Tuesday, May 28, 2013

Vioxx® Chronicles: At Federal Trial Court Level, Merck Learns Kentucky AG May Hire Contingent Fee Private Lawyers

UPDATED | 05.29.13 -- 4 PM EDT: It turns out that many a legal news outlet have found this story worthy of note. Two of the best are (1) this one, from The American Lawyer (founded so long ago, by Steve Brill), and (2) this one, from Pharmalive's Pharmalot -- Ed Silverman's right on point. Do read them both. [End, updated portion.]

Merck's counsel at Skadden, Arps had argued that using privately-retained contingent fee lawyers -- essentially to prosecute the Kentucky consumer protection enforcement actions -- resulted in improper incentives, and interfered with the impartial administration of justice in Kentucky. And so, it was argued that the private lawyers' employment (with a would-be "bounty" provision) was a violation of Merck's due process rights.

All of this transpired last year, in the Kentucky edition of the Attorney General's action to recover payments the state made to Merck, to buy Vioxx®, for patients in the Commonwealth.

Last Thursday (while I was busy with other matters), the very capable federal trial judge Danny C. Reeves issued a memorandum opinion holding that so long as the AG retained control over decision-making in the enforcement proceeding, it was no violation of Merck's rights to sign a contingent fee agreement with a private lawyer, where the AG's offices didn't have the resources to pursue the investigation adequately. That said, I expect that Merck will appeal the federal trial court ruling. We shall see.

Here is the 33 page PDF of Judge Reeve's opinion -- and a bit:

. . . .As long as the AG’s office is reviewing the contingency-fee counsel’s work before adopting or approving it — and Merck has cited no evidence in the record to convince the Court that it is not — the AG has retained and exercised his decisional authority.

The Court will not second-guess the AG’s decision to grant a certain amount of “room for the outside attorneys to. . . exercise their professional skills in putting a lot of [the litigation] together.” [Record No. 77-1, pp. 317-18] Because these decisions are “generally internal to the preparation of the litigation” and the AG does not allow outside counsel to dictate the direction or goals of the action, the arrangement has not violated Merck’s due process rights. . . .
And so it goes -- we will keep you posted if/when Merck files its notice of appeal. Net, net -- this just means Merck will face incremental refunds/damages in Kentucky, in this 2004-era litigation.

To be clear, I don't expect this single development will be in any way material to New Merck. [Prior background here, and here.]

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