyeth-Ayerst, No. 97-665 (Van Zandt Co., Texas, Dist. Ct.)) to $150 million (Washington v. American Home Products, No. 99-0035 (Jefferson Col, Miss., Cir. Ct.)). The latter involved five plaintiffs, and the verdict was for compensatory damages. Before the jury took up punitives, the company settled with these and many other plaintiffs for a confidential sum. Other verdicts were also slashed post-trial and then settled.

Now come the suits brought by plaintiffs who initially filed settlement claims. There are 78,000 such plaintiffs. “Our plan is to challenge eligibility in any cases where it's questionable,” said Lawrence Stein, Wyeth's general counsel, “and to vigorously defend the cases at trial, if they get past that hurdle.” Some weeks ago, Stein added, plaintiffs' lawyers withdrew 51 cases in Louisiana following such challenges. He couldn't say how many others have done so.

Because these plaintiffs initially joined the settlement, they must abide by the agreement. They cannot seek punitive, exemplary or multiple damages or pursue claims other than for heart valve injuries. The defense cannot seek to bar claims based on the statute of limitations.

Where It Stands Now

The plaintiffs and the defense each won a trial in late 2003. Plaintiffs won a $1.4 million verdict on November 7 in Hayes v. Wyeth-Ayerst, No. B165374 (Jefferson Co., Texas, Dist. Ct.). One indication of how carefully the cases are being scrutinized is that after the verdict, Wyeth's stock fell 7%. A few weeks earlier, Wyeth said it was setting aside an extra $2 billion, bringing the total the company is reserving to cover the minimum it believes it will need for all litigation costs (including the settlement) to $16.6 billion.

On November 26, the defense prevailed in a trial, Eichmiller v. American Home Products, No. 2002-CV-52077. Afterward, Wyeth's stock increased by 7%. Wyeth's lead lawyer was Peter Bleakley, a partner at Washington's Arnold & Porter — the firm that has been most prominent defending the company. Bleakley garnered the company's only other Fen-Phen win last February in Garcia v. Wyeth, No D-101-CV-2000-1387 (Santa Fe Co., N.M. D.Ct.). The win was important not just because it was the first in a delayed opt-out case, but because Bleakley conceded that the plaintiff developed a heart valve condition after she took the drug. “It may very well have been caused by taking Fen-Phen,” Bleakley said in an interview. “There were other medical facts relevant to her condition,” he said, “but I think the jury here found in favor of Wyeth before they ever got to those questions.” The verdict did not require jurors to answer detailed questions, and Bleakley did not interview them afterward, so he cannot be sure of their reasoning. But he believes he knows what swayed them. “I think the evidence that convinced the jury was the evidence we presented that Wyeth did not know back in 1995 and 1996, when Linda Eichmiller was taking Pondimin, that [the drug] could cause valvular heart disease,” he said.

Fleming and Bartle

Opposing Bleakley was George Fleming of Houston's Fleming & Associates. It was the second Fen-Phen case Fleming tried to a verdict. His first, Wirt v. Wyeth-Ayerst, No. 99CV0307, in August 2000, resulted in a $29 million award. The case was “resolved,” Fleming said, before the judgment was entered. He is not at liberty to discuss details, and is barred from using the word “settlement,” he said.

In late 2000 and early 2001, Fleming “resolved” the cases of about 500 clients who had opted out immediately. He represents an additional 8000 clients who opted out later, he added, and about half have filed lawsuits. He also represents 1000 people who filed claims with the trust. “We had a jury that got confused,” Fleming said of his loss, “and I'll take care of that confusion in the next case. But I'm more concerned about the evidentiary restrictions imposed by the federal court that prevent juries from getting the true facts.”

Fleming was referring to his run-ins with the federal judge who oversees the settlement, Harvey Bartle of the Eastern District of Pennsylvania. The dispute actually dates from two opt-out cases Fleming was scheduled to try in Texas state courts in 2002. During pretrial proceedings, the defense moved to enjoin Fleming from introducing evidence of Wyeth's conduct, arguing that he was impermissibly seeking punitive damages or attempting to introduce punitive damages evidence without actually calling it that. Before the Texas court could rule, Wyeth requested emergency injunctive relief from Bartle, who granted a hearing last January. Bartle enjoined Fleming and his client from proceeding and found Fleming in contempt for violating the settlement agreement. The scenario played out again in his second Texas case, and neither has yet been tried. Fleming has appealed to the Third Circuit.

The injunctions prevented him from introducing important evidence in Atlanta, Fleming said. There may be an overlap between evidence relevant to punitive damages, he argued, and evidence relevant to negligence. As far as he knows, Eichmiller was the first time plaintiffs were not allowed to delve into the company's dealings with the FDA. His most important documents revealed the company's early knowledge of problems with the drugs, and he wasn't allowed to introduce these either, he complained. Fleming's appeal has been supported by Dallas' Baron & Budd and Trial Lawyers for Public Justice, which filed amicus briefs.

Conclusion

So far, the trust reports, 2750 claimants have been paid $1.1 billion — an average of $400,000 each. An additional 7000 claims have been withdrawn or denied. Michael Fishbein of Philadelphia's Levin Fishbein Sedran & Berman defended the settlement agreement that, as a class counsel, he has been largely credited with fashioning. “A group of lawyers tried to capitalize on the settlement, and they started gaming the system,” he said. Bartle had no choice but to order the trust to examine each claim, causing delays. But the fault lies with the lawyers, not the system, he said.

Fen-Phen litigation is entering a critical phase that promises to be at least as complex and contentious as anything that preceded it. The national settlement that was supposed to buy peace is now smack in the middle of the storm that swirls, as always, around Wyeth. Claims against the Madison, NJ-based drug manufacturer are moving slowly through the $3.75 billion trust Wyeth funded to compensate people whose heart valves were damaged by its diet drugs. Lawyers and clients have been highly critical of the delays.

And just when Wyeth has finally settled the lawsuits of nearly all those who opted out immediately, tens of thousands of claimants who initially elected to join the class have now opted out and sued. Despite the numbers, the company has said that it doesn't plan to settle but to defend the suits vigorously. The first two were tried in late 2003, with mixed results.

An appeal that was scheduled to be argued before the U.S. Court of Appeals for the Third Circuit in December may say a lot about the company's legal prospects. If the court rejects it, these more recent opt-out plaintiffs will not be permitted to introduce evidence that focuses on Wyeth's bad conduct.

Background

In 1997, American Home Products (now Wyeth) pulled from the market Pondimin and Redux, drugs that contained fenfluramine, the “fen” that caused heart valve damage when combined with drugs containing the chemical phentermine. A flood of suits followed. The multidistrict settlement agreement, which took years to work out, was supposed to help claimants resolve cases quickly. It permitted people to opt out and sue or file a claim and change their minds. They were free to opt out later, as long as their suits adhered to agreed-on limitations.

Now the agreement is under fire from all sides. On the one hand, the trust that the settlement established has accused doctors and lawyers of “gaming the system” by fabricating phony claims. On the other, plaintiffs' lawyers complain that the settlement's terms have been changed after the fact and the trust consistently misses deadlines, leaving thousands of claims unpaid.

More Litigation

The disputes have led to more litigation. In September, the trust filed a suit alleging that Kansas City, MO, cardiologist Linda Crouse violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by reviewing an assembly line of thousands of plaintiffs' echocardiograms and “confirming” purported injuries, sometimes in just a few minutes. The judge overseeing the settlement called it “a mass production operation that would have been the envy of Henry Ford.” Crouse's lawyer denied the allegations.

In November, the trust filed a motion to disqualify all echocardiograms conducted by EchoMotion of Chapel Hill, NC. Dubbing the company an “echo mill,” the trust alleged that the 60,000 to 75,000 images it produced were taken in hotel rooms and law offices, unsupervised by a qualified doctor. The company could not be reached for comment.

As for the plaintiffs, most of the 50,000 who opted out immediately have settled. Wyeth will not disclose numbers or amounts of settlements, but only five were tried. Four resulted in plaintiffs' wins, with verdicts ranging from $23.4 million (Lovett v. Wyeth-Ayerst, No. 97-665 (Van Zandt Co., Texas, Dist. Ct.)) to $150 million (Washington v. American Home Products, No. 99-0035 (Jefferson Col, Miss., Cir. Ct.)). The latter involved five plaintiffs, and the verdict was for compensatory damages. Before the jury took up punitives, the company settled with these and many other plaintiffs for a confidential sum. Other verdicts were also slashed post-trial and then settled.

Now come the suits brought by plaintiffs who initially filed settlement claims. There are 78,000 such plaintiffs. “Our plan is to challenge eligibility in any cases where it's questionable,” said Lawrence Stein, Wyeth's general counsel, “and to vigorously defend the cases at trial, if they get past that hurdle.” Some weeks ago, Stein added, plaintiffs' lawyers withdrew 51 cases in Louisiana following such challenges. He couldn't say how many others have done so.

Because these plaintiffs initially joined the settlement, they must abide by the agreement. They cannot seek punitive, exemplary or multiple damages or pursue claims other than for heart valve injuries. The defense cannot seek to bar claims based on the statute of limitations.

Where It Stands Now

The plaintiffs and the defense each won a trial in late 2003. Plaintiffs won a $1.4 million verdict on November 7 in Hayes v. Wyeth-Ayerst, No. B165374 (Jefferson Co., Texas, Dist. Ct.). One indication of how carefully the cases are being scrutinized is that after the verdict, Wyeth's stock fell 7%. A few weeks earlier, Wyeth said it was setting aside an extra $2 billion, bringing the total the company is reserving to cover the minimum it believes it will need for all litigation costs (including the settlement) to $16.6 billion.

On November 26, the defense prevailed in a trial, Eichmiller v. American Home Products, No. 2002-CV-52077. Afterward, Wyeth's stock increased by 7%. Wyeth's lead lawyer was Peter Bleakley, a partner at Washington's Arnold & Porter — the firm that has been most prominent defending the company. Bleakley garnered the company's only other Fen-Phen win last February in Garcia v. Wyeth, No D-101-CV-2000-1387 (Santa Fe Co., N.M. D.Ct.). The win was important not just because it was the first in a delayed opt-out case, but because Bleakley conceded that the plaintiff developed a heart valve condition after she took the drug. “It may very well have been caused by taking Fen-Phen,” Bleakley said in an interview. “There were other medical facts relevant to her condition,” he said, “but I think the jury here found in favor of Wyeth before they ever got to those questions.” The verdict did not require jurors to answer detailed questions, and Bleakley did not interview them afterward, so he cannot be sure of their reasoning. But he believes he knows what swayed them. “I think the evidence that convinced the jury was the evidence we presented that Wyeth did not know back in 1995 and 1996, when Linda Eichmiller was taking Pondimin, that [the drug] could cause valvular heart disease,” he said.

Fleming and Bartle

Opposing Bleakley was George Fleming of Houston's Fleming & Associates. It was the second Fen-Phen case Fleming tried to a verdict. His first, Wirt v. Wyeth-Ayerst, No. 99CV0307, in August 2000, resulted in a $29 million award. The case was “resolved,” Fleming said, before the judgment was entered. He is not at liberty to discuss details, and is barred from using the word “settlement,” he said.

In late 2000 and early 2001, Fleming “resolved” the cases of about 500 clients who had opted out immediately. He represents an additional 8000 clients who opted out later, he added, and about half have filed lawsuits. He also represents 1000 people who filed claims with the trust. “We had a jury that got confused,” Fleming said of his loss, “and I'll take care of that confusion in the next case. But I'm more concerned about the evidentiary restrictions imposed by the federal court that prevent juries from getting the true facts.”

Fleming was referring to his run-ins with the federal judge who oversees the settlement, Harvey Bartle of the Eastern District of Pennsylvania. The dispute actually dates from two opt-out cases Fleming was scheduled to try in Texas state courts in 2002. During pretrial proceedings, the defense moved to enjoin Fleming from introducing evidence of Wyeth's conduct, arguing that he was impermissibly seeking punitive damages or attempting to introduce punitive damages evidence without actually calling it that. Before the Texas court could rule, Wyeth requested emergency injunctive relief from Bartle, who granted a hearing last January. Bartle enjoined Fleming and his client from proceeding and found Fleming in contempt for violating the settlement agreement. The scenario played out again in his second Texas case, and neither has yet been tried. Fleming has appealed to the Third Circuit.

The injunctions prevented him from introducing important evidence in Atlanta, Fleming said. There may be an overlap between evidence relevant to punitive damages, he argued, and evidence relevant to negligence. As far as he knows, Eichmiller was the first time plaintiffs were not allowed to delve into the company's dealings with the FDA. His most important documents revealed the company's early knowledge of problems with the drugs, and he wasn't allowed to introduce these either, he complained. Fleming's appeal has been supported by Dallas' Baron & Budd and Trial Lawyers for Public Justice, which filed amicus briefs.

Conclusion

So far, the trust reports, 2750 claimants have been paid $1.1 billion — an average of $400,000 each. An additional 7000 claims have been withdrawn or denied. Michael Fishbein of Philadelphia's Levin Fishbein Sedran & Berman defended the settlement agreement that, as a class counsel, he has been largely credited with fashioning. “A group of lawyers tried to capitalize on the settlement, and they started gaming the system,” he said. Bartle had no choice but to order the trust to examine each claim, causing delays. But the fault lies with the lawyers, not the system, he said.