Mass Tort Defense : Mass Tort Defense Lawyer & Attorney : Sean P. Wajert : Dechert Law Firm : Products Liability, Class Actions, Pharmaceutical Litigation

Here at MassTortDefense we know that while not the "sexy" part of litigation, the nuts and bolts of settlement agreements are crucial to clients.  That is why it caught our eye that the U.S. Senate Judiciary Committee last week approved a bill that would require courts to consider so-called public health and safety concerns before approving the sealing of certain legal agreements and settlements in product liability suits.

The committee voted 12-6 to pass S. 623, the so-called Sunshine in Litigation Act. The bill would  prohibit a federal court, in any civil action in which the pleadings state facts relevant to the "protection of public health or safety," from entering an order restricting the disclosure of information obtained through discovery, or from approving a settlement agreement that would restrict such disclosure, or restricting access to court records, unless in connection with that order the court has first made certain findings of fact.  Specifically, the bill requires the court to find that: (1) the order would not restrict the disclosure of information relevant to the protection of public health or safety; or (2) the public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information, and the requested protective order is no broader than necessary to protect the confidentiality interest asserted.

The bill similarly would prohibit the court from enforcing any provision of a settlement agreement that prohibits a party from disclosing that a settlement was reached or the terms of the settlement, other than the amount paid, or from discussing the civil action, or evidence produced in it, that involves matters relevant to the protection of public health or safety -- unless, again, the court finds that the public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information or records in question, and the requested order is no broader than necessary to protect the confidentiality interest asserted.

Surprisingly Republican Senators. Orrin Hatch, R-Utah, and Chuck Grassley, R.-Iowa, joined all 10 Democrat committee members in support. But the bill seems ill-conceived and even unnecessary. As pointed out by the American College of Trial Lawyers' Federal Rules of Civil Procedure Committee, the bill would establish an undesirable precedent by circumventing the procedure set out in the Rules Enabling Act that Congress established for amending the Federal Rules of Civil Procedure. These kind of ad hoc legislative initiatives that address specific parts of the Federal Rules contradict the careful, open, deliberative, rigorous ways that the rules have been amended from time to time.

Moreover, the bill would would unduly restrict the discretion of trial judges to regulate civil litigation and would impose substantial new fact-finding burdens on the courts, without a demonstrated need for those changes.  There is no compelling evidence that protective orders governing discovery or confidentiality provisions in settlement agreements are frequently abused. Nor is there evidence that federal courts do not currently have the power to regulate those agreements. 

Moreover, as written, the bill would lead to more confusion, not less, regarding what information has to be released, and when.  As pointed out by Steve Zack, President of the ABA, the language is is vague and indefinite, threatening to sweep up many cases having little to do with true public health or safety.  And it certainly would  require the parties and courts to spend extensive time and resources litigating whether and how the statute applies.  The politicians seem to forget  that protective orders are critical to both plaintiffs and defendants, including by helping to safeguard against dissemination of highly personal sensitive information or trade secrets.  

Perhaps Congress should spend less time on restricting judicial discretion and more on seeing that federal judges are paid a market-competitive wage.  A district court judge on the bench since 1993 failed to receive a total of $283,100 in statutorily authorized but then-denied pay. Appellate court judges have lost even more.
 

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Defendants and certain plaintiffs in the FEMA TRAILER FORMALDEHYDE PRODUCTS
LIABILITY LITIGATION, MDL NO. 07-1873(E.D. La.) have filed a joint motion seeking approval of a partial settlement of the litigation.

Readers may recall from our previous posts that plaintiffs had filed claims against the United States and several manufacturers alleging that they were exposed to high levels of formaldehyde contained in emergency housing provided to them by FEMA in the aftermath of Hurricane Katrina. The plaintiffs proposed litigating the claims in six subclasses, including four subclasses for residents divided by state (Louisiana, Alabama, Texas, and Mississippi), a medical monitoring (“future medical services”) subclass, and an economic loss subclass.  The court denied the personal injury class, and then the medical monitoring class.   The court then adopted a bellwether trial approach.  We posted on the federal jury in Louisiana returning a defense verdict in just such a bellwether plaintiffs' suit over alleged exposure to formaldehyde fumes while living for several months in a FEMA-provided trailer.  Indeed, all three bellwether trials have resulted in losses for plaintiffs. There are currently two appeals pending from previous bellwether trial verdicts. The MDL court also found last year that FEMA itself could not be held liable for the alleged formaldehyde in the trailers.
 

Now, several maker of the emergency mobile homes used after hurricanes Katrina and Rita have agreed to pay approximately $2.6 million to settle certain claims that plaintiffs were allegedly sickened by levels of formaldehyde in the homes.  The proposed settlement covers FEMA mobile homes issued to victims of the hurricanes, not the travel trailers, which actually formed the majority of emergency housing made available after the hurricanes. 

Under the proposed settlement, a whopping 48% of that total will be set aside for plaintiff attorneys' fees.  According to the settlement agreement, the size of the potential settlement class is more than 1,000.  In addition to the trial results, the joint motion makes reference to the MDL court ruling that precluded plaintiffs from arguing for liability under varied (and higher) state standards, rather than a uniform federal level.

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The Georgia Superior Court has preliminarily approved a $6.5 million settlement between the Lowe's home improvement stores and a nationwide proposed class of drywall purchasers. Vereen v. Lowe's Home Centers Inc., SU10-CV-2267B (Ga. Super. Ct., Muscogee Cty.).

The proposed resolution of this piece of the drywall litigation would provide Lowe's gift certificates ranging from $50 to $2,000 to any consumer who purchased drywall (not just from China), as well as cash awards of up to $2,500, if the claimant can provide documentation of damages and proof of purchase. That is, plaintiffs who provide proof of purchase of drywall from Lowe's but have no proof of actual damages would receive gift cards valued up to $250. Class members unable to provide a proof of purchase would receive $50 gift cards.

Under the settlement, Lowe's also agreed to pay attorneys' fees and expenses up to 30% of the class fund, as well as $1 million to the plaintiff attorneys for administration of claims. The settlement purports to release Lowe's from all drywall claims.The Georgia court conditionally certified a settlement class and set a final fairness hearing for November 19th.

But the proposed settlement has apparently drawn objections from participants in the federal Chinese drywall multidistrict litigation, who are arguing that the settlement fund is too small and that the settlement would interfere with federal jurisdiction.  The plaintiffs' steering committee for the Chinese drywall multidistrict litigation in the Eastern District of Louisiana went so far as to move to enjoin the state court from moving ahead with the settlement, arguing that the benefit to the class is too small, and the attorneys' fees too large. Ironically, these plaintiff attorneys assert that the form of the class benefit, i.e.,  a gift card, is also improper.

The MDL lawyers assert that the parties involved in the MDL have been negotiating towards a global settlement, and allowing the state court, one-defendant settlement to go forward would simply undermine those efforts.  They called on the federal court, pursuant to the Anti-Injunction Act, to enjoin state court proceedings where, as here, it is allegedly necessary in aid of its jurisdiction or to protect or effectuate its judgments.

Readers will recall that after Hurricanes Katrina and Rita in 2005, drywall was imported from China to address a shortage of drywall required for repairs and new construction. After the drywall was installed, homeowners began to complain of smells, gas emanations, corrosion of appliances and electrical fixtures, and other alleged property damage. The lawsuits typically allege that sulfur compound levels in the drywall are too high, causing issues with air conditioning systems, electrical appliances, internal wiring, and other electrical systems in homes. Plaintiffs also allege the drywall produces a rotten egg-like stench and causes a variety of respiratory and other health problems for those who live in the affected homes.

So far, a few bench or jury bellwether trials have been completed, with mixed results.
 
 

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The Sergeant Joe Friday character on Dragnet was created and played by actor Jack Webb.  Like so many famous lines, the immortal words, "Just the facts, ma'am," were apparently never uttered by the character.  What Friday actually said in early episodes is "All we want are the facts, ma'am."  

Either way, that's our motto when we post about litigation the firm has been involved in.  But with that limitation, a noteworthy decision is In re Vioxx Products Liab. Litig., 2010 WL 2802352 (5th Cir. July 16, 2010).

After a tentative settlement was reached in the Vioxx litigation, the MDL court entered several pre-trial orders with respect to the claims of those plaintiffs who could not or chose not to participate in the Master Settlement Agreement (MSA).  PTO 28 required non-settling plaintiffs to notify their healthcare providers that they must preserve evidence pertaining to the plaintiffs' use of Vioxx. Plaintiffs were also required to produce pharmacy records and medical authorizations, answers to interrogatories, and a Rule 26(a)(2) report from a medical expert attesting that the plaintiff sustained an injury caused by Vioxx and that the injury occurred within a specified time period. Failure to comply could result in dismissal of the plaintiffs' claims with prejudice.

PTO 28 is characterized as a Lone Pine order, named for Lore v. Lone Pine Corp., No. L-33606-85, 1986 WL 637507 (N.J.Super. Ct. Law Div. Nov. 18, 1986). Lone Pine orders are designed to handle the complex issues and potential burdens on the aprties and the court in mass tort litigation. Acuna v. Brown & Root Inc., 200 F.3d 335, 340 (5th Cir.2000).

The trial court extended deadlines, but eventually defendant Merck moved for an Order to Show Cause as to sixty-one plaintiffs for alleged failure to provide a case-specific expert report as required by PTO 28. The plaintiffs filed responses, arguing that they were in substantial compliance with PTO 28 and that state substantive law only required general forms of causation proof. In April 2009, the district court dismissed these plaintiffs' complaints with prejudice for failure to comply with PTO 28.

A district court's adoption of a Lone Pine order and decision to dismiss a case for failing to comply with a Lone Pine order are reviewed for abuse of discretion. Acuna, 200 F.3d at 340-41. The district court stated that “it is not too much to ask a plaintiff to provide some kind of evidence to support their claim that Vioxx caused them personal injury.”

The court of appeals had previously held that such orders are issued under the wide discretion afforded district judges over the management of discovery under Federal Rule 16. The court had held that the Lone Pine orders essentially required information which plaintiffs should have had before filing their claims pursuant to Rule 11.  Each plaintiff should have at least some information regarding the nature of his injuries, the circumstances under which he could have been exposed to harmful substances, and the basis for believing that the named defendants were responsible for his injuries.

The Fifth Circuit reaffirmed its view that it is within a trial court's discretion to take steps to manage the complex and potentially very burdensome discovery that these mass tort cases would require. The court of appeals thus affirmed the judgment of the district court.
 

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At the request of the Standing Committee on Rules of Practice and Procedure, the Advisory Committee on Civil Rules sponsored a conference last week at Duke University School of Law. The purpose of the conference was to explore the current costs and burdens of civil litigation, particularly discovery, and to discuss possible solutions. The Conference was designed in part to highlight some new empirical research done by the Federal Judicial Center, and others, to assess the degree of satisfaction with the performance of the present system and the suggestions of lawyers as to how the system might be improved.  The Conference included insights and perspectives from lawyers, judges and academics, on the discovery process (particularly e-discovery), pleadings, and dispositive motions. Other topics considered included judicial management and the tools available to judges to expedite the litigation process, the process of settlement, and the experience of the state courts on these issues.

Specifically, the empirical data from the FJC was discussed by Judge Rothstein, and Emery Lee and Tom Willging of the FJC; the ABA Litigation Section research data was to be reported by Lorna Schofield; the NELA Data was next.  Prof. Marc Galanter commented on vanishing jury trial data. Litigation cost data from the Searle Institute, and RAND data were circulated. The next section of the agenda focused on pleadings and dispositive motions, fact based pleading, Twombly, Iqbal. Participants included several judges and academics. The following panel asked about excessive discovery, and included practitioners, judges, and academics. The judicial management issue, and the level of early judicial involvement, was next.

Day Two focused on e-discovery and the degree to which the new rules are working or not.  The U.S. Chamber Institute for Legal Reform weighed in with a white paper.  The conference turned next to whether the process was structured sufficiently for trial and settlements as they really occur, i.e., should the endgame be viewed as settlement rather than trial. Corporate counsel, outside lawyers, public and governmental lawyers weighed in next. The following panel offered perspectives from the state courts. Finally, the Bar Association and lawyer group proposals were on the table. The Lawyers for Civil Justice, DRI, Federation of Defense & Corporate Counsel, and International Association of Defense Counsel submitted a white paper.

One speaker summed up the two-day discussion, suggesting that consensus had formed around the proposition that federal judges should provide strong, early, consistent case management, although plaintiff lawyers felt there was no need to give the judges any more formal authority.  But there was great disagreement on critical questions of the scope of discovery, the breadth of possible voluntary disclosures, and pleading requirements. Readers have read my posts about  Twombly and Iqbal, which clarified the requirements of what must be included in a complaint.

A survey of the Oregon system, a fact-based pleading approach, was presented by the Institute for the Advancement of the American Legal System. It has not led to more dismissals, and most observers agreed that fact-based pleading was revealing the key issues and narrowing the contentions earlier. 

The notion that the cost of the process is so large that it may be making litigation beyond the reach of many potential litigants is something a number of participant expressed concern about. One judge noted that he now requires lawyers to estimate the costs of discovery, and report that to their client. One participant raised the issue of cutting off discovery for defendants who move to
dismiss, although it is unclear how that would be an effective remedy for any current unsatisfactory case management methods.

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Many mass torts involve multiple defendants, and many of our readers have been in the position of hearing that co-defendants had settled out of the case.  It is natural to wonder, and could be quite useful to know, what co-defendants paid to settle their part of the case.  Typically, the agreements are subject to confidentiality agreements, and the protections of Fed. R. Evid. 408, which recognizes the strong public policy promoting settlement. See Block Drug Co. v. Sedona Labs., Inc., 2007 WL 1183828, at *1 (D.Del. Apr.19, 2007); Fidelity Fed. Sav. & Loan Assn. v. Felicetti, 148 F.R.D. 532, 534 (E.D.Pa.1993).

A recent federal case tested these boundaries.  Dent v. Westinghouse, et al., 2010 WL 56054 (E.D.Pa. Jan. 4, 2010).  Warren Pumps, a defendant in multi-party asbestos litigation, filed a motion to compel the plaintiff to respond to certain interrogatories and requests for production of documents regarding the settlement of any claim asserted in the complaint. Plaintiff objected.  The thrust of Warren Pumps' argument was that the discovery about each additional asbestos-containing product which plaintiff claims caused his mesothelioma made it that much less likely that his mesothelioma was caused by exposure to any Warren Pump product.  And it allegedly made plaintiff's assertions to the contrary less and less credible.

Warren Pumps pointed out that on its face Rule 408 pertains to the admissibility of evidence, and argued it was inapplicable to a discovery dispute. (citing DirecTV, Inc. v. Puccinelli, 224 F.R.D. 677, 685 (D.Kan.2004)).  Although Rule 408 speaks in terms of admissibility, several courts have concluded that a heightened showing is required for even the discovery of settlement information. That is, they have required a more particularized showing that the evidence of settlement sought is relevant and calculated to lead to the discovery of admissible evidence. Block Drug, 2007 WL 1183828, at *1; Lesal Interiors, Inc. v. Resolution Trust Corp., 153 F.R.D. 561, 562 (D.N.J.1994)). 

Warren Pumps also argued that it was not seeking the information for any purpose prohibited by the rule.  Rule 408 bars the use of settlement information “to prove liability for, invalidity of, or amount of a claim....” F.R.E. 408(a). Among other purposes, Rule 408 specifically permits settlement evidence to show a witness's bias or prejudice. F.R.E. 408(b).  The defendant contended that it was merely seeking the settlement information to test the credibility of plaintiff's claims.

The court found this was merely "repackaging" the motives forbidden by Rule 408 by placing them under the guise of credibility.  To the extent the defendant was seeking the information to determine whether the dismissed co-defendants were dismissed for lack of evidence, Warren Pumps wanted to impugn the credibility of plaintiff's claims against Warren Pumps by virtue of his apparently merit-less claims against the dismissed co-defendants. Thus, Warren Pumps sought the information to prove the invalidity of the claims against it, a use which Rule 408 prohibits, said the court.  To the extent defendant sought the settlement information, and the amounts of those settlements, it was trying to show that if plaintiff had settled with a co-defendant more or less equivalent in culpability to Warren for a certain sum of money, and thus established the value of his damages with regard to that co-defendant, it would not be credible for plaintiff to seek a higher sum from Warren.   But, said the court, this would be using the settlement information to establish the amount of plaintiff's claim against Warren Pumps. Again, this is forbidden by Rule 408.

Bottom line, the discovery was denied because while disclosure of the settlement agreements would reveal the amount of money plaintiff received from other asbestos manufacturers, the settlement amounts could not then be used to prove the extent of plaintiff's exposure to, or damages from, asbestos from another manufacturer's product.

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The Sixth Circuit has approved a class action settlement in an interesting toxic tort case. Moulton v. U.S. Steel Corp., 2009 WL 2997921 (6th Cir., 9/22/09).

This class action was filed in 2004 by neighbors of a steel mill operated by defendant U.S. Steel, and alleged various claims arising from “metal-like dust and flakes” allegedly falling on plaintiffs' property. The district court in Michigan certified the class in 2006, and the parties eventually agreed on a settlement for $4.45 million in 2008.

As is not unheard of, some class members and at least one plaintiffs' lawyer objected to the settlement. They argued that the settlement agreement was not “fair, reasonable, and adequate” under Fed.R.Civ.P. 23(e)(2).  Specifically, they argued (1) that the agreement dis-serves the “public interest” due to the broad scope of the release, (2) that alleged “collusion” between Class Counsel and U.S. Steel tarnished the agreement and (3) that the agreement improperly prioritizes the distribution of the settlement proceeds. The district court rejected all such objections, and the court of appeals reviewed the district court's conclusions for abuse of discretion.

To determine whether a settlement agreement satisfies Rule 23's fairness standard,  courts consider:  (1) the risk of fraud or collusion;  (2) the complexity, expense and likely duration of the litigation;  (3) the amount of discovery engaged in by the parties;  (4) the likelihood of success on the merits;  (5) the opinions of class counsel and class representatives;  (6) the reaction of absent class members; and (7) the public interest. UAW v. Gen. Motors Corp., 497 F.3d 615, 631 (6th Cir.2007). 

On the issue of the scope of the release, the release of the continuing nuisance claims was held not unfair, because, contrary to the objections, it did not go“well beyond the claims plead in the complaint."  Since 2005, every version of the plaintiffs' complaint included a claim for “continuing private nuisance.”  As class members, the objectors are the last individuals in a position to claim lack of notice that this claim was on the table at the settlement talks. And the bar on future continuing nuisance claims applies only to claims arising out of conditions that existed prior to the settlement. It does not preclude future continuing nuisance claims based on emissions from new equipment installed after the date of settlement. Nor does it bar future claims based on old equipment, so long as the continuing nuisance is a “new” one.

Neither did the objectors make the case that the agreement was a product of collusion. See Williams v. Vukovich, 720 F.2d 909, 921 (6th Cir.1983). The duration and complexity of the litigation undermined the objectors' suspicions. The parties litigated for almost four years before reaching a settlement agreement. The court fielded numerous contested pretrial motions. Class Counsel pursued multiple avenues to gather evidence; and the agreement itself was a product of months of supervised negotiations, two facilitated mediations and a settlement conference with the court.

Third, there was the challenge to the $4.45 million settlement, which the agreement distributed as follows: $300 to each covered member of the class, limited to one award per household; $10,000 to the seven class representatives; and $1.335 million in attorney's fees (30%) and $622,279.86 in costs to class counsel. Any residual goes to local public schools. Because class counsel received 4,026 class-member claims, roughly $1.21 million will go to the claimants and roughly $1.28 million will go to the schools. The appeals court noted that the district court should have been more expansive in its explanation of the approval of the award as reasonable.  However, that claimants will in the aggregate receive less than Class Counsel does not automatically invalidate the agreement. That the public schools will receive $1.28 million in unclaimed funds does not reflect on the settlement's fairness.

Finally, a plaintiffs' lawyer purporting to represent multiple class members insisted that the court improperly shut him out of the case. In what the appeals court called a “sideshow” to the main case, the attorney reportedly contacted an unknown number of class members after the class certification advising them to opt out because those who opt out “always get a much higher settlement than … the general population.”  The 6th Circuit found that the district court also did not err by corralling the extent of this counsel's involvement in the case. Rule 23 gives the district court broad discretion in handling class actions, authorizing orders that impose conditions on the representative parties or on intervenors. Fed.R.Civ.P. 23(d)(1)(C).  In view of the questionable communications with litigants, unannounced solicitation of opt outs, and apparent guarantee to individuals who opted out, the district court appropriately exercised its discretion, said the Circuit.

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The U.S. Supreme Court has denied General Motor's cert petition seeking review of the Arkansas Supreme Court's affirmation of a nationwide class of owners of pickup trucks and sports utility vehicles with allegedly defectively designed parking brakes. General. Motors Corp. v. Bryant, U.S., No. 08-349, certiorari denied 1/12/09.

GM filed the petition after the Arkansas Supreme Court ruled, in June, 2008, that an Arkansas circuit court was not required to conduct a choice-of-law analysis before certifying a multi-state class action.

Last June, we called this a “disturbing” opinion. General Motors had noted that the significant variations among the fifty-one pertinent product defect laws should defeat predominance. [Most courts have accepted this notion.] But the trial court provided four reasons for its finding that the potential application of multiple states’ law did not create predominance concerns. First, the court noted that, unlike the federal rule which requires a rigorous analysis of class certification factors including the impact state law variations may have on predominance, no such rigorous analysis is required in Arkansas. Second, the potential application of many states’ laws was not germane to class certification, but was instead a task for the trial court to undertake later in the course of exercising its autonomy and substantial powers to manage the class action. Third, the trial court found that assessing choice of law was a merits-intensive determination and thus inappropriate at the certification stage. “It would be premature for the Court, at this stage in the case, to make the call on choice of law.” Fourth, if application of multiple states’ laws was eventually required, and it proved too cumbersome or problematic, the circuit court could always consider decertifying the class. The state supreme court agreed.

MassTortDefense would suggest that most courts and commentators do not equate a choice of law analysis with an impermissible examination of the merits of the plaintiffs’ claims. Choice of law is a threshold question that ultimately permits a court to reach the merits of the dispute by establishing the governing legal rules. The selection of the proper law cannot fairly be termed a “merits-intensive determination.”  Moreover, the trial court need not make any determination about the merits of the causes of actions alleged in order to assess, based on relevant contacts, which state’s law ought to apply to those claims. Nor does the trial court even have to “make the final call” on what law will apply to each and every claim by every class member. It is sufficient for class certification for the trial court to discover that the law of many other states will likely have to be applied to many class members’ claims, and factor that into superiority and manageability of the proposed class.

The repeated references to the trial court’s ability to later decertify the class smacks of the improper, rejected, concept of conditional certification – a practice that has been soundly rejected in recent years by state and federal courts and is now prohibited under both the Arkansas Rules of Civil Procedure and the federal rules on which they are modeled. After considerable time and effort is expended, courts are reluctant to decertify. Here, for example, GM presented the court with a thorough analysis of conflicts of laws regarding the state-law fraud claims, breach of warranty, applicable statutes of limitations, and unjust enrichment. It seems unlikely that the trial court (after its certification was affirmed) will ever seriously revisit this issue in the context of a new predominance determination. If the Arkansas court’s approach were correct, class certification would be a meaningless exercise since courts would not address the most difficult and important class certification-related questions – i.e., whether a class trial is fair or feasible – until long after certification. 

Perhaps it is not surprising that the Supreme Court would decline to weigh in on a state procedural law issue, particularly one billed by respondents as a preliminary determination, but a shame that resources will be wasted on a clearly inappropriate class action.  And let's not forget the "blackmail settlement" pressure that these types of cases create.  Castano v. American Tobacco Co., 84 F.3d 734, 746 (5th Cir. 1996); In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298-99 (7th Cir.1995); Bruce L. Hay & David Rosenberg, “ ‘Sweetheart’ and ‘Blackmail’ Settlements in Class Actions,” 75 Notre Dame L.Rev. 1377, 1389-92 (2000).
 

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China's Dairy Industry Association announced last week that the Chinese dairy companies accused of producing contaminated milk-containing products have agreed to pay compensation.  Reports are that nearly 300,000 people (mostly kids) were sickened, and six reportedly died.  Baby formula was contaminated with melamine, apparently an intentional act to deceive protein quality control testing.  Melamine artificially increases the protein profile of the milk, but can cause kidney damage at higher doses.

MassTortDefense has posted on the issues before.

The settlement includes an immediate payment of $130 million, and $30 million to cover future medical bills for related health problems.  Wrongful death cases will receive a reported $30,000, and seriously sick kids' families will get $4000.  Some 28,000 product users were hospitalized.

Many officials responsible for quality control and inspection of the dairy industry have been fired or indicted.  Trials are ongoing for 17 such defendants, and the former head of the largest dairy outfit was to be charged last week with manufacturing and selling counterfeit goods. That company, the Sanlu Group, ceased operations and filed for the equivalent of bankruptcy in the Fall.

China is also reportedly revising its regulatory approach to the dairy industry, with new safety and quality standards, new testing approaches, and more tools to enable local governments to catch issues.

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The U.S. Supreme Court has agreed to review a federal appeals court decision rejecting the resolution of asbestos claims against an insurer, and to decide whether thousands of personal injury plaintiffs may directly sue the insurer. Travelers Indem. Co. v. Bailey, 2008 WL 4106796 (U.S., December 12, 2008).

The case arises from the now-decades old Manville bankruptcy. From the 1920s until the 1970s, Johns-Manville was the largest manufacturer of asbestos-containing products and the largest supplier of raw asbestos in the United States. As a result, in the 1960s and 1970s, Johns-Manville became the target of product liability suits. Johns-Manville filed for Chapter 11 protection under the federal bankruptcy law on Aug. 26, 1982. On that date, Johns-Manville was a defendant in more than 12,500 asbestos-related suits. To fund its reorganization plan, the bankruptcy court allowed Johns-Manville to settle its insurance claims for about $850 million.

Travelers, Johns-Manville's primary insurer from 1947 to 1976, paid about $100 million into the bankruptcy estate in exchange for a full and final release of Manville-related claims. In 1986, Bankruptcy Judge Lifland entered a confirmation order, inter alia barring any person from commencing any actions based upon, arising out of or related to insurance policies that Travelers issued to Manville. In 2004, Judge Lifland found that his injunction was being violated by a new species of asbestos-related lawsuits (referred to by some as “direct action” claims) against insurers. These new asbestos claims were part of a global strategy developed by the plaintiffs' bar to put insurers in Manville's shoes and thereby hold them liable on account of their insurance relationship with Manville.

The Second Circuit, rather than enforce the confirmation order as it was originally written, entered and affirmed on a prior appeal, ruled that Judge Lifland had exceeded the “subject matter jurisdiction” granted by the Judicial Code. In re: Johns-Manville Corp., 517 F.3d 52 (2d Cir. 2008). The Second Circuit concluded that the bankruptcy court in 1986 was without power to enjoin all claims that literally arise out of the insurance policies that Manville purchased from Travelers. Thus, the bankruptcy court had exceeded its authority in approving a multi–million dollar settlement of asbestos–related claims filed against Travelers. The court said the bedrock issue in this case requires a determination as to whether the bankruptcy court had jurisdiction over the disputed statutory and common law claims. While the bankruptcy court repeatedly used the terms “arising out of” and “related to,” global finality for Travelers is only as global as the bankruptcy court's jurisdiction.

Travelers filed a petition for writ of certiorari, as did a group of plaintiff attorneys. Travelers argued that “decades of bankruptcy practice in the lower federal courts” are at risk, and that the Second Circuit opinion is inconsistent with “the carefully crafted legislative scheme Congress constructed.” The plaintiffs petitioner group asserted that the Second Circuit obscured the distinction between jurisdiction and statutory authority and that as a result of the Second Circuit decision, the finality of certain Chapter 11 reorganization plans in federal bankruptcy would be rendered uncertain.

One may wonder whether mass tort reorganization plans might be in jeopardy, under the Second Circuit opinion. Some tens of billions of dollars have been committed to asbestos trusts in cases that relied at least in part on the finality of the Johns-Manville bankruptcy. And the Second Circuit noted that Travelers had alleged that all underlying asbestos settlements were dependent upon the continued validity of the settlement scheme utilized over the past 20 years.

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The federal judge overseeing the MDL involving claims over allegedly mishandled genetically modified rice has appointed a special master to assist with settlement talks. In re Genetically Modified Rice Litigation, MDL No.1811.
 

The order comes as the parties prepare for the process of selecting the bellwether trials currently slated to begin in November, 2009. The parties are to select plaintiff claims from each of 5 affected states for the initial trial pool. The bellwether trial plan approach follows the court's denial of class certification.

The bulk of plaintiffs are long grain rice producers who allege that defendants developed and tested a genetically modified strain of rice that contaminated the U.S. commercial rice supply. When rice importers banned the importation of U.S. rice, prices dropped and plaintiffs sued. Defendants have argued that such damages are too legally remote and speculative to be recovered.

The court noted that it “is important that the parties continue to explore settlement while preparing the cases for trial or remand to the transferor districts.” Because the MDL court did not have time to address settlement in as an effective and timely manner as is needed, the court proposed appointment of Hon. Steven N. Limbaugh, Sr., who has recently retired from the bench, and is available and willing to serve as a settlement special master for this case.

The court is giving the parties notice and an opportunity to be heard, and the opportunity to suggest alternative candidates for appointment. If no party files objections by Nov. 20, any objections will be waived, and the court will enter an order appointing him as Special Master.
 

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Settlement agreements that require a plaintiff not to disclose or publicize any information about her claim are common in mass tort and product liability cases, and sometimes controversial. See generally Bechamps, Sealed Out-of-Court Settlements: When Does the Public Have a Right to Know, 66 Notre Dame L. Rev. 117 (1990); Dore,  Settlement, Secrecy, and Judicial Discretion: South Carolina’s New Rules Governing the Sealing of Settlements, 55 S.C. L. Rev. 791 (2004); Drahozal & Hines, Secret Settlement Restrictions and Unintended Consequences, 54 Kan. L. Rev. 1457 (2006); Moss, Illuminating Secrecy: A New Economic Analysis of Confidential Settlements, 105 Mich. L. Rev. 867 (2007).

The conventional wisdom is that confidential settlement agreements aid defendants. Confidentiality minimizes bad publicity for the corporate defendant which is important to the defendant both for its own sake and to minimize additional claims. But both the defendant and an early claimant - a claimant who discovers that he or she has a claim before other claimants do - may have a strong incentive to maintain confidentiality. And they have a variety of means by which they might do so.  

Nevertheless, several commentators and academics have called for restrictions on secret settlements. Such attempted restrictions on secret settlements may be ineffective: a claimant may circumvent restrictions adopted by a single state or federal court by filing suit in a state or court without such restrictions. Second, parties might circumvent secret settlement restrictions adopted by a single state by choosing another state's law to govern the settlement. Third, parties could avoid restrictions on secret settlements in court by settling before the claimant files suit. Finally, many parties could try to accomplish much the same result as a secret settlement by use of pre-dispute or post-dispute arbitration agreements, taking advantage of the privacy of the arbitration process. See generally, Drahozal and Hines, Secret Settlement Restrictions and Unintended Consequences, 54 Kansas Law Rev. 1457 (2006).

An interesting recent paper by James Anderson observes that under some conditions, however, a mass tort defendant will rationally choose to discourage such secrecy. A defendant can use publicity to act as a commitment device akin to a most-favored-nation agreement to increase its bargaining power with plaintiffs. The paper uses the real world example of a drug (statin) litigation as a case study to illustrate this theory in practice and to explore the public policy implications of this finding. The paper is Understanding Mass Tort Defendant Incentives for Confidential Settlements, published by the RAND Institute for Civil Justice.  An interesting read, worth a look.
 

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