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Legal Affairs: PRODUCT LIABILITY
A BREAST-IMPLANT DEAL COMES DOWN TO THE WIRE
It seemed to be such a good idea one year ago. In his courtroom in Birmingham, Ala., U.S. District Judge Sam C. Pointer Jr. had given final approval to the largest settlement in litigation history. In one fell swoop, a $4.2 billion package put to rest much of the years-old pandemonium associated with thousands of claims made by women that silicone-gel breast implants had made them sick. The plaintiffs would get money for their physical and mental anguish. And implant manufacturers such as Dow Corning Corp. and Bristol-Myers Squibb Co. would avoid a legal nightmare that threatened financial upheaval and seemingly endless courtroom brawls.
As it turns out, the class-action settlement began to crumble almost before the ink from Pointer's pen had dried. Some 440,000 women, many more than expected, registered throughout the year to get a piece of the $4.2 billion pie, either now or when they become ill in the future. About 70,000 of them appear to qualify for immediate compensation, far beyond the 6,000 originally anticipated. Another 8,000 women elected to opt out of the deal altogether, choosing instead to pursue their cases in court. "It's the biggest mess you've ever seen," says T. Gail Armstrong, an implant recipient who serves as the consumer adviser to the global settlement.
Now, working under an Aug. 30 deadline set by the judge, plaintiffs and defendants are scrambling to rescue the package. "It's an extremely difficult problem," says Pointer, who in May sent both sides back to the drawing board. "I certainly have hopes but also serious doubts about whether it can be worked out."
Although substantial progress has been made, BUSINESS WEEK has learned that an industrywide deal is unlikely by September. Instead, according to sources close to the negotiations, Bristol-Myers is spearheading an effort to craft a minisettlement of sorts with co-defendants 3M and Union Carbide that it hopes will lure other manufacturers later. "I'm cautiously optimistic," says Stanley Chesley, one of the plaintiffs' chief negotiators.
Sources say the retooled proposal, which is still evolving, would call for defendants other than Dow Corning to chip in a total of $3.6 billion, 42% more than their original contribution of $2.1 billion. If Dow Corning, which filed for bankruptcy in May, could be persuaded to join the deal, the package could be worth as much as $7.2 billion.
But more cash doesn't mean more money for individual plaintiffs, mainly because there are too many of them. The current plan calls for cases involving the vast majority of claimants--women with less serious health problems--to be split off from those with more debilitating conditions. And compensation, which had ranged from $140,000 to $1.4 million depending on each plaintiff's age and medical situation, will be cut deeply. Moreover, defendants are fighting to require women dissatisfied with a revised deal to mediate their disputes rather than take them to juries, sources say.
The talks could break down as Pointer's deadline approaches. No draft agreement even exists yet. But most lawyers involved in the process agree that the gamble would be too great to let the plan perish. "I believe that the global deal is the best alternative for securing global peace in this litigation," says Kenneth R. Feinberg, Dow Corning's point man in the negotiations. "I don't think we can permit the deal to collapse and send hundreds of thousands of women back to court."
Why not? Because most participants believe the stakes are just too high. To the implant recipients, who would otherwise have to wait for their cases to wend their way through court, a deal offers some quick financial help. Their lawyers, who have spent millions bringing suits, are eager to see a return on the investment--for themselves and their clients.
And even as the tide has begun to shift in the defendants' favor, with new research casting doubt on links between silicone and various diseases, manufacturers remain willing to bargain. A reasonable, fixed settlement would be preferable to the uncertainty of years of litigation, they say. Implant makers have had some notable successes in court, but they have also had some painful experiences. Bristol-Myers, for one, was hit with a $25 million verdict in 1992. "We continue to believe that resolving most of the claims through a single forum is in the best interests of all the parties involved," says a spokesperson for Baxter International Inc., one of the defendants.
SCRATCH ONE BILLION. Baxter's eagerness for a deal shows just how much the industry craves an end to this legal fiasco: The Deerfield (Ill.)-based company hasn't been officially involved in the talks since July, when it was expelled by plaintiffs for balking at their demands. Dow Corning, too, has stayed on the sidelines. On Aug. 22, its counsel met plaintiffs' lawyers for the first time in months to initiate talks on a revised deal.
There are many factors impelling everyone toward settlement. Dow Corning, which is in danger of becoming the property of its largest creditor, breast-implant plaintiffs, says it has already spent $1 billion defending itself. "It was Litigation Inc. that forced us into this situation," fumes Dow Corning's president, Gary Anderson. Dow Corning's half owner, Dow Chemical Co., which is not part of the settlement talks, says it spends $10 million a year on legal fees generated by some 3,000 breast-implant cases.
On the plaintiffs' side, too, a collapsed agreement means delay and a loss of millions. One estimate puts plaintiffs' lawyers' investment at least at $200 million. The women at the center of the storm could end up with nothing from an unsympathetic jury.
Many of the estimated 1 to 2 million women with silicone-gel implants are plotting their next move in the event no acceptable pact is reached. "It would be wonderful to save this deal," says Sybil Niden Goldrich, co-founder of Command Trust Network, a support group for implant recipients. "But to be further humiliated getting 5 cents on the dollar is absolutely out of the question." Two retaliatory measures under review: a boycott of manufacturers' products or a coordinated, massive opt-out by plaintiffs. Support-group leaders, who claim that ruptured silicone implants have disabled women worldwide, have begun circulating lists of products made by the various defendants in case a boycott is declared. "We know we can wield a lot of power," says Armstrong.
The industry may wield even more, given its financial muscle. As negotiation time grows short, the defendants are backing a campaign to sway public opinion and convince women that a deal is their best option. In the current probusiness climate in Congress, for example, breast-implant manufacturers have become the poster children of tort reform. Portraying themselves as victims of a legal system run amok, they have skillfully shifted the focus from the women's allegations to the plight of businesses unfairly accused of wrongdoing. Complaining about what they see as unreasonable demands by plaintiffs, one lawyer gripes: "We're talking about a larger amount of money than Clinton was able to garner from Japan and West Germany when he was trying to save Russia."
Dow Corning is now questioning whether to offer silicone in other products because of the liability it might face. To plead its case, Dow Corning ran full-page ads in 19 major newspapers nationwide in May. The message: No link exists between silicone gel breast implants and disease. "To pay large sums of money for diseases we did not cause is unfair," says Dow Corning's Anderson.
The executive's beef comes after scientific research has shown no tie between silicone and a variety of maladies. Two recently published studies--one by the Mayo Clinic and another by Harvard University--found that women with silicone implants are no more likely to develop autoimmune or connective-tissue diseases than women without implants. The Mayo Clinic study compared the medical histories of 749 women who had implants with 1,498 who didn't and found no greater incidence of disease in one group than the other. Another larger, more comprehensive study is due out early next year.
"DEAR DOCTOR." The studies don't yet prove that the products are safe. And the Food & Drug Administration, which is still studying alarming rupture rates of the implants, will not allow gel implants to be used for anything other than reconstructive surgery anytime soon. It pulled them from the market in 1992. But these two studies and several others do weaken plaintiffs' claims that silicone-related diseases are widespread. "We now have a reasonable assurance that silicone-gel implants do not cause a large increase in traditional connective-tissue disease in women who have the implants," concluded FDA Commissioner David A. Kessler at an Aug. 1 congressional hearing. Added Dr. John S. Sergent, a professor of medicine at Vanderbilt University School of Medicine: "The only thing keeping this issue alive is litigation."
To be sure that physicians are up on the latest science, a New York public-relations firm, The Dilenschneider Group, sent out on July 12 "Dear Doctor" letters to rheumatologists around the country. The goal of the campaign is to alert the specialists, who diagnose women making claims against implant manufacturers, to what Dilenschneider dubs the "junk science" plaintiffs' lawyers disseminate. Dilenschneider principal Matthew M. Swetonic, who declines to say for whom he's working, says he simply wants to get accurate information to doctors. Dow Chemical, Dow Corning, and Baxter all deny hiring Dilenschneider, while a Bristol-Myers spokesperson declines comment.
Plaintiffs' lawyers are considering launching their own PR machine to combat the industry's blitz. "We have to have somebody that can react to the total trash being put out there," says Houston attorney Richard N. Laminack, who represents 2,000 women.
Laminack's "total trash" refers to research that he and others contend is flawed and biased. The laundry list of deficiencies they allege includes the charge that researchers are focusing on the wrong diseases. Instead of probing traditional autoimmune sicknesses such as lupus and rheumatoid arthritis, these critics argue that an atypical disease made up of a hodgepodge of symptoms such as joint pain, fatigue, and hair loss should be studied. "The attorneys, FDA regulators, and scientists have been looking for zebras when they are surrounded by horses," says Dr. Norman D. Anderson, an associate professor of medicine and surgery at Johns Hopkins University.
SHORT TEMPERS. While the battles over science rage, another war is on. Plaintiff negotiators are increasingly divided over the terms they'll accept in a new deal. "There's a civil war," says one lawyer. The rift, which has led lawyers to resort to name-calling and to storming out of meetings, pits class-action counsel against lawyers more versed in representing individual plaintiffs. The dispute has not only complicated the settlement talks but distanced the hundreds of lawyers nationwide representing implant recipients from their negotiating team. "The negotiators felt strongly that everything had to be done in secret," says Gayle L. Troutwine, a lawyer representing about 730 women. "As a result, they have become very, very isolated and are not keeping other lawyers informed."
The plaintiffs' negotiators say the feuding is only natural in such a tense environment and that it is not impeding efforts to forge a new deal. "I've been walking out of meetings for two years. That's negotiation," says plaintiff lawyer Chesley, adding that bickering has little to do with whether or not a new settlement can be reached by Aug. 30.
Instead, Chesley says it will come down to how badly all the parties want it. Everything else, he says, is posturing. "The defendants would like the public to think that these bad old plaintiffs' lawyers want to destroy Corporate America," he says. "If they like their cases so much, let them go to court." Unless Judge Pointer grants the parties more time, that could very well be where everyone is headed.
The Sticking Points
For a global pact to work, negotiators must address the following issues:
WHO'S LIABLE AND FOR HOW MUCH With scores more women than anticipated filing claims, more money is needed. But Dow Corning is in bankruptcy, and Dow Chemical refuses to participate in talks, so extra funds are proving tough to find.
WHO WILL QUALIFY FOR COMPENSATION Most women seeking compensation have ill-defined symptoms such as fatigue. Setting new criteria to qualify for money could knock plaintiffs with minor ailments out of the deal.
THE STATE OF SCIENTIFIC EVIDENCE Recently published studies cast doubt on whether silicone implants cause disease. Though inconclusive, the data have emboldened manufacturers to bargain harder.
OPT-OUTS A new deal will likely include an opt-out clause that allows plaintiffs to pursue cases outside the settlement. But too many opt-outs would hurt the pact, so negotiators are weighing whether to compel women into mediation.By Linda Himelstein in New York, with John Carey in Washington and Keith Naughton in Detroit