Vioxx® Counsel Awarded $1.55 Billion -- Merck's Reserves Were $1.9 Billion -- Now What?

So, after billing over half a million hours, while reviewing some 50 million documents, and taking over 2,000 sworn depositions, many lasting several days each -- and then trying 16 cases to verdict, and then negotiating one of the largest mass-tort settlements in history -- the Vioxx^® plainfiffs' lawyers will finally see a payday. [Judge Fallon's full order (a 38 page, 113Kb PDF file) is here.] And a handsome one at that, per Bloomberg:

. . . .A lead group of lawyers will get $315.3 million for doing most of the work on lawsuits against Merck & Co. over its Vioxx painkiller. . . .

Lawyers who worked for the so-called common benefit of the plaintiffs in thousands of lawsuits against Merck deserve 6.5 percent of the $4.85 billion settlement. . . said U.S. District Judge Eldon Fallon in New Orleans. . . .

The judge ruled yesterday that the $315.3 million in common benefit fees will come from the total legal fees, leaving $1.24 billion for other lawyers who sued Merck. . . .

The lawyers doing common benefit work billed for 562,944 hours at 109 law firms, according to the judge. They took more than 2,000 depositions, reviewed more than 50 million documents, briefed and argued more than 1,000 motions, conducted trials around the U.S., and negotiated a settlement. . . .

The company [has reserves of] $1.9 billion for [these] legal fees. . . .

I don't think that amount -- some $350 million of legal fee reserve "left overs" -- will flow through to the bottom line, as "other income" in Q3 or Q4 2010, though. So don't look for an "upside" to Merck, here.

I say that because Merck was -- at least as of the end of Q2 2010 -- significantly under-reserved for the burgeoning legal defense costs in the Fosamax^® matters (some background, on that notion).

In any event, yesterday's Vioxx legal fee award will end the more than seven years -- in many cases -- of carrying these legal fees, mostly on credit, for the plaintiffs' lawyers. And so, finally, it would be deceptive to simply divide the known billed hours by the total fee award, to generate a $3,300 per hour rate; but no doubt some in the MSM will do so this morning. Actually, though -- as Judge Fallon's order recites (at pages 34 to 35) -- the average billing rate for all partner, associate, and other professional common benefit time was $443.29 per hour.