Bloomberg News

Glaxo Accord Said to Spur Lawyer Fight Over Fees

January 19, 2013

GlaxoSmithKline Plc (GSK)’s settlement of lawsuits over its Avandia drug triggered a challenge from nine law firms to a bid by lead attorneys for almost three-quarters of a $143 million fee fund, including one seeking about $2,700 per hour, according to two people familiar with the matter.

Attorneys suing on behalf of users of the diabetes medicine, who said it caused heart attacks and strokes, filed objections to the fee request in Philadelphia federal court, said the people, who asked not to be identified because the matter isn’t public. The contested amount is sought by a court- appointed group of plaintiffs’ lawyers picked to recommend how much attorneys in the cases should be paid, the people said.

Six law firms on that fee committee asked for 71 percent of the fund set aside by U.S. District Judge Cynthia Rufe for the Avandia cases before her, according to the people. The committee lawyers put the most time and money into efforts to collect evidence that Glaxo allegedly mishandled warnings about Avandia’s risks, Dianne Nast, a lawyer who led the group, said in an interview.

“These were the folks who were the most active in working on the case, so it’s only natural they are in line for a larger share of the fees,” Nast said. The fee fund, between 6 and 7 percent of the total settlement, according to the people, means the total accord may be worth more than $2 billion. As a result, the average payout for the 40,000 users of Avandia involved in the litigation would be about $50,000 -- before legal fees.

Highest Fee

Joseph Zonies, a Denver-based attorney who served as one of the lead lawyers in the Avandia cases before Rufe, is slated to collect more than $24.4 million, the highest recommended fee, according to the people. Zonies put in more than 18,000 hours of work on the case and his fee would amount to $1,341-an-hour for his efforts, the people said. He declined to comment on the fee recommendation. Another lawyer, Vance Andrus, is seeking almost double that per-hour amount, according to the people.

Plaintiffs’ lawyers in product liability cases work on a contingency fee basis. While per-hour calculations may be much higher than attorneys who regularly work at an hourly rate, lawyers who work on contingency are often forced to spend millions of dollars of their own money to pursue a case and aren’t guaranteed payment in the end, unless they win or settle.

Benedict Morelli, a New York-based lawyer who according to the court’s docket objected to the fee recommendations, and Samuel Lanham, a Maine attorney who also objected, didn’t return calls for comment on their objections.

Under Seal

While Rufe ordered objections to be filed under seal, it’s probable that plaintiffs’ lawyers unhappy with their proposed cut of the fees are demanding more money, said Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia and follows such consolidated cases, also known as multidistrict litigations, or MDLs.

“MDL fee fights are common and the infighting among plaintiffs’ lawyers over that money can get fierce,” Tobias said in an interview.

Glaxo, the U.K.’s biggest drugmaker, has said it paid more than $3 billion to settle federal and state government claims that it illegally marketed Avandia, once the world’s best- selling diabetes pill, and other medications.

Glaxo officials haven’t stated what the drugmaker spent to settle the Avandia lawsuits before Rufe, and in state courts, alleging executives failed to properly warn consumers about the drug’s risks, Bernadette King, a spokeswoman for London-based Glaxo said in interview.

Stop Promoting

Glaxo said in 2010 it would stop promoting Avandia worldwide after regulators said the treatment would be withdrawn from the market in Europe and sales would be limited in the U.S. because of studies linking the drug to increased risks of heart attacks.

Sales fell 43 percent in the wake of the restrictions, Glaxo said.

In MDL cases, suits filed in federal courts across the U.S. are consolidated before a single judge to make pretrial information exchanges more efficient. Often, lawyers use the case consolidations to resolve suits, Tobias said.

The group of lawyers tapped by a judge to lead an MDL’s evidence-gathering efforts are entitled to receive a “common- benefit fee” for their work, said Howard Erichson, a Fordham University law professor who teaches classes on complex litigation and product-liability law.

MDL Evidence

Lawyers who use MDL-collected evidence to help achieve a settlement in their cases are required to hand over a percentage of their fee, Erichson said. Those monies are used to compensate MDL attorneys for work on the case that benefits everyone in the litigation, Erichson said.

“MDL cases can involve an enormous amounts of work and the benefits to all claimants of that work can also be enormous,” Erichson said in an interview. That’s why MDL fee funds can run into the hundreds of millions of dollars, he added.

Lawyers who settled MDL cases against Merck & Co. (MRK:US) over the company’s withdrawn painkiller Vioxx split more than $315 million in fees in 2011.

U.S. District Judge Eldon Fallon in New Orleans also had to evaluate objections to fee allocations in that case, which featured at least 16 trials in federal and state courts. No

Avandia cases went to trial in either federal or state court. Rufe approved the fee fund in October.

The lawyers on the fee-advisory group headed by Nast included Zonies, Andrus, Thomas Cartmell, Bryan Aylstock, Stephen Corr, Paul Kiesel and Bill Robins III, according to court records. Cartmell, Andrus and Kiesel declined to comment on the fee recommendations. Aylstock, Corr and Robins didn’t return calls seeking comment.

Lead Counsel

Andrus, a Denver-based lawyer who served as lead counsel in the Avandia case at one point, is slated to receive more than $17 million for his work on the consolidated cases, according to the people familiar with the matter. He put in more than 6,300 hours of work on the case and his fee would provide a payment of almost $2,700-an-hour, the people said.

Cartmell, a Kansas City, Missouri-based lawyer who also served as a lead lawyer on the federal cases, is in line to receive more than $18.5 million, according to the people. He racked up more than 12,000 hours of work on the case and his recommended fee would amount to $1,496-an-hour, the people said.

Aylstock, whose law practice is based in Pensacola, Florida, also served in a lead role in the Avandia MDL. The group recommended he receive more than $18.5 million in fees, the people said. Aylstock worked more than 8,400 hours on the MDL case and his fee is equal to $2,211-an-hour, according to the people.

Leadership Group

Robins, of Santa Fe, New Mexico, another member of the leadership group, stands to receive at least $11.4 million for more than 11,300 hours of work, according to the people familiar with the matter. That is a rate of $1,008-an-hour. Kiesel, a Beverly Hills, California-based lawyer who also served as one of the MDL’s lead counsels, stands to make more than $5.5 million in fees for more than 3,600 hours of work, or $1,521-an-hour, the people said.

Nast, based in Philadelphia, would receive more than $6.7 million for more than 4,100 hours of work, according to the people. That works out to a $1,631-an-hour rate.

Nine law firms have objected to the Avandia MDL fees, according to the court docket. While their filings are sealed, objectors are probably arguing that Zonies, Cartmel and other MDL leaders are “double dipping” on fees, Tobias said.

Those lawyers received their fees for settling their Avandia cases consolidated before Rufe and now are getting a second fee for their work on the MDL, Tobias said.

‘Biggest Fees’

“It sort of feels like a conflict of interest to have the folks on the fee committee recommending that they get the biggest fees,” Tobias said. “Then again, they are most likely the ones who have done the most work on the MDL cases, so they may be deserving of those fees.”

Rufe appointed lawyer Bruce Merenstein of Philadelphia to serve as a special master to review the fee-advisory committee’s recommendations and the objections to it, public court filings state. He’s being paid $475-an-hour for his work, according to the filings.

Merenstein said in an interview that he’s been talking with lawyers who’ve complained about their split of the fees.

“We are moving toward resolving the objections,” he added.

Rufe has the final say on any fee award, Erichson said. Questions about self-dealing by an MDL fee committee can raise “legitimate concerns,” the law professor said.

The consolidated case is In re Avandia Marketing, Sales Practices and Products Liability Litigation, 07-01871, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net and; Sophia Pearson in Philadelphia at spearson3@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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