An Odd Development -- in the Schering Class Action ERISA Violations Cases

This will likely not change the process surrounding the ERISA putative classs actions pending against Schering-Plough related to ENHANCE non-disclosures -- resulting in alleged securities-law fraud, and alleged breaches of ERISA fiduciary duties -- in any other case, but I find it fascinating, nonetheless.

Apparently one of the original named plaintiffs (there are at least three named plaintiffs) had previously "served in a significant role in connection with conducting the Vytorin study" at Schering, and -- it is alleged, by Schering -- that participation in this suit would arguably violate his severance agreement.

My thoughts on this topic appear after the below excerpt -- from the motion preceding the proposed order:

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

IN RE SCHERING-PLOUGH
ERISA LITIGATION

MASTER FILE NO.: 08 Civ. 1432 (DMC)(MF)

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THIS DOCUMENT RELATES TO ALL ACTIONS

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PLAINTIFF JOHN OETTINGER’S UNOPPOSED MOTION FOR VOLUNTARY WITHDRAWAL

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TO: ALL PARTIES AND THEIR COUNSEL OF RECORD:

1. Plaintiff John Oettinger (“Plaintiff”) hereby moves the Court for an Order approving his withdrawal as Plaintiff in the above-referenced action (“Action”). By Court Order dated June 27, 2008, Plaintiff was consolidated into the Action.

2. Plaintiff is a former employee of Schering-Plough Corporation (the “Company”) and a participant in the employee benefit plan on whose behalf the Action is brought. Specifically, Plaintiff served in a significant role in connection with conducting the Vytorin study, which is the subject of the Action.

3. After authorizing the filing of his complaint, Plaintiff had second thoughts about proceeding with his lawsuit because he believed he would be in violation of a severance agreement he entered into with the Company upon his departure.

4. Defendants do not oppose this motion. . . .

While some might view this development as favorable to Schering's chances -- as it appears that a true "insider" -- presumably, someone with first-hand knowledge of the ENHANCE delays -- is no longer involved in the suit, it is quite-likely going to turn out in exactly the opposite fashion. This will be a boon to the plaintiffs. How so?

First, Mr. Oettinger will likely still be called to answer questions under oath, in a series of sworn depostions, about what he knows. [And, rather sadly, it will allow the other plaintiffs' lawyers to treat him as a semi-hostile witness, should he balk at answering anything he had previously shared with them. More on that notion, in a futute, separate post.] And that may happen sooner than many think. See my earlier thoughts, on this topic.

Second, no legally-enforceable severance agreement may prevent this testimony. Such agreements may be construed to prevent bringing a separate suit, in one's own name, but Schering may not "purchase" the "unavailablity of key witnesses", in this manner.

Third, this very-likely means that Mr. Oettinger was let go in the latest round of layoffs, at Schering -- and, so this actually frees him up to answer deposition questions, without first consulting with any Schering attorney, for the defense. Now, under the customary terms of such a severance agreement, he can no longer "volunteer" information, and help, to the plaintiffs -- conversely, he cannot be prevented from telling the whole and unvarnished truth in depostions, or ultimately, in the witness box, on the stand, at trial -- should it not settle before then. It is highly-likely he has already provided the plaintiffs' counsel with much help -- prior to signing the agreement -- as would be well-within his legal rights.

Fourth, in the mean-time, Mr. Oettinger will have a (perhaps a highly-enhanced, non-standardized) bolus of Schering's money to "get by on" until this litigation progresses toward settlement, or trial. And that is a good thing, for him -- and his family.

Next, I am slightly-perplexed that apparently he brought the case while he was still a Schering employee -- more typically, this sort of suit would be filed by a retiree, or former employee. It isn't unprecedented, but it often does strain working relationships -- making the plaintiff a pariah in his own department.

Finally, were I a Lowenstein, Sandler (Schering defense) lawyer this morning, I might also be a little concerned that this filing suggests someone inside (or outside) Schering made some only-thinly-veiled threats against Mr. Oettinger -- the sort of threats that occasionally invalidate such a severance agreement's provisions. Understand that it is likely that Mr. Oettinger has laready received all his money under the agreement -- and such behavior would only detract from Schering's ability to stop Oettinger from disclosing secrets, or competing with it -- not a great scenario, that.