Vioxx settlement: Judge Fallon caps fees at 32%

by Ted Frank on August 28, 2008

MDL Judge Eldon Fallon orders plaintiffs’ attorneys’ fees in the $4.85 billion settlement to be capped at 32%. Hooray, right? Certainly, the trial bar is capable of arguing for itself that the ruling is wrong and it is entitled to a couple of hundred million more, but I might just have to take their side here.

Let’s set aside for the moment the substantive argument that Lester Brickman would make whether the median attorney is being overcompensated even under this limitation. (Perhaps four fifths of the claims involve the attorneys doing nothing but administrative scrivening, and a Judge Lester Brickman sitting on the bench would have some colorable basis under most states’ laws to be slicing and dicing in response to any client complaints against those attorneys.)

But it’s not clear to me that Judge Fallon has any authority to do anything about the attorney-client relationship without a particular client complaining in front of him. Imagine the case of a Florida attorney with a Florida client who sued in Florida state court after signing an agreement explicitly waiving fee caps but agreed to the global settlement. That Florida attorney about to dismiss his case in Florida state court certainly has no reason to expect New Jersey law to be applied to his case by a federal judge–and Fallon didn’t even apply New Jersey law, but some abstract Fallonesque federal common law that he pulled out of thin air.

Fallon’s only claim of authority is his ability to modify the settlement to ensure that it is enforceable — but the settlement is between Merck and the attorneys, and the whether the attorney fulfilled fiduciary duties to the client can’t make the settlement unenforceable. The provisions of the settlement giving the Settlement Administrator (in this case, Fallon) authority to set common-benefit fees certainly don’t apply to the individual fee agreements. And even if Fallon did somehow have judicial authority to declare a case was a “quasi-class-action” (a hybrid anticipated by no statute or rule of federal procedure), there’s no indication that Fallon made the requisite findings that all plaintiffs are similarly situated with respect to all attorneys justifying a global cap. The 32% figure is going to undercompensate some attorneys, even as it overcompensates others. A legislature can make that kind of procrustean mistake ex ante, but a court is required to give individualized consideration ex post. (Even the questionable Zyprexa and Guidant opinions Fallon relies upon authorized upward departures.)

Too, in the long run, if agreeing to a global settlement gives a court authority to meddle with the attorney-client fee agreement when it doesn’t even have jurisdiction over the individual case, it’s a huge disincentive for plaintiffs’ attorneys to settle cases. Fallon said 32%, but nothing in his opinion stops a different judge from saying 16% given the same facts–Guidant said 20%, and it’s hard for me to see why the Vioxx economies of scale were different than Guidant‘s.

Dropping the substantive ethical argument for reducing fees in at least the cases where the attorneys’ work was perfunctory (an argument I agree with, though others might not), is Fallon’s ruling procedurally defensible? I don’t see how, and I’m not one to cut plaintiffs’ attorneys breaks, especially in litigation that I’ve elsewhere argued has produced a nuisance settlement. What am I missing that this seems ultra vires to me?

{ 3 comments }

1 Ron Miller 08.28.08 at 3:15 pm

Naturally, I agree. I disagree with you latter comment about ethical obligations to reduce fees based on work done. The nature of contingency fee agreements have highs and lows. I once defended Tyco in the latex glove litigation. They poured a bunch of money and time into the cases and ended up with nothing. (If they had just asked me, I would have told them they were worthless.) That happens. Contingency fees are like buying an insurance policy where the lawyer bears the risk. That system means you get windfalls and huge losses.

But this is why I read this blog. It is an honest look at the issues instead of a knee jerk partisan response at every turn.

2 Rita Moore for Mother Delia Moore 09.17.08 at 2:24 pm

My mother was a victim of this horriable med that took her life. I am very angry that they are taking so long to compensate the families of love ones that have passed on. every day I am reliving my mother’s death over and over and over again due to the fact that I am still waiting for the out come. I would rather they would pay the survivor’s moneies first so they can move on. These are my comments and I am sure that others feel the same way too.

Thanks for letting me vent……..angry, angry, angry, survivor.

3 Willie 04.13.09 at 9:18 pm

The fees should have been capped at no more than 10% not 32%.

Merck should have to pay the govt and insurance companies out of funds other than those for the vicitims.

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