Tuesday, August 25, 2009

Great Summary of Twombly/Iqbal Rulings

This August 6 post from the Device and Drug Law Blog provides a great summary of Twombly/Iqbal rulings over the last couple of years.

Madison County's Asbestos Judge, Daniel Stack, to Retire in 2010

This article from the Madison County Record reports that Judge Daniel Stack has decided to retire as of 2010. Judge Stack is well known as the Madison County judge who took over the asbestos docket from Judge Byron. Judge Stack is generally credited with having made Madison County a less extreme place to litigate for asbestos defendants, although that's relative praise. That said, Madison County continues to grind out trial dates and settlements for asbestos cases, and so claims for 2009 are up from recent years.

Chrysler Opinion by 2d Circuit - Todd Brown Comments On the Sacrifice of Rights of Future Claimants and I Pile On Regarding The Scope of Future Claima

Todd Brown is a former defense-side lawyer (Wilmer Hale and Jones Day) now teaching law in Buffalo after a stint at Temple. Mr. Brown has written pretty extensively and astutely on deep flaws in asbestos bankruptcies (see my post here regarding his prior law review on section 524(g)). Mr. Brown has been guest blogging and commented here on Pointoflaw on two aspects of the 2d Circuit's Chrysler opinion. As it pertains to tort claimants, Mr Brown said the following:

" Second, the panel addressed the various arguments that the Chrysler assets could not be sold free and clear of successor liability for various personal injury type claims. Here, the panel adopted a fairly broad reading of the "interests" that can be cleansed in a Section 363 sale, reasoning that this interpretation is more consistent with the purpose of this section and the priority scheme of the Bankruptcy Code.

The panel refused to weigh in on the question of whether a Section 363 sale can cleanse future claims (such as those that might arise from asbestos exposure). This not only makes sense in the abstract; it is the right approach for future claimants. As we have seen in the 524(g) context (which requires setting aside funds to pay current and future asbestos claims, among other things), future claimants' interests are often sacrificed by those currently asserting asbestos claims against bankruptcy estates. Now that courts have started taking a harder line against these schemes, it is easy to see how the 363 sale approach might be viewed as a possible end-run around 524(g)'s limitations on front-loading recoveries. Until the "free and clear" sale's applicability to future claimants is clarified, however, such an end-run remains, at best, extremely risky for most asbestos defendants." (emphasis added).

Todd certainly is correct that the the interests of future claimants have repeatedly been been sacrificed in the asbestos chapter 11 cases. To go further, recognize that future claimants are NOT just the personal injury claimants, and instead there are multiple types of future claimants against the debtor's estate. Future claimants may be, for example, state agencies that want to recoup expenses from a debtor that caused personal injuries or created an environmental mess. Future claimants also include underlying case co-defendants which want to pursue cross-claims against former co-defendants now hiding behind chapter 11 injunctions The same applies to those insurers with subrogation and indemnity rights. against debtors.

Bankruptcy judges and plan proponents may in the future rue the day they did not 1) give due process notice to these groups of future claimants, and 2) did not cause appointment of a futures representative who actually intended to and actually did represent the interests of these other groups of "future claimants."

Monday, August 24, 2009

Plaintiff's Bar and US Chamber of Commerce Agree - Let's Make It Easier to Sue Non-US Manufacturers

Catching up on things I missed while on vacation. PointofLaw includes this interesting post on a draft federal statute to require overseas manufacturers of many consumer products to appoint registered agents in the US for service of process. The point is to make it equally easy to sue overseas companies. According to pointoflaw, the bill amazingly produced harmony between the plaintiff's bar and the US Chamber of Commerce- - now that's quite a feat:

"The bill follows on the footsteps of a Senate Judiciary subcommittee hearing in May, "Leveling the Playing Field and Protecting Americans." As the sponsors show, the issue crosses partisan lines. General support is also broad: Witnesses at the hearing included a representative of the trial lawyer lobby, AAJ, as well as Victor Schwartz, testifying on behalf of the U.S. Chamber."

W.R. Grace, Solvency Findings, Asbestos Liability Estimates, and Injunctions that Bind Others

Today's post follows up on this August 13 post regarding asbestos plaintiff's lawyers asking the Court to order the rest of the world not give any effect to whatever the Court finds on Grace's solvency, and item 4 of this prior post of May 12 regarding Nobel prize winner James Heckman's expert report in Grace in which he and the non-asbestos creditors indicted bankruptcy court estimation proceedings as having no scientific validity.

The topic today is Grace's August 7 trial brief asserting that it is impossible for the Court to determine whether Grace is solvent or insolvent, and that instead it should just find that Grace will be solvent and viable if the plan is confirmed. Grace's brief [Docket 22732] is available through PACER or here.

Key quotes from the Grace brief are below. The gist is that estimates of its "personal injury liability" range from a low end of $ 200 million (from Grace's expert, Tom Florence) to $ 6.2 billion (plaintiff's expert Mark Peterson). In addition, its "property damage liability" is estimated by some at about $ 3-5 billion, with one calculation suggesting $ 82 billion. The facts, as argued by Grace, are set out below. The question I pose is this:

In tort cases, we say that good science must be applied. In business litigation, the general rules is that damages must be proved with reasonable certainty. Given those rules, why would it be socially useful and/or constitutional for bankruptcy courts to issue world-wide injunctive orders without making actual factual findings on key issues when the factual claims are so extremely different as they are in the Grace case, and the answer on solvency plainly could come out on either side of the solvency question?

In posing that question, I recognize that Grace and others will and do say that what we need most are deals that end litigation and that courts should accept deals. But, isn't it also fair to say that individual case settlements are much different because, unlike Grace's desired confirmation order, those other settlements do not include sweeping injunctions purporting to bar and limit the manner of future prosecution of tens or hundreds of thousands of present or future claims to be asserted by personal injury claimants, and that also will enjoin cross-claims or subrogation claims to be asserted by underlying case co-defendants and/or insurers in those same hundreds or thousands of future personal injury claims?

The Grace brief states the following, at 12-14:

"Among the most significant hurdles that the Committee and the Lenders must overcome
before they even get to the analysis under section 1129 is the requirement that they prove the Debtors are solvent. This they cannot do. The most significant component of Debtors' liabilities, the Asbestos PI Claims, has never been agreed upon or adjudicated. The estimation proceeding, which was designed specifically to estimate the value of the Asbestos PI Claims,was not completed. And there has never been an agreed upon or adjudicated resolution of Debtors' potential property damage asbestos claims. Without such adjudication, the liabilities cannot be established, and the Lenders and Committee cannot prove that the Debtors are solvent.

The incomplete estimation proceeding only highlights the fact that, absent the Plan, there is an enormously wide range of estimated values of the Debtors' asbestos liabilities. For example, the Debtors' estimation expert, Dr. Tom Florence, estimated that value of Debtors'asbestos personal injury claims ranged between $200 million and $989 million with a median value of $468 million. But Dr. Denise Martin, another one of Debtors' experts, determined that at the standard 95% confidence interval for scientific reliability, Dr. Florence's estimates could range from $4.6 million to $6.3 billion. The PI Committee's expert, Dr. Mark Peterson, could
offer no more definite estimates of Debtors' asbestos liabilities. He opined that Debtors' potential liabilities for asbestos personal injury claims were "between $4.7 and $6.2 billion and most likely between $5.4 and $6.2 billion." See Expert Report of Dr. Mark Peterson in Connection with the Asbestos Personal Injury Estimation Hearing, dated June 20, 2007 at ES-5 (Dkt. 16113, Ex. A).

Likewise, the value of the Zonolite Attic Insulation ("ZAI") claims is also highly
uncertain and disputed. While the Plan provides between $54.5 million and $58 million to ZAI (and potential additional contract payments), ZAI made substantially higher demands. For example, ZAI claimants have previously stated that ZAI could potentially be in 11 million homes5 with a value of$5,000 to $7,500 per home,6 for a total of up to $82.5 billion. Even using the claimants' lower estimates of 1 million homes7 at a value of $3,000 to $5,000 per home, the total liability would be $3 billion to $5 billion. The range of non-ZAI Propert Damage liability is also entirely uncertain. While the Plan provides $ 49.3 million for non-ZAI Property
Damage claims, the potential claim was much greater. Together, the total potential Property Damage liability, absent a Plan, reaches at least $3.149 billion to $5.149 billion and may be much greater.


B. The liability disputes foreclose any demonstration of solvency. The Plan
disposes of that liability and therefore cannot be relied on to prove solvency.

As described above, there has never been an adjudication of Debtors' asbestos liabilities, and estimates of those liabilities vary greatly. There is simply no estimation method that can accurately measure the Debtors' asbestos liabilities. Without a binding determination of Debtors' potential asbestos liabilities, there cannot be a final and binding determination that Debtors are solvent. Zily Aff. ~ 4.9

As discussed infra, the Lenders' new expert, Robert 1. Frezza, relies on estimates from the never-completed estimation hearing to attempt to "determine" Debtors' solvency. This attempt is unavailing. Indeed, the only way that Mr. Frezza can even begin to argue Debtors' solvency is by relying upon the Plan, the very one to which the Committee and the Lenders now object. Absent the Plan, there is no cap on Debtors' asbestos liabilities. As already noted, the Proposed Asbestos Settlement, which forms the basis of the Plan, does not represent an adjudication of the Debtors' asbestos liabilities. Rather, it represents a compromise that disposes
of the need to adjudicate those liabilities. Without the Plan, all that is left are potentially enormous amounts of asbestos liabilities, the adjudication of which would determine whether Debtors are solvent. In other words, the Plan does not prove solvency; it paves the way for solvency from and after the Effective Date."

Sunday, August 23, 2009

Glaxo, Sponsored Writing and Paxil

This article from the Associated Press in the August 19, 2009 issue of the NYT reports on Glaxo's program in which "ghostwriters" were hired to assist doctors in writing medical journal articles regarding Paxil. The information provided is rather skimpy in terms of trying to evaluate the scope and influence of the ghost-writing and whether it actually produced incorrect statements. The article states:

August 19, 2009
Glaxo Used Ghostwriting Program to Promote Paxil
By THE ASSOCIATED PRESS
Filed at 5:07 p.m. ET
WASHINGTON (AP) -- Drugmaker GlaxoSmithKline used a sophisticated ghostwriting program to promote its antidepressant Paxil, allowing doctors to take credit for medical journal articles mainly written by company consultants, according to court documents obtained by The Associated Press.
An internal company memo instructs salespeople to approach physicians and offer to help them write and publish articles about their positive experiences prescribing the drug.
Known as the CASPPER program, the paper explains how the company can help physicians with everything from ''developing a topic,'' to ''submitting the manuscript for publication.''
The document was uncovered by the Baum Hedlund PC law firm of Los Angeles, which is representing hundreds of former Paxil users in personal injury and wrongful death suits against GlaxoSmithKline. The firm alleges the company downplayed several risks connected with its drug, including increased suicidal behavior and birth defects.
A spokeswoman for London-based Glaxo said the published articles noted any assistance to the main authors.
''The program was not heavily used and was discontinued a number of years ago,'' said Mary Anne Rhyne.
According to the memo, which dates from April 2000, the CASPPER program was designed to ''strengthen the product positioning and overcome competitive issues.''
At the time, Paxil was competing with rival antidepressant blockbusters like Eli Lilly's Prozac and Pfizer's Zoloft. Paxil has since lost its patent protection and competes against cheaper generic versions. Sales of Paxil last year totaled $849 million.
Drug companies frequently hire outside firms to draft a manuscript touting a company's drug, retain a physician to sign off as the author and then find a publisher to unwittingly publish the work.
But the use of ghostwriting by drug companies has come under increased scrutiny by members of Congress, including Sen. Charles Grassley, R-Iowa, a longtime critic of the industry's influence over physicians. Grassley and Sen. Herb Kohl, D-Wis., are pushing a bill that would require companies to disclose all payments to physicians over $100.
According to ghostwriting expert Dr. Leemon McHenry, Glaxo's program was unusually intertwined with its internal sales and marketing department.
''We know that GSK has engaged in ghostwriting for many years,'' said McHenry, who works as a research consultant for Baum Hedlund. ''But to create an internal ghostwriting program and have the gall to name it after a cartoon ghost demonstrates their juvenile attitude and careless disregard for patients.''
McHenry acknowledged that ghostwriting is legal in principal, but said it could contribute to illegal activity if the information is misleading and causes harm.
''If these ghostwritten publications are contributing to the harm of patients because they're making false claims, then that's illegal,'' McHenry said.
Articles from the company's program appeared in five journals between 2000 and 2002, including the American Journal of Psychiatry and the Journal of the American Academy of Child and Adolescent Psychiatry.
Drug company salespeople often present medical journal articles to physicians as independent proof that their drugs are safe and effective.
Publication in a medical journal also is a point of prestige for physicians, a fact Glaxo's memo seems to acknowledge: ''Physicians will be eager to participate in CASPPER regardless of their professional stature,'' the brief notes.
(This version CORRECTS spelling of 'Baum' in graf 4.)

Saturday, August 22, 2009

New Science - Observable Brain Changes in Rats Subjected to Stress

More on brain rewiring and damages potentially recoverable in current or future tort litigation. This prior post provided some fact patterns and legal issues on future damages issues as drawn from research breakthroughs described in a wonderful book on brain plasticity - The Brain That Changes Itself -- Stories of Personal Triumph from the Frontiers of Brain Science, by Dr. Norman Doidge.

Now, here's more to think about as both individuals and as tort lawyers who end up in arguments about what is "harm," how it is proved and measured, and how it is compensated. Specifically, yet more news on brain rewiring is out and indicates that stress does produce physical changes in the brain, thus providing possible evidentiary support for claims that stress is indeed a physical injury.

This August 17, 2009 NYT article by Natalie Angier summarizes new research on brain plasticity as it relates to stress. The gist is that scientists in Portugual this summer published an article in a prestigious medical journal regarding their findings on brain changes when rats were subjected to stress. The not so good news is that stress does indeed destroy brain wiring. The better news is that the brain can rewire and return to "normal" when the stress is reduced back to normal levels. Here are key quotes:

"Reporting earlier this summer in the journal Science, Nuno Sousa of the Life and Health Sciences Research Institute at the University of Minho in Portugal and his colleagues described experiments in which chronically stressed rats lost their elastic rat cunning and instead fell back on familiar routines and rote responses, like compulsively pressing a bar for food pellets they had no intention of eating.

Moreover, the rats’ behavioral perturbations were reflected by a pair of complementary changes in their underlying neural circuitry. On the one hand, regions of the brain associated with executive decision-making and goal-directed behaviors had shriveled, while, conversely, brain sectors linked to habit formation had bloomed. (emphasis added).

****
But with only four weeks’ vacation in a supportive setting free of bullies and Tasers, the formerly stressed rats looked just like the controls, able to innovate, discriminate and lay off the bar. Atrophied synaptic connections in the decisive regions of the prefrontal cortex resprouted, while the overgrown dendritic vines of the habit-prone sensorimotor striatum retreated."


If I were a plaintiff's lawyer, the NYT and Science article would be dropped into my bag of citations and evidence to argue for a broader range of treatment after, for example, suffering a trauma from a one time physical event or after cancer has been countered via surgery, chemotherapy or other means. As a defense lawyer, I'm probably going to argue this is not (yet) accepted science and try to keep it out of evidence under the Daubert rules. But, one might also ask what makes sense for the long term - perhaps injured people should receive some paid for r & r to get them into good patterns and a better recovery that may save money in the long run. Then we lawyers can argue about who should pay for it - the health insurer, the Comphrehensive General Liability insurer, the tort defendant or some government agency.