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2020 Highlights Louisiana 2020 – HB 57 (special session) Provides

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2020 Highlights

Louisiana

2020 – HB 57 (special session)

Provides that in cases where a claimant’s medical expenses have been paid, in whole or in part, by a health insurance issuer or Medicare to a medical provider, the claimant’s recovery of medical expenses is limited to the amount actually paid to the medical provider by the health insurance issuer or Medicare, and any applicable cost sharing amounts paid or owed by the claimant, and not the amount billed.  Provides that the court shall award 40% of the difference between the amount billed and the amount actually paid to the contracted medical provider by a health insurance issuer or Medicare in consideration of the plaintiff’s cost of procurement provided that this amount shall not make the award unreasonable.  Provides that in cases where a claimant’s medical expenses have been paid, in whole or in part, by Medicaid to a medical provider, the claimant’s recovery of medical expenses paid by Medicaid is limited to the amount actually paid to the medical provider by Medicaid, and any applicable cost sharing amounts paid or owed by the claimant, and not the amount billed.  Provides that the recovery of any other past medical expenses shall be limited to amounts paid to a medical provider by or on behalf of the claimant, and amounts remaining owed to a medical provider, including medical expenses secured by a contractual or statutory privilege, lien, or guarantee.  Provides that in cases where a claimant’s medical expenses are paid pursuant to the La. Workers’ Compensation Law (LWC), a claimant’s recovery of medical expenses is limited to the amount paid under the medical payments fee schedule of the LWC.  Provides that in a jury trial, only after a jury verdict is rendered may the court receive evidence related to the limitations of recoverable past medical expenses paid by a health insurance issuer or Medicare.  The jury shall be informed only of the amount billed by a medical provider for medical treatment. Whether any person, health insurance issuer, or Medicare has paid or has agreed to pay, in whole or in part, any of a claimant’s medical expenses shall not be disclosed to the jury. In trial to the court alone, the court may consider such evidence.  The bill does not apply in medical malpractice claims or in claims brought pursuant to the Governmental Claims Act.

 

Missouri

2020 – SB 224

Provides that punitive damages shall only be awarded if the plaintiff proves by clear and convincing evidence that the defendant intentionally harmed the plaintiff without just cause or acted with a deliberate and flagrant disregard for the safety of others, and the plaintiff is awarded more than nominal damages.  Punitive damages may be awarded against an employer due to an employee’s conduct in certain situations, as provided in the act.  When an employer admits liability for the actions of an agent in a claim for compensatory damages, the court shall grant limited discovery consisting only of employment records and documents or information related to the agent’s qualifications.

A claim for punitive damages shall not be contained in the initial pleading and may only be filed as a written motion with permission of the court no later than 120 days prior to the final pretrial conference or trial date.  The written motion for punitive damages must be supported by evidence.  The amount of punitive damages shall not be based on harm to nonparties.  A pleading seeking a punitive damage award may be filed only after the court determines that the trier of fact could reasonably conclude that the standards for a punitive damage award, as provided in the act, have been met.  The responsive pleading shall be limited to a response of the newly amended punitive damages claim.

The legislation provides that the defendant may also be credited for punitive damages paid in a federal court.

These provisions shall not apply to claims for unlawful housing practices under the Missouri Human Rights Act.

Modifies the definition of “punitive damages” as it relates to actions for damages against a health care provider for personal injury or death caused by the rendering of health care services.  In order to be awarded punitive damages, the jury must find by clear and convincing evidence that the health care provider intentionally caused damage or demonstrated malicious misconduct. Evidence of negligence, including indifference or conscious disregard for the safety of others, does not constitute intentional conduct or malicious misconduct.


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2023 State Tort Reform Enactments

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Florida, Georgia, Indiana, Iowa, Kansas, Montana, Texas, Utah, West Virginia

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Georgia

Indiana

Iowa

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West Virginia


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2022 State Tort Reform Enactments

|2022

Arizona Asbestos Overnaming – S.B. 1157 Secondary Sources / Insurance

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White Papers & Reports

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Trial Lawyer Playbook Report

|2023

Regardless of the product, “The Trial Lawyer Playbook” is essentially the same every time. ATRA’s report unearths the foundational elements of this complex mass tort machine.

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Executive Summary

In the dynamic landscape of Capitol Hill discussions and evolving policy debates, one topic has emerged as a pivotal concern – “The Trial Lawyer Playbook.” As policymakers grapple with the intricate web of mass tort litigation, it is evident that this playbook serves as the proverbial oil that keeps the mass tort machine running smoothly. 

The American Tort Reform Association’s comprehensive report, “The Trial Lawyer Playbook,” seeks to pull back the curtain and expose the inner workings of the trial bar – namely, the three-legged stool that upholds their operations, comprised of robust public relations and advertising campaigns, the propagation of junk science, and an infusion of funding from third-party investors.

Recent developments and events on Capitol Hill have set the stage for this pivotal discussion. In September 2023, the House Committee on Oversight and Reform held a hearing on third-party litigation financing, during which the American Tort Reform Association submitted a compelling letter of testimony, underscoring the urgency of this report. Equally pertinent is the introduction of a bill, the “Protecting Our Courts from Foreign Manipulation Act,” championed by Senators John Kennedy (R-LA) and Joe Manchin (D-WV), which looms large on the legislative horizon.

What is the Trial Lawyer Playbook?

Regardless of the product, “The Trial Lawyer Playbook”  is essentially the same every time. ATRA’s report unearths the foundational elements of this complex mass tort machine – third-party litigation financing, dubious scientific theories, and the ubiquitous influence wielded by trial lawyer advertising.  

The first pillar, third-party litigation financing (TPLF), swiftly has burgeoned into a multi-billion-dollar industry. Hedge funds and private equity entities now play a pivotal role by furnishing substantial capital to plaintiffs’ law firms, thereby securing a share of forthcoming settlements. While proponents extol TPLF for expanding access to justice, it introduces ethical quandaries and upends the conventional dynamics of litigation.

As foreign investment enters the realm of litigation finance, the narrative becomes further convoluted. Sovereign wealth funds, often enshrouded in opacity, have initiated investments in litigation finance entities, potentially infusing foreign influence into domestic legal matters. Apprehensions surrounding national security repercussions have prompted the aforementioned legislative response from Senators Kennedy and Manchin, forging bipartisan endeavors to address these concerns.

The second pillar of the triad centers on trial lawyer advertising. Law firms and lead generators spare no expense in soliciting new clients, deploying aggressive advertising campaigns that instill unwarranted trepidation in consumers. These campaigns are often made possible by third-party financing. Products such as Roundup® weed killer and talcum powder are thrust into the public limelight, frequently bereft of scientific substantiation. From 2017 to 2021, an astonishing $6.8 billion was spent on legal advertising, underscoring the magnitude of this issue.

The third pillar, the proliferation of unsubstantiated scientific evidence, finds particular resonance in mass tort litigation. Unscrupulous experts, characterized by dubious credentials and lax scientific standards, are enlisted to provide baseless scientific testimony. The integrity of our legal system is at risk as lenient evidentiary standards persist, permitting misleading assertions to infiltrate courtrooms.

Our hope is that legislators and policymakers utilize this report as a resource, given the report’s illuminative insights into a system that profoundly impacts not only the judicial echelon but also the lives and livelihoods of our neighbors. A report by the Perryman Group found that the total current impact of excessive tort costs on the U.S. economy includes losses of an estimated $472.88 billion in output (gross product) each year and about 4.46 million jobs when dynamic effects are considered. Some states with the highest “tort taxes” paid due to these excessive tort costs are in Judicial Hellholes® like California, New York, and Illinois, where residents pay an annual “tort tax” of $2,119, $2,013, and $1,688, respectively.

This report navigates the labyrinth of the trial lawyer playbook, encompassing in-depth analysis, instances of litigation, prospective trends, and a look at actions that have served as remedial measures in states, which have dealt with these issues. These states have proactively embraced measures to redress such pressing concerns.

 

Download Full Report

 

The Finance Play: Third Party Litigation Financing

What Is Third-Party Litigation Funding (TPLF)?

Third party litigation funding (TPLF) is the practice of investors buying an interest in the outcome of a lawsuit – and it has rapidly become a multi-billion-dollar industry.

There are multiple types of litigation financing, but “big-ticket” lawsuit lending typically involves hedge funds and private equity companies that specialize in financing mass tort litigation, commercial and intellectual property litigation, or a broader portfolio of cases handled by a law firm.

Third-party litigation funders front money to plaintiffs’ law firms in exchange for an agreed-upon cut of any settlement or money judgment. When these cases are resolved, the lawsuit lender is usually entitled to a percentage of the recovery, much like a contingency-fee. Investors are attracted by the prospect of a substantial return on their investment and law firms use the money to cover upfront litigation costs.

Importantly, litigation financing does not only fund lawsuits, but it creates them. For example, an outsider’s financial investment in a case may be used to cover the cost of the mass tort lawsuit advertising that has surged in recent years and the call centers that handle the responses. These ads often urge viewers who have taken a prescription drug, been treated with a medical device, or used a consumer product to “call right now” because “you may be entitled to substantial compensation.” Even when sound science does not support these suits, mass tort lawyers and their investors understand that if they quickly generate thousands of claims tying a widely used product to a common illness, the targeted company will face strong pressure to reach a global settlement. That settlement will result in a substantial payout to both the contingency-fee lawyers and investors. 

Proponents of lawsuit financing argue that TPLF provides access to justice for those who might not otherwise be able to afford it. But, the reality is that it can create serious problems for the legal system as a whole.

Litigation financing raises several ethical concerns, such as a threat to a lawyer’s ability to exercise independent judgment in cases where the funder can influence litigation or settlement decisions. The presence of an unknown third-party with a stake in the outcome of a lawsuit can change what is essentially a two-party negotiation into a multi-party process with a “behind-the-scenes” influencer. As a TPLF company executive has acknowledged, litigation funding “make[s] it harder and more expensive to settle cases.” 

An Analysis of TPLF Today

With mass torts frequently being litigated on a contingency arrangement by plaintiffs’ firms, financing litigation has become a lucrative business. An article from The New York Times in 2018 noted that hedge funds and investment firms have begun to open funds based on litigation finance, with these investors becoming “go-to financiers for many of these cases.” These loans to law firms often carry interest rates as high as 18%, with some investors also receiving a cut of any possible return in some larger cases. The head of one large litigation finance fund even equated mass tort lending to “payday lending.”

With more than $10 billion in capital distributed from investors to law firms in 2021, hedge funds are not only capitalizing individual mass torts, they are also funding law firms to buy mass tort cases from other firms to bulk up their caseloads. Litigation finance has become a booming industry as large Wall Street firms and pension funds aim to diversify their investment portfolios with alternative investment classes that make money independent of market variance.

Examples of TPLF & Litigation Funders

Beyond Wall Street money, some of the smaller trial law firms also are receiving financing from larger, more established trial law firms. One example of this phenomenon is Counsel Financial, a boutique litigation finance firm partially overseen by Weitz & Luxenberg, a large plaintiffs’ firm focusing on mass torts. Counsel Financial boasts of financing lawsuits dealing with talc, Xarelto and hernia mesh, all of which have been a focus of  Weitz & Luxenberg. Counsel Financial even has a program offering to help new trial lawyers get into mass torts dealing with those three case classes. Weitz & Luxenberg lawyers are even offered up as mentors for trial lawyers looking to file those lawsuits.

A hybrid model between Wall Street funding and the Counsel Financial model exists with Armadillo Litigation Funding. Armadillo Litigation Funding is run by employees of the Johnson Law Group, a mass tort firm based in Texas, but appears to be funded by EJF Capital. Armadillo Litigation Funding supplies money not just to the Johnson Law Group, but also gives money to smaller firms participating in mass torts.

 

Counsel Financial Boasts About Providing Funding for Various Lawsuit Classes, Including Talcum And Xarelto

 

(Source: “Mass Torts,” Counsel Financial, Accessed 5/21/21)

 

(Source: “Talcum Powder,” Counsel Financial, Accessed 5/21/21)

 

(Source: “Xarelto,” Counsel Financial, Accessed 5/21/21)

 

 

Outside Investors Owning Law Firms

Rules in virtually every state prohibit private interests from owning – or co-owning – law firms. This recently changed in Arizona, where the state supreme court ruled that outside investors can own law firms. Experts have said the groups most likely to participate in co-owning a law firm could be litigation funders or legal marketing firms.This arrangement could lead to lawyers directly splitting case proceeds with their outside investors, something that wasn’t possible before. Legal experts worry this could create cross-pressure with law firms that may be trapped between their fiduciary duty to their investors and their ethical duty to their clients. 

Conflicts of interest between fiduciary duty and client representation in mass torts has already been an issue in direct litigation finance. Some lenders charge higher interest rates as cases drag on, putting pressure on the trial lawyer to settle or take less than what their client would get by prolonging the case. During pelvic mesh cases, the federal government investigated whether lawyers and litigation funders were urging women to remove their mesh implants to receive larger settlements from companies that made or manufactured pelvic mesh.

 

Using Loans to Buy New Clients from Other Firms

Using loans to acquire new clients from other firms raises additional concerns within the legal industry. A prime example of this practice can be seen in the 2016 acquisition of Gerchen Keller Capital by Burford Capital. In this transaction, a substantial sum of $160 million was involved, composed of cash, notes, and shares. Gerchen Keller Capital, previously known for its involvement in personal injury mass torts, had amassed a considerable $475 million fund in 2015. They extended $100 million to the Houston law firm AkinMears for the explicit purpose of buying injury claims from other lawyers.

This strategy essentially turns legal cases into commodities, with financing deals often structured at interest rates near 16%. AkinMears utilized Gerchen Keller’s capital to acquire a staggering 14,000 defective product claims, primarily focusing on transvaginal mesh cases.  The potential profits were immense, with calculations suggesting attorneys’ fees of up to $200 million if the cases proved successful.

Furthermore, part of the funds obtained by AkinMears from Gerchen Keller went toward settling debts with another litigation financing company, Virage Capital Management. AkinMears had found itself in dire financial straits due to substantial debt, making it increasingly challenging to secure additional loans. Gerchen Keller’s capital infusion not only facilitated the acquisition of new clients but also acted as a lifeline, allowing AkinMears to stabilize its financial position by paying off a portion of its outstanding debts.

This practice underscores the ethical and moral dilemmas inherent in the legal industry’s pursuit of profit. Using loans to buy clients from other firms transforms justice into a commercial venture, potentially compromising the integrity of legal proceedings and the interests of clients. It raises serious questions about the prioritization of financial gain over the principles of justice and the sanctity of legal practice.

 

Foreign Investment

Coupled with the rise of large hedge funds and pension funds to find alternative assets for portfolio diversification, it is no surprise that sovereign wealth funds have begun to invest in litigation finance firms and funds. Disclosures as to which litigation finance funds receive sovereign wealth investment is sparse as sovereign wealth funds do not have to publicly disclose their investments.

While the exact investments of sovereign wealth in litigation finance is largely unknown, some reports have leaked. A 2022 article in Arabian Gulf Business implied that the Abu Dhabi Investment Authority has invested in litigation finance funds. Litigation finance firms like Burford Capital, Fortress Investment Group, IMF Bentham and Therium Capital Management all have announced publicly that they have received sovereign wealth investment.

The issues relating to sovereign wealth investment in litigation finance have been noted by several outside experts. In December 2022, an unnamed outside association warned the U.S. Government Accountability Office that sovereign wealth funds could seek to influence litigation decisions via these funds. University of Iowa law professor Maya Steinitz noted, “a sovereign wealth fund or a foreign government may seek to advance foreign policy or military goals.” A recent report by the U.S. Chamber of Commerce echoed similar concerns. In December 2022, 14 Republican Attorneys General asked the U.S. Department of Justice to investigate foreign funding into litigation finance. 

Senator John Kennedy (R-LA), a member of the Senate Judiciary Committee, has expressed concerns that state actors like China and Russia could infiltrate litigation financing in the U.S. which could have dire national security implications. Senator Kennedy recently asked Chief Justice John Roberts and Attorney General Merrick Garland to proactively issue guidance and take steps to limit the ability of foreign governments from being involved in funding domestic litigation. In September 2023, Senator Kennedy and Senator Joe Manchin (D-WV) introduced bi-partisan legislation aimed at addressing these concerns. 

How to Curb Abuse

Our legal system is intended to achieve fair and just resolution – not to generate profits for investors. If third-party litigation financing continues to be allowed, there must be regulations in place to ensure that investors are held accountable for their actions and that the integrity of the legal system is preserved. 

Regulations should include transparency surrounding TPLF agreements. Disclosure of such arrangements at the outset of litigation or upon entering a funding agreement would provide parties and courts with vital information to assess the influence of funders on the litigation.

 

Recent Successful Legislative Efforts

In some states, legislative bodies have prioritized reforms to address various forms of TPLF. These efforts are outlined below.

2023

Indiana

H.B. 1124 – Requires disclosure of a consumer litigation funding agreement. 

Missouri

S.B. 103 – Provides that consumer litigation funding agreements are subject to the rules of discovery, among other requirements. 

Montana

S.B. 269 – Subjects TPLF to the maximum usury interest rate or a 25% fee cap, requires automatic disclosure of the agreement in litigation and requires registration with the state as well as disclosure of the officers of the company engaging in litigation financing in Montana.  The legislation explicitly applies to class actions and subjects lenders to joint liability for costs and sanctions.

 

The Advertising Play: Trial Lawyer Advertising & Client Acquisition

Why and How Are Lawyers Advertising Their Services?

Law firms and businesses known as lead generators or aggregators increasingly spend large sums of money on advertising to recruit new clients – especially in plaintiff-friendly Judicial Hellholes®. They know it’s an effective way to needlessly scare consumers and encourage them to file claims.

If you turn on your television, chances are you will see an advertisement for either a law firm or a mass tort. Between 2017 and 2021, $6.8 billion was spent on legal advertising on television, comprising more than 77 million ads aired. Of the $6.8 billion spent, $1.4 billion of that came in 2021 alone. As Bloomberg noted in 2023, mass tort cases have been “turbocharged by a mass tort marketing industry that has evolved in recent years from the door-knocking of Erin Brockovich types into a high-tech, targeted operation on social media and TV.”

These ads include those soliciting claims alleging that consumer products, pharmaceuticals, and medical devices are responsible for medical conditions that either have a range of potential causes or the causes of which are unknown. Top targets of these ads include Roundup® weed killer, talcum powder and, more recently, the herbicide paraquat.

As of 2022, Roundup® was the top target of mass tort product liability litigation TV ads since 2015, with an estimated $131 million spent on more than 625,000 ads airing nationally and locally across the country between 2015 and 2022. Second only to Roundup® litigation ads, are ads soliciting claims alleging a link between the use of talcum powder and incidences of cancer. An estimated $109 million was spent on more than 370,000 talc litigation ads nationwide between 2015 and 2022.

Since plaintiffs’ lawyers have earned billions of dollars on talc and Roundup® litigation, showing a good return on their advertising investment, they’ve turned their attention to another herbicide – paraquat. Between2021 and 2022, more TV ads aired across the country soliciting claims alleging injuries caused by paraquat than mass tort ads related to any other product. Advertisers spent more than $24 million to air more than 150,000 of these ads between 2021 and 2022.

Notably, much of this advertising is conducted by aggregators: businesses that recruit potential plaintiffs and then sell their information to law firms.

From advertising to in-person advocacy to the outright purchase of caseloads, there are many ways to build out a portfolio of cases. And the payoff can be massive, with firms holding the largest caseloads often getting preference for payouts and the allocation of funds from cases involving large, multidistrict litigation.

An Analysis of Trial Lawyers’ Marketing Tactics & Client Acquisition Today

 

Legal Services Advertising

Advertising is the trial bar’s main method for finding claimants, with many advertisements being paid for by legal lead generators. Those lead generators then turn around and sell the potential clients based on a formula determined by the number of lawyers advertising for the case and where the litigation stands in the courts. A simple rule of thumb is that the more lawyers who are interested in gaining clients via advertising, the more expensive it will be for the trial law firm to gain caseload on a per-client basis. Beyond lead generation, some of these marketing firms have even opened a sideline in retrieving the medical records of potential claimants before passing this information along to tort law firms –a function previously handled  by the law firms directly.

Some of the biggest players in legal lead generation include MCM Services Group (more commonly known as the Gold Shield Group) and the Relion Group, which is wholly owned by the Carlyle Group. Another player, Knightline Legal is owned by Lucy Business Services LLC and primarily utilizes TV ads to generate leads for mass tort firms. Knightline Legal positions itself as a consolidated group of lawyers offering legal services to those injured by dangerous drugs and medical devices. Potential leads who call their hotline provide confidential information, which is then forwarded to law firms for evaluation. 

While advertising and buying client loads have been an aspect of client generation for decades, several new frontiers of client generation have popped up in recent years. Newsome Melton, an Orlando-based law firm, has started an Astroturf marketing campaign by creating a website with information on brain and spinal injuries. This informational website then serves to drive potential personal injury clients to the firm. Newsome Melton has also sought to write guest articles for other, work safety-related blogs under a pseudonym, with content designed to drive business to the firm.

 

Client Acquisition Beyond Ads

Mass tort firms have also started to get more aggressive with in-person marketing. In 2018, mass tort firm Napoli Shkolnik hosted an in-person event in Flint, Michigan with actor Harper Hill. The event aimed to get local residents to sign retainer agreements for lawsuits relating to the detection of lead in the Flint water system. Another law firm involved in litigation in Flint, Cohen Milstein, accused Napoli of breaching ethics laws against solicitation. 

Another new method of client generation comes from Levy Konigsberg in the competitive market for asbestos and mesothelioma clients. The law firm donates a considerable amount of money to a doctor studying mesothelioma at the NYU Langone Medical Center, leading the doctor to refer his clients directly to the firm

Examples of Trial Lawyer Ads 

Ad analysis conducted by the American Tort Reform Association utilizing data and creative provided by Kantar. 

 

Impacts of Misleading Legal Services Advertisements

Unfortunately, consumers may see doomsday ads about the lethal effects of medications or even general medical injury, and consequently stop using their prescribed medications. This is often done without consulting a doctor, causing health problems for the patients and increasing litigation risk for the product manufacturers.

A 2019 FDA study shows the real-life consequences of deceptive trial lawyer ads. The report found 66 incidents of adverse events following patients discontinuing the use of blood thinner medication (Pradaxa, Xarelto, Eliquis or Savaysa) after viewing a lawyer advertisement. The median patient age was 70 and 98% stopped medication use without consulting with their doctor. Thirty-three patients experienced a stroke, 24 experienced another serious injury, and seven people died. 

Dr. Shawn H. Fleming, doctor for one of the deceased, stated before a 2017 U.S. House Judiciary committee hearing, “It’s my opinion that the tone and content of these advertisements imply a qualitative judgment about these medications that are just not true. When you say ‘call 1-800-BAD-DRUG,’ that clearly implies it’s a bad drug, which runs counter to current medical evidence and also to the FDA’s recommendations.” 

These over-the-top advertisements from personal injury attorneys with catchy jingles and toll-free numbers pose a serious danger. These ads undermine the simple notion that physicians and health care providers, not personal injury lawyers or the “aggregators” who run the ads for the lawyers, should dispense medical advice.

The reason trial lawyers pump significant money into these ad buys is because, armed with more clients, they can boost settlements and payouts when they go after large corporations. This leads to larger contingency fees for themselves.

The ads do more than help recruit clients, however. They can also influence the thinking of citizens who may serve on a jury in lawsuits. A survey conducted by Trial Partners, Inc. found that 90% of jurors would be somewhat or very concerned if they saw an advertisement claiming a company’s product injured people. Additionally, 72% of jurors agreed somewhat or strongly that if there are lawsuits against a company claiming its products injured people, then there is probably truth to the claim – showing just how great an impact these ads can have.

These examples collectively shed light on the complexities and ethical issues surrounding legal services advertisements and the acquisition of clients in the legal industry. The changing industry highlights the need for transparency, regulation, and scrutiny of practices that may compromise the integrity of the attorney-client relationship.

 

How To Curb Abuse

States need to place reasonable regulations regarding deceptive or misleading lawsuit or legal services advertisements.

In some states, legislative bodies have prioritized reforms to address misleading legal services advertisements. These efforts are outlined below.

 

Recent Successful Legislative Efforts

2023

Florida

H.B. 1205  – Creates law related to legal advertising and the use of protected health information to solicit individuals for legal services.

 

2022

Kansas

S.B. 150 – Creates law related to legal advertising and the use of protected health information to solicit individuals for legal services.

 

Louisiana

S.B. 378 – Prohibits deceptive or misleading advertisements, specifically those presented as a medical alert, health alert, drug alert, or public service announcement. 

 

The Junk Science Play: Misleading Scientific Evidence

What is Junk Science?

The trial bar engages in massive television ad buys and public relations campaigns that peddle misinformation and taint the public’s preconceptions, while judges in Judicial Hellholes® fail to restrict falsehoods in their courtrooms. Junk science is especially common in mass tort litigation regarding the glyphosate-based Roundup® weed killer and talcum baby powder. The trial bar is spending hundreds of millions of dollars trying to drive home the message that these products cause cancer, despite the lack of sound scientific evidence verifying such claims.

Many courts have lax standards for evidence and judges who abandon their role as gatekeepers, resulting in an abundance of “junk science” presented to jurors.

Trial lawyers sometimes partner with so-called experts to provide misleading scientific evidence to support their claims both inside and outside the courtroom.

Simply stated, for a mass tort to exist, a target must be found to sue. In the past, targets were found via more traditional methods such as product recalls, regulation, and legislation, all of which are done by government organizations. Now, beyond these traditional methods, the plaintiff’s bar is also finding targets by relying on non-governmental organizations, often featuring shoddy research, using novel legal strategies to identify new targets, and even infiltrating traditional regulatory bodies to push regulations to extremes to make it easier to sue.

Trial lawyers turn to individuals with dubious credentials and a loose appreciation of ethical norms for one reason – the truth simply isn’t on their side.

An Analysis and Examples of Junk Science Today

Valisure & Private Testing Labs

Valisure, a small private sector company based in Connecticut, has been the genesis of a number of lawsuits filed against drug and chemical manufacturers, most notably lawsuits on the diabetes drug Metformin and heartburn medication Zantac.

Valisure has been repeatedly criticized by experts for their faulty methodology, with the U.S. Food and Drug Administration calling out Valisure’s methodology on both its tests on Zantac and Metformin. Valisure was also forced to retract a study on Zantac due to methodological issues.  

Valisure’s testing methodology involved heating the product to over 260 degrees, which is clearly not a realistic scenario for how an individual would consume the drug, considering that is double the temperature of the average healthy person.

Besides heating the product to temperatures it would not otherwise be subjected to, Valisure also tested the product with an artificial stomach containing unusually high amounts of salt – amounts that humans could not safely ingest.

Of more long-term concern is Valisure’s ties to trial lawyers. Several times, mass torts have been filed in the wake of Valisure testing results, including lawsuits regarding Metformin and Zantac.

Valisure has publicly said their business model is based on “generating data” for companies and other stakeholders, with Valisure’s CEO David Light noting they made money via a “data index subscription services.”One defendant who was the subject of a mass tort based on Valisure data explicitly called the company out, noting the company might have “financial incentives to… skew the results of its testing in a plaintiff-friendly manner.”

This contention was borne out in emails found during the discovery process in a mass tort filed using Valisure data. The emails found that Valisure received direct funding from trial lawyers for testing and had discussions with trial lawyers prior to filing a citizen’s petition with the FDA against rapid-release acetaminophen gel caps produced for Rite Aid. Emails also showed that trial lawyers hired Vailsure as a consultant before the citizen’s petition was filed and Valisure discussed the progress of the study and citizen’s petition “for months in advance of its publication. The brother-in-law of Valisure’s CEO also appears to have gotten information from Valisure tests ahead of publication, with lawsuits on the levels of ranitidine in Zantac and the amount of benzene in body sprays being filed the same exact day Valisure publicly released FDA citizen’s petitions on the topics.

 

The World Health Organization and the International Agency for Research on Cancer (IARC)

Over the course of the last several decades, the use of outlier studies to instigate new mass torts has risen precipitously. One of the most frequent sources for these outlier studies has been the World Health Organization’s International Agency for Research on Cancer, which is more commonly known as IARC. As of 2016, IARC had studied 989 separate substances and activities and had only found one that they didn’t deem a cause of cancer – a nylon used in yoga pants and nylon bristles. 

Among IARC’s more interesting determinations, they rated processed meats, wood dust and Chinese salted fish as existing at the same cancer-causing level as plutonium, mustard gas and tobacco use. IARC has also ruled that working as a painter causes cancer, mobile phone usage possibly causes cancer and working as a nurse is “probably carcinogenic.” With rulings like this, it’s no surprise that IARC has been called out by outside governmental regulators for their suspect methodology. 

IARC also has  been subjected to heavy criticism from outside experts and even former employees. Bob Tarone, the Head of Biostatistics at the International Epidemiology Institute, said IARC’s cancer determinations were “not good for science” and “not good for regulatory agencies.” Anotherformer employee stated IARC’s cancer determinations sometimes lack “scientific rigor.” Geoffrey Kabat, a cancer epidemiologist at the Albert Einstein College of Medicine, said IARC’s cancer determinations are “theoretical exposures which might, under some far-fetched conditions, possibly have an effect,” which does the public a “disservice.”

On glyphosate, a chemical IARC deems probably carcinogenic, a host of governmental regulators have dismissed the IARC methodology as flawed, as has been the case with IARC’s classification of aspartame. Environmental safety agencies in the U.S., Canada, Brazil, Australia, New Zealand, Japan, and the European Union have spent decades reviewing the health impacts of glyphosate. All agree that no credible evidence exists linking glyphosate to non-Hodgkin’s lymphoma.

But IARC says otherwise. The chemical, generally found safe by regulators worldwide, was termed a “probable” carcinogen by IARC in 2015. A member of the working group was a scientist named Christopher Portier, who, beyond being paid by an anti-pesticide advocacy group, later received $160,000 to serve as a consultant for a group of lawyers suing Monsanto over their use of glyphosate in their products. According to emails, Portier even took it upon himself to go on a “counteroffensive policy” to “deflect any reputational damage to IARC’s review” by going after agencies such as Germany’s Federal Institute for Risk Assessment and European Food Safety Authority’s assessments of glyphosate. 

 

Roundup® Litigation

Monsanto faces thousands of cases across the country alleging Roundup® causes cancer. Expert witnesses testify that glyphosate, the active ingredient in Monsanto’s signature Roundup® weedkiller, is to blame for triggering the disease. 

While a vast majority of plaintiffs’ lawyers rely on IARC’s glyphosate study as the foundation for their claims, others have looked to questionable “expert” witnesses.  

One such example was in August 2022, in the first St. Louis County case involving three plaintiffs from Florida, Washington, and upstate New York. Ten of the 12 jurors in the St. Louis courtroom sided with Monsanto, even after hearing a month’s worth of unfounded science put forth by plaintiffs’ witnesses. The case fell apart under cross-examination as the expert witnesses proved less than credible. 

The LinkedIn resume of one plaintiffs’ witness, William Sawyer, advertised that he was a “board-certified toxicologist” — until he was confronted on the stand and forced to admit that he was unable to obtain certification from the American Board of Toxicology. Sawyer failed both of his attempts to pass the examination required to secure that important credential. Sawyer then turned to Robert O’Block, founder of the American College of Forensic Examiners, who supplied an appropriate diploma. In fact, O’Block was so willing to certify any paying customer that he once certified a cat as a toxicologist.

Sawyer is a full-time expert witness in glyphosate product liability trials, an occupation that has made him a millionaire. Billing $785 an hour for his time, Sawyer has collected $2.5 million from his testimony in four Roundup® trials, according to his own testimony at trial.

At least Sawyer had academic training in toxicology. Fellow expert witness Charles Benbrook, by contrast, testified about the health effects of glyphosate despite having no training whatsoever in medicine, toxicology, or epidemiology.

Benbrook runs the Heartland Health Research Alliance (HHRA) which produces studies linking cancer to herbicides like Roundup®, as well as competing herbicides like dicamba and 2,4-D. His studies are likely laying the groundwork for future lawsuits against those products.

The trial bar sees great value in Benbrook’s endeavor – he was rewarded with $1.3 million for his testimony in addition to the $220,000 annual salary he takes from his non-profit, scientific research organization. The trial bar not only provides funding, it provides management direction. HHRA’s vice chair is Robin Greenwald, a partner at Weitz & Luxenberg, one of the many firms suing Monsanto.

 

Talcum Powder Litigation

Plaintiffs’ lawyers see the media as co-counsel in mass tort litigation. Most recently, The New Yorker published a story about Johnson & Johnson and its long-running talc litigation. 

Plaintiffs’ lawyers seem unwilling to let the litigation’s facts and legal arguments speak for themselves. Instead, as their communications with The New Yorker show, they helped orchestrate a media broadside in the form of a misleading 8,000-word article riddled with false statements, half-truths and omitted facts they then promoted tirelessly on social media. 

Plaintiffs’ attorneys persuaded The New Yorker to print their allegations as if they were facts. One of the sources The New Yorker cites is the plaintiffs’ attorneys’ hired gun expert, Dr. David Egilman, who testifies that, every time he looks, he finds asbestos in the tissue of customers who use Johnson & Johnson’s baby powder. In addition, Dr. Egilman recently testified that, when shown a picture of the Orion constellation, it was a depiction of talc, which allegedly contained asbestos. 

The magazine also failed to disclose that, in 2007, Dr. Egilman conspired with others to violate a protective order in a case regarding the drug Zyprexa, and he provided hundreds of cherry-picked confidential documents to various media outlets – including by using a sham subpoena. A federal district court held extensive hearings and strongly rebuked Dr. Egilman for his conduct, noting that he and his conspirators “executed the conspiracy using other people as their agents in crime.” Judge Jack Weinstein of the U.S. District Court for the Eastern District of New York stated that “such unprincipled revelation of sealed documents seriously compromises the ability of litigants to speak and reveal information candidly to each other; these illegalities impede private and peaceful resolution of disputes.

Judge Weinstein issued a Stipulated Order in which Dr. Egilman accepted responsibility and was ordered to pay Eli Lilly $100,000, which the company then donated to a charity of its choosing. 

Despite a myriad of baseless claims by the plaintiffs’ bar, independent medical experts have not found a confirmed link between talcum powder and cancer. 

 

PFAS Litigation

The plaintiffs’ bar also have set their sights on companies in the per- and polyfluoroalkyl (PFAS) business. These chemicals have been used since the 1950s and are valued for their ability to resist heat, repel water, protect surfaces, and reduce friction. They have been incorporated into an array of consumer products, such as nonstick cookware, stain-resistant carpet, and electronics.

In 2016 the U.S. Environmental Protection Agency issued new regulations on the amount of PFAS allowed in drinking water. This has led to a spate of new mass tort lawsuits across the country, with trial lawyers not just targeting PFAS manufacturers, but also companies that used PFAS and even landfill owners and operators over alleged PFAS contamination. This is despite the fact that no definitive evidence of adverse health effects from PFAS exists, with the states of New York and Minnesota showing no health effects from PFAS.

Despite this fact, 3M settled an 8-year long case with Minnesota for $850 million in February 2018. Of this total, $125 million went to private contingency fee lawyers — which, according to a Minnesota legislator, was the equivalent of earning $47,000 per day for seven years.

How To Curb Abuse

Juries and judges should have access to the most complete and accurate evidence during trials and be presented with scientifically and factually accurate information to allow them to make well-informed decisions.

Judges and lawmakers must support implementation of Federal Rule of Evidence 702 in courts, requiring that theories must be based on sound scientific method.

The Rule 702 standard is utilized in the federal court system and by a majority of states. Judges must follow applicable laws regarding evidentiary standards if they are in place in their state.  


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The National Association of Attorneys General

|2022

A Nonprofit That Acts Like a Plaintiffs’ Firm

[…]

Executive Summary

The National Association of Attorneys General (NAAG) was founded in 1907 as a nominally independent association as a way for state AGs to coordinate shared antitrust cases.[1] Historically, the Association has played an influential role in managing multistate investigations and lawsuits. Over time, however, NAAG’s focus has shifted from promoting efficiency and coordination to instead promoting entrepreneurial litigation targeting a variety of industries – similar to the mission of the mass torts plaintiffs’ bar.

NAAG has had a significant role in some of the most prominent mass tort litigation over the past few decades. Its targets have included manufacturers of tobacco, and most recently, opioids. The Association fully participates in settlements reached in multistate lawsuits, just as individual states and their for-profit, contingency-fee counsel participate. Interestingly, this places what once was an independent association in a situation in which it now has profit as a main motive to help initiate and settle litigation, just as the trial bar does.

For example, in March 2021, NAAG received $15 million as part of McKinsey’s $600 million settlement for the company’s role in marketing opioid prescriptions.[2] NAAG also received $103 million that grew to $140 million from the landmark Tobacco Master Settlement Agreement.[3]

NAAG essentially acts as a self-sustaining litigation machine, mainly funded by two revenue sources: yearly dues from state attorneys general of approximately $70,000 per state, per year[4]; and carveouts from multistate litigation settlements.

NAAG’s programs, operated through these funds, seem to be tailored specifically to promote litigation against business – attorneys in state AGs’ offices are trained under NAAG programming to bring more cases against other industries.[5] These training sessions are designed to help AGs be more effective in litigation. NAAG’s targeted training and support of state AGs offices is similar to that of other activist groups looking to influence and promote litigation in AG offices. For example, the Bloomberg-funded State Energy & Environmental Impact Center at New York University School of Law is designed to further litigation by placing lawyers funded by the Center in the offices of friendly attorneys general across the country, empowering them to bring climate change litigation. However, outside influence, whether it be from NAAG or other activist organizations, creates a concerning lack of accountability and transparency in state attorneys’ general offices.

To promote coordinated mass tort litigation, NAAG members also participate in working groups that focus on potential multi-state lawsuits. Their activities include information sharing agreements between state AG offices as well as monthly phone calls to discuss ongoing investigation. NAAG then offers lead states the opportunity to recruit other states to join specific litigation.

Additionally, plaintiffs’ lawyers often hold training sessions at NAAG conferences in which they discuss best practices for pursuing mass torts. It is an excellent business development opportunity for these plaintiffs’ lawyers because many of them will later look to be hired on a contingency-fee basis once the AGs initiate lawsuits.

In the early stages of litigation, NAAG provides grants to the states to help litigation get off the ground. Currently, NAAG has more than $200 million in assets. States receive grants to fund research and other expenses needed to determine participation in a multistate lawsuit. Any state seeking NAAG funding must submit a detailed memo outlining their legal strategy, expenses, and predicted results. States are required to repay the grant if there is a settlement regardless of whether the settlement terms stipulate reimbursement to NAAG.[6]

Utilizing this sort of funding source for litigation allows AGs to avoid using state-appropriated funds – or having to go to the legislature for more funds. This funding side-step weakens potential checks and balances a legislature may want to exercise in these situations.

NAAG continues to find new targets, from the tobacco litigation of the 1990s to the opioid lawsuits of today. While the opioid lawsuits begin to wind down, NAAG is now forming working groups on climate change and environmental issues like PFAS, eyeing a new generation of potential mass tort lawsuits.[7] Given the new NAAG focus on mass tort profit motive, it’s only a matter of time until they move into new areas of focus.

The following report provides additional information about the innerworkings of NAAG along with supporting background and research.

 

[1] Rachel M. Cohen, “The Hour Of The Attorneys General,” The American Prospect, Spring 2017.

[2] O.H. Skinner, “Payouts To Victims, Not Special-Interest Groups,” Washington Times, 3/3/21; https://www.washingtontimes.com/news/2021/mar/2/payouts-victims-not-special-interest-groups/.

[3] Daniel Fisher, “The House Tobacco Built,” Forbes, 8/14/08.

[4] Sean Ross, “Alabama Becomes First State To Leave National Association Of Attorneys General — ‘Going Further And Further Left’,” Yellowhammer News, 4/26/21.

[5] “Events & Training,” National Association Of Attorneys General, Accessed 1/27/22.

[6] “Janssen Settlement Agreement,” Office Of The Texas Comptroller, 7/21/21.

[7] “Clean Energy Issues Are On The Docket For State Attorneys General,” New York University, 10/3/19.


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L

Recent Legal Briefs

House Committee on Oversight and Reform Hearing on “Unsuitable Litigation: Oversight of Third-Party Litigation Funding”

|2023

View Letter Submitted by ATRA to the House Committee on

[…]

View Letter Submitted by ATRA to the House Committee on Oversight and Reform

 

House Committee on Oversight and Reform – Hearing on “Unsuitable Litigation: Oversight of Third-Party Litigation Funding”

 

ATRA is a broad-based coalition of businesses, corporations, municipalities, associations, and professional firms. Our mission is to establish and advance a predictable, fair, and efficient civil justice system through the enactment of legislation, filing amicus curiae (friend of the court) briefs in litigation, and public education. ATRA recently documented the rise of third party litigation funding (TPLF), the public policy concerns this practice raises, and potential solutions in “The Hidden Money Behind the Litigation: The Problematic Expansion of Third Party Litigation Funding” (June 2022).[1] ATRA is also among the organizations that has urged the federal judiciary to address TPLF, thus far, to no avail.

The influx of outside money into generating, advancing, and prolonging civil litigation – with the expectation that funders will receive a substantial return on their investment – is a key ingredient in the mass tort litigation machine that has taken hold of our federal courts. In this environment, the sheer volume of cases, rather than the merits of each case, is the driving force behind the litigation. Faced with investigating the validity of thousands of dubious claims and endlessly litigating them, businesses often make the rational choice to enter a global settlement, sometimes for hundreds of millions or billions of dollars. They do so even when the claims are unsupported by sound science or would otherwise likely be dismissed if evaluated on their individual merits.

The Rapid Growth of Third Party Litigation Funding

TPLF is the practice of investors buying an interest in the outcome of a lawsuit. Hedge funds, institutional investors, and public and private companies are pouring billions of dollars into funding litigation.[2] The lawsuit-investment industry is rapidly expanding, with startup businesses joining the fray, seeing a lucrative opportunity.[3] Litigation funders report that their business has grown over the past year, while attorneys indicate an increased willingness to consider outside funding.[4]

Attorney ethics rules and common law doctrines traditionally prevented the outside financing of litigation, but those are falling by the wayside. Champerty, for example, long prohibited a stranger to a lawsuit agreeing to help pursue a litigant’s claim in exchange for a portion of the case’s proceeds. Courts considered such agreements void and unenforceable, reasoning that the bar stops “officious intermeddlers from stirring up strife and contention by vexatious and speculative litigation which would disturb the peace of society, lead to corrupt practices, and prevent the remedial process of the law.”[5] In recent years, however, some courts have relaxed or abolished these rules.

Now, third-party litigation funders front money to law firms in exchange for an agreed-upon cut of any settlement or money judgment. Investors are attracted by the prospect of a large profit. For example, the CEO of Burford Capital, the largest litigation funder, has indicated that, on average, they will “largely double our money” when investing in a case and sometimes walk away with more than the plaintiff.[6]  According to a recent GAO report, litigation funding is present in a wide range of cases, including commercial and intellectual property disputes, antitrust litigation, and personal injury litigation.[7] The use of TPLF in mass tort and class action litigation, where lawyers drive the litigation on behalf of clients that have little or no involvement, exacerbates the likelihood of conflicts of interest.[8]

Adverse Consequences and Concerns of Undisclosed TPLF

Courts, litigants, and the public know very little about these hidden arrangements, which may complicate the ability to fairly resolve disputes and hide conflicts of interest or potentially unethical or illegal conduct. TPLF arrangements are rarely disclosed in court.[9]

The presence of an unknown third party with a stake in the outcome can change what is essentially a two-party negotiation into a multi-party process with a “behind-the-scenes” influencer. For example, it may be in the best interests of plaintiffs to accept an early, fair settlement offer that would provide reasonable compensation for their injuries. On the other hand, a litigation funder that is solely motivated by profit may pressure the attorneys involved to reject the offer in the hopes of receiving a jackpot verdict. Although litigation funders often state that they do not control the course of litigation or its settlement, these representations cannot be confirmed without disclosure and recent events have cast doubt on such claims.[10]

In addition, attorneys who receive TPLF will make higher settlement demands because they need to not only provide their clients with meaningful compensation after subtracting their own 33% to 40% contingency fee plus expenses, but also pay the lawsuit lender its agreed-upon share. As a TPLF company executive has acknowledged, litigation funding “make[s] it harder and more expensive to settle cases.”[11]

TPLF can enable litigation that is driven by ulterior motives, rather than what the parties and court would understand from the complaint. A defamation action may be bankrolled by a wealthy individual with a vendetta against the defendant.[12] A breach of contract action may stem from a funder’s desire to put a competing business at a disadvantage or gain trade secrets. There are also concerns that foreign governments, or sovereign wealth funds, could secretly invest in U.S. litigation to obtain sensitive technologies from American defendants, target U.S. rivals or dissidents, or destabilize the economy.[13]

TPLF Enables the Mass Tort Machine

TPLF can create litigation, not just fund it. Investments by outside funders have enabled the growth of mass tort litigation by covering upfront costs for maximizing the number of claims to flood the courts and overwhelm defendants, and by spreading the risk of filing speculative lawsuits.

An entire industry has developed to generate and settle mass tort litigation. Law firms and businesses known as “lead generators” spend extraordinary sums on lawsuit advertising. Between 2017 and 2021, they invested $6.8 billion on more than 77 million television ads.[14] These ads have also inundated social media. Sometimes presented as “medical alerts,” the ads urge viewers who have taken a medication, been treated with a medical device, or used a consumer product to “call right now” because “you may be entitled to substantial compensation.”

For example, spending on ads seeking plaintiffs for lawsuits blaming talcum powder or Roundup for a person’s cancer or alleging the blood thinner Xarelto led to side effects each has exceeded $100 million.[15] Call centers, sometimes in other countries, gather medical and other information from those who respond, then package and sell potential claims to interested law firms. In some instances, strangers have solicited individuals for lawsuits by phone, apparently through misuse of their medical records.[16] One law firm filed over 5,000 complaints in a mass tort docket in a single week.[17]

Even when sound science does not support these lawsuits, mass tort lawyers and their investors understand that if they quickly generate thousands of claims tying a widely used product to a common illness, the targeted company will face strong pressure to reach a global settlement. That settlement will result in a substantial payout to both the contingency-fee lawyers and investors. The strategy is to pressure a company to settle regardless of the merits of the litigation because of the challenge of suddenly defending thousands of lawsuits. A business must also consider the damage to its reputation, brand, and shareholders resulting from a barrage of negative ads.

That strategy is working for the plaintiffs’ bar, but is detrimental to the fairness of our civil justice system and is transforming the federal judiciary. In 2020, for the first time in history, multidistrict litigation (MDL), primarily product liability mass tort cases, made up more than half of the federal civil caseload.[18] That percentage reached an astounding 73% as of the conclusion of the 2022 fiscal year.[19] The percentage of cases in federal MDLs has doubled over the past decade and more than tripled over the past two decades. In some instances, companies have settled this litigation at levels in the hundreds of millions of dollars even after prevailing in every bellwether trial.[20]

Federal judges have expressed concern with the impact that the flooding of the courts with mass tort claims has on the civil justice system. When overseeing an MDL including 850 lawsuits targeting a medical device, the Chief Judge of the U.S. District Court for the Middle District of Georgia observed that lawyers file “cases that otherwise would not be filed if they had to stand on their own merit as a stand-alone action” in an MDL because they believe clear deficiencies in their claims will not be scrutinized when the claim is swept into a global settlement.[21] Another federal judge, who has overseen product liability mass tort litigations, explained that it is difficult to apply the ordinary procedural safeguards used to verify claims when “the volume of individual cases in a single MDL can number in the hundreds, thousands, and even hundreds of thousands.”[22] He cautioned that the “high volumes of unsupportable claims clog the docket, interfere with a court’s ability to establish a fair and informative bellwether process, frustrate efforts to assess the strengths and weaknesses of the MDL as a whole, and hamper settlement discussions.”[23] A Federal Advisory Committee on Civil Rules report provides a troubling estimate of the percentage of claims, likely generated through advertising funded through TPLF, that are unsupportable: 20% to 30% and, in some litigation, as many as 40% to 50%.[24]

TPLF is a key contributor to this mass tort litigation machine in which federal MDL dockets go from zero to tens of thousands of questionable claims in only a few months, many of which are meritless, with the expectation of a global settlement that will provide a handsome return to investors.

A Needed First Step: Transparency in TPLF

The extent to which TPLF is present in mass tort and other litigation cannot be fully understood since TPLF arrangements are not disclosed during litigation and remain hidden from public scrutiny. Nor can it be determined, in a specific mass tort litigation or individual case, whether an outside funder is behind the lawsuit, using the litigation for an improper purpose, or interfering with the ability of the parties to enter a reasonable settlement.

TPLF agreements should be disclosed at the outset of litigation or upon entering an agreement to receive outside funding, and courts should allow use of discovery to investigate the nature of litigation funding and its influence on the litigation. Disclosure of the agreement allows the parties and court to know whether an outside funder may be calling the shots in the litigation.

Six years ago, ATRA was among thirty organizations that asked the Federal Advisory Committee on Civil Rules to amend the rules to require automatic disclosure of TPLF agreements in all civil actions in federal courts.[25] This proposal is consistent with federal rules that mandate automatic disclosure of insurance agreements in litigation because this transparency enables counsel on both sides to evaluate the case and influences decisions about settlement and trial.[26] This proposal has remained stagnant even as the use of TPLF explodes and examples of funders influencing litigation mount.[27]

ATRA commends the Committee for holding this hearing and shining a light on an issue that is critical to the proper functioning and continued fairness of our civil justice system. ATRA urges Congress to address TPLF by, at minimum, requiring disclosure of such arrangements to other parties and the court.

[1] Available at https://www.atra.org/white_paper/the-hidden-money-behind-the-litigation-the-problematic-expansion-of-third-party-litigation-funding/.

[2] See U.S. Gov’t Accountability Office, GAO-23-105210, Third-Party Litigation Financing: Market Characteristics, Data, and Trends 11-12 (Dec. 2022) (“GAO Report”).

[3] See, e.g., Matt Wirz, The 26-Year-Old Dropout Lapping the Hedge-Fund Field, Wall St. J., Apr. 26, 2022.

[4] See Annie Pavia, Analysis: Are Boom Times Ahead for Litigation Finance?, Bloomberg Law, Nov. 13, 2022.

[5] Rancman v. Interim Settlement Funding Corp., 789 N.E.2d 217, 2019-20 (Ohio 2003).

[6] Leslie Stahl, Litigation Funding: A Multibillion-dollar Industry for Investments in Lawsuits with Little Oversight, CBS’s “60 Minutes,” Dec. 18, 2022 (interview with Christopher Bogart, CEO of Burford Capital).

[7] See GAO Report, supra, at 9, 13. According to a Swiss Re analysis, in 2021, mass tort litigation led TPLF investments (38%), followed by commercial litigation (37%) and personal injury litigation (25%). Swiss Re Inst., US Litigation Funding and Social Inflation 8 (Dec. 2021).

[8] See Maya Steinitz, Follow the Money? A Proposed Approach for Disclosure of Litigation Finance Agreements, 53 U.C. Davis L. Rev. 1073, 1105 (2019).

[9] See Bloomberg Law, Litigation Finance Survey 2022, at 3.

[10] See, e.g., Hannah Albarazi, When A Litigation Funder is Accused of Taking Over the Case, Law360, Mar. 15, 2023; Mike Scarcella, Litigation Funder Burford Sues Sysco Over $140 Mln Antitrust Investment, Reuters, Mar. 13, 2023; see also Editorial, The Litigation Financing Snare, Wall St. J., Mar. 21, 2023.

[11] Jacob Gershman, Lawsuit Funding, Long Hidden in the Shadows, Faces Calls for More Sunlight, Wall St. J., Mar. 21, 2018 (quoting Allison Chock, chief investment officer for IMF Bentham Ltd.’s U.S. division).

[12] See, e.g., Michael M. Grynbaum, Thiel Makes a Bid for Gawker.com, a Site He Helped Bankrupt, N.Y. Times, Jan. 12, 2018; Matt Drange, Peter Thiel’s War on Gawker: A Timeline, Forbes, June 21, 2016.

[13] See Donald J. Kochan, Op-ed, Keep Foreign Cash Out of U.S. Courts, Wall St. J., Nov. 24, 2022.

[14] See Am. Tort Reform Ass’n, Legal Services Advertising in the United States 2017-2021, at 4 (2022).

[15] See Roy Strom, Camp Lejeune Ads Surge Amid ‘Wild West’ of Legal Finance, Tech, Bloomberg Law, Jan. 30, 2023. Congress may be interested to learn if outside funders bankrolled the $145 million spent, as of the end of 2022, on television and social media ads to solicit Camp Lejeune claims against the federal government, and, if so, what cut they may be taking from the $6 billion authorized for veteran payments. See id.

[16] See Matthew Goldstein & Jessica Silver-Greenberg, How Profiteers Lure Women Into Often-Unneeded Surgery, N.Y. Times, Apr. 14, 2018.

[17] See David Nayer, Analytics Show One Firm Filed Over 5,000 Lawsuits in a Week, Law Street, Feb. 8, 2023.

[18] See Daniel S. Wittenberg, Multidistrict Litigation Dominating the Federal Docket, ABA J., Feb. 19, 2020.

[19] See Rules for MDLs, Press Release, 73% of Federal Civil Cases Are in MDLs as of Fiscal Year 2022, Apr. 27, 2023 (reporting that 392,374 civil cases out of 536,651 civil cases in federal courts, excluding Social Security and prisoner cases, reside in MDLs as of the end of FY22).

[20] See, e.g., Bayer and Johnson & Johnson Settle Lawsuits Over Xarelto, a Blood Thinner, for $775 Million, N.Y. Times, Mar. 25, 2019.

[21] In re Mentor Corp. Obtape Transobturator Sling Prods. Liab. Litig., 2016 WL 4705827, at *2 (M.D. Ga. Sept. 7, 2016).

[22] Judge M. Casey Rodgers, Vetting the Wether: One Shepherds View, 89 UMKC L. Rev. 873, 873 (2021).

[23] Id.

[24] Advisory Committee on Civil Rules, Agenda Book, Nov. 1, 2018, at 142.

[25] See Letter to Rebecca A. Womeldorf, Secretary of the Committee on Rules of Practice and Procedure of the Administrative Office of the United States Courts, Renewed Proposal to Amend Fed. R. Civ. P. 26(a)(1)(A), June 1, 2017 (Document No. 17-CV-O).

[26] Fed. R. Civ. P. 26(a)(1)(A)(iv) and Adv. Comm. Notes – 1970 Amendment.

[27] Three federal district courts require disclosure of TPLF, demonstrating that transparency works. District courts in Delaware and New Jersey require parties to disclose the identity of any litigation funder, whether the funder may influence litigation decisions or settlements, and the nature of the funder’s financial interest in the litigation, demonstrating that viability of disclosure. See Standing Order Regarding Third-Party Litigation Funding Arrangements (D. Del. Apr. 18, 2022); Disclosure of Third-Party Litigation Funding, N.J. Civ. R. 7.1.1 (June 21, 2021). The Northern District of California has adopted a similar disclosure requirement that applies to any proposed class action. See Standing Order for All Judges of the Northern District of California, Contents of Joint Case Management Statement, ¶ 18 (N.D. Cal. Jan. 17, 2023).


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Senate Judiciary Committee Hearing on Chapter 11 Bankruptcy

|2023

View Letter Submitted by ATRA to the Senate Judiciary Committee

[…]

View Letter Submitted by ATRA to the Senate Judiciary Committee

 

Hearing on Use of the Chapter 11 Bankruptcy Process to Address Overwhelming Mass Tort Litigation

 

Thank you for holding this hearing and for the opportunity to share the American Tort Reform Association’s (ATRA) concerns with criticism of corporate use of the bankruptcy process as a means of responding to the unprecedented, overwhelming number of mass tort lawsuits, many of which are of meritless. We respectfully do not agree with the Committee’s presenting this hearing as “Evading Accountability: Corporate Manipulation of Chapter 11 Bankruptcy.” Rather, our bankruptcy laws were established precisely for situations, as are now occurring, in which a business suddenly faces tens of thousands or hundreds of thousands of dubious claims with the prospect of never-ending litigation that will cost millions of dollars to legal defense alone, even if it expects to prevail in the vast majority of cases. In such instances, bankruptcy laws provide a fair system for compensating claimants while allowing American businesses to continue contributing to the economy without being saddled and distracted by litigation.

ATRA is a broad-based coalition of businesses, corporations, municipalities, associations, and professional firms. Our mission is to establish and advance a predictable, fair, and efficient civil justice system through the enactment of legislation, filing amicus curiae (friend of the court) briefs in litigation, and public education. In recent litigation that will likely be discussed in this hearing, ATRA has voiced its concerns with restricting the ability of businesses that face overwhelming mass tort litigation to use the bankruptcy system.[1] We have also urged the House Oversight Committee to address the hidden use of funding from outside investors that has contributed to the rise of mass tort litigation.[2]

Courts and Congress have historically recognized that the bankruptcy system is a valid means of addressing mass tort claims. In such cases, bankruptcy may be the best way for businesses to address overwhelming tort liability while continuing to contribute to society. Members of this Committee may be aware that the unique complexities of mass asbestos litigation led Congress to enact the Bankruptcy Reform Act of 1994, codified at 11 U.S.C. 524(g). That law ensures that the interests of claimants are protected while “simultaneously enabling corporations saddled with asbestos liability to obtain the ‘fresh start’ promised by bankruptcy.”[3] Section 524(g) “affirm[s] what Chapter 11 organization is supposed to be about: allowing an otherwise viable business to quantify, consolidate, and manage its debt so that it can satisfy its creditors to the maximum extent feasible, but without threatening its continued existence and the thousands of jobs that it provides.”[4] In passing this legislation, members reaffirmed that the bankruptcy process “is  designed to help asbestos victims receive maximum value.”[5]

For decades, businesses facing mass tort claims have filed Chapter 11 petitions to address mass tort liabilities and the courts have consistently permitted them to do so. As a result, millions of people have received compensation for their claims, often in a prompt and efficient manner, while at the same time preserving beneficial aspects of those businesses. For example, there are more than 60 asbestos trusts in operation, holding billions of dollars to “compensate claimants expeditiously at minimal cost.”[6] Companies have also invoked Chapter 11 to address mass tort liabilities ranging from medical device product liability claims, such as those involving Dalkon Shield and silicone breast implants,[7] to train crashes and wildfire damage claims.[8]

The most common targets today include pharmaceutical, medical device, and consumer product manufacturers. In recent years, mass tort litigation has exploded as an entire industry has developed to generate it. Law firms and businesses known as “lead generators” spend extraordinary sums on lawsuit advertising, sometimes financed by an influx of outside investment in speculative litigation by outside sources (known as third party litigation funding).[9]  Between 2017 and 2021, they invested $6.8 billion on more than 77 million television ads.[10] Ads have also inundated social media. Sometimes presented as “medical alerts,” ads urge viewers who have taken a medication, been treated with a medical device, or used a consumer product to “call right now” because “you may be entitled to substantial compensation.” For example, spending on ads seeking plaintiffs for lawsuits blaming talcum powder or Roundup for a person’s cancer or alleging the blood thinner Xarelto led to side effects each has exceeded $100 million.[11] Call centers, sometimes in other countries, gather medical and other information from those who respond, then package and sell potential claims to interested law firms. In some instances, strangers have solicited individuals for lawsuits by phone, apparently through misuse of their medical records.[12]

With minimal screening, claims are filed en masse. One law firm recently filed over 5,000 complaints in a mass tort docket in a single week.[13] Potentially viable claims may be buried among unsupportable ones. The strategy of the plaintiffs’ bar is to pressure companies to settle the litigation at incredible sums to avoid endless litigation and prolonged damage to their reputations, regardless of the merits of the individual cases. In litigation involving latent injuries, however, it is impossible for a company to settle unknown potential future claims through the tort system. Likewise, the mass tort system may breakdown when lawsuit advertising, the ease of filing claims, and a lack of verification of their validity leads to more claims than defendants and the courts can fairly handle. In those instances, use of the bankruptcy process offers a legitimate, needed means of fully resolving the litigation.[14]

But don’t take it from us, listen to what federal judges managing mass tort litigation have said about what is occurring. When overseeing an MDL of lawsuits targeting a medical device, the Chief Judge of the U.S. District Court for the Middle District of Georgia observed that lawyers file “cases that otherwise would not be filed if they had to stand on their own merit as a stand-alone action” in an MDL because they believe clear deficiencies in their claims will not be scrutinized when the claim is swept into a global settlement.[15] Another federal judge, who has overseen product liability mass tort litigation, explained that it is difficult to apply the ordinary procedural safeguards used to verify claims when “the volume of individual cases in a single MDL can number in the hundreds, thousands, and even hundreds of thousands.”[16] He cautioned that the “high volumes of unsupportable claims clog the docket, interfere with a court’s ability to establish a fair and informative bellwether process, frustrate efforts to assess the strengths and weaknesses of the MDL as a whole, and hamper settlement discussions.”[17] A Federal Advisory Committee on Civil Rules report provides a troubling estimate of the percentage of claims in MDLs that are unsupportable: 20% to 30% and, in some litigation, as many as 40% to 50%.[18]

In a mass tort litigation machine in which federal MDL dockets go from zero to tens of thousands of questionable claims in only a few months, many of which are meritless, companies must consider bankruptcy as a legitimate means of resolving cases while protecting the future viability of the business and the interests of its employees and other stakeholders.

ATRA is concerned that, recently, the U.S. Court of Appeals for the Third Circuit ruled that a company cannot invoke the federal bankruptcy process until it is in immediate “financial distress.”[19] This new precondition is contrary to Congress’s intent in enacting the bankruptcy law. Not only does it place bankruptcy out-of-reach for businesses facing never-ending litigation, it is against the interests of claimants, who will not have access to the business’s resources until they are depleted.[20] Requiring a business’s financial situation to be so dire that there is an imminent risk that it will collapse before allowing it to file for bankruptcy is also inconsistent with how the judiciary has historically applied the law. Over the past four decades, courts have consistently permitted businesses to file Chapter 11 petitions irrespective of the solvency of the debtor or the state, nature, and timing of the company’s financial distress.

Similarly, a bankruptcy court in Indiana recently denied a Chapter 11 stay petition seeking relief from hundreds of thousands of product liability lawsuits.[21] While six bellwether trials resulted in defense verdicts, ten trials concluded with verdicts ranging from $1.7 million to $77.5 million (with appeals pending).[22] Meanwhile, discovery in cases in the federal MDL proceeded in “waves” of 500 cases at a time.[23] In such situations, the Bankruptcy Code’s procedures, allowing for establishment of a settlement trust with sufficient resources to pay legitimate claims, provide a legitimate alternative to an overwhelmed MDL. Yet, even as the bankruptcy court recognized the unprecedented lawsuit “tsunami,” it denied the companies’ requested stay, finding the bankruptcy did not serve a “valid reorganizational purpose” because it viewed the defendants, which had not yet begun paying judgments, as “financially healthy.”[24]

If a business facing tens of thousands of lawsuits,[25] with thousands more expected in the future, that has already been hit with a single verdict for $4.69 billion[26] and will need to spend immense sums on defense costs is not in sufficient “financial distress” to invoke our nation’s bankruptcy laws, who is? We also wonder, if a companies facing the largest MDL in history—over 343,000 claims with 260,000 currently pending and no end in sight, representing a staggering 30% of all cases currently pending in federal district courts[27]—cannot obtain a bankruptcy stay, who can?

 

[1] ATRA filed amicus briefs in In re: Bestwall, LLC in the Fourth Circuit on July 24, 2023, In re: LTL Mgm’t, LLC in the Third Circuit on February 21, 2023 and August 22, 2022, and In re: Aearo Technologies, LLC in the Seventh Circuit on December 19, 2022.

[2] Letter from Sherman Joyce, President, American Tort Reform Association to the Hon. James Comer, Chairman, and the Hon. Jamie Raskin, Ranking Member, House Comm. on Oversight and Accountability, Hearing on “Unsuitable Litigation: Oversight of Third-Party Litigation Funding,” Sept. 11, 2023.

[3] In re Federal-Mogul Global Inc., 684 F.3d 355, 359 (3d Cir. 2012).

[4] 140 Cong. Rec. 28,358 (Oct. 6, 1994) (statement of Senator Brown).

[5] Id. (statement of Sen. Heflin).

[6] Mark A. Behrens, Asbestos Trust Transparency, 87 Fordham L. Rev. 107, 111-12 (2018).

[7] See In re Dow Corning Corp., 280 F.3d 648 (6th Cir. 2002); In re A.H. Robins Co., 88 B.R. 742 (E.D. Va. 1988), aff’d, 880 F.2d 694 (4th Cir. 1989).

[8] See In re PG & E Corp., 617 B.R. 671 (Bankr. N.D. Cal. 2020), appeal dismissed sub nom, McDonald v. PG&E Corp., 2020 WL 6684592 (N.D Cal. Nov. 12, 2020), aff’d, 2022 WL 1657452 (9th Cir. May 25, 2022); In re Montreal Maine & Atl. Ry., Ltd., 2015 WL 7431192 (Bankr. D. Me. Oct. 9, 2015), adopted, 2015 WL 7302223 (D. Me. Nov. 18, 2015).

[9] See U.S. Gov’t Accountability Office, GAO-23-105210, Third-Party Litigation Financing: Market Characteristics, Data, and Trends 11-12 (Dec. 2022) (“GAO Report”).

[10] See Am. Tort Reform Ass’n, Legal Services Advertising in the United States 2017-2021, at 4 (2022).

[11] See Roy Strom, Camp Lejeune Ads Surge Amid ‘Wild West’ of Legal Finance, Tech, Bloomberg Law, Jan. 30, 2023. Congress may be interested to learn if outside funders bankrolled the $145 million spent, as of the end of 2022, on television and social media ads to solicit Camp Lejeune claims against the federal government, and, if so, what cut they may be taking from the $6 billion authorized for veteran payments. See id.

[12] See Matthew Goldstein & Jessica Silver-Greenberg, How Profiteers Lure Women Into Often-Unneeded Surgery, N.Y. Times, Apr. 14, 2018.

[13] See David Nayer, Analytics Show One Firm Filed Over 5,000 Lawsuits in a Week, Law Street, Feb. 8, 2023.

[14] See In re Plant Insulation Co., 734 F.3d 900, 905-06 (9th Cir. 2013) (“[G]iven the lengthy latency period of asbestos-related diseases, companies facing asbestos risks have no way finally to resolve or even effectively estimate their exposure.”).

[15] In re Mentor Corp. Obtape Transobturator Sling Prods. Liab. Litig., 2016 WL 4705827, at *2 (M.D. Ga. Sept. 7, 2016).

[16] Judge M. Casey Rodgers, Vetting the Wether: One Shepherds View, 89 UMKC L. Rev. 873, 873 (2021).

[17] Id.

[18] Advisory Committee on Civil Rules, Agenda Book, Nov. 1, 2018, at 142.

[19] In re: LTL Mgm’t, LLC, 58 F.4th 738, 755 (3d Cir. 2023), rehearing denied (Mar. 22, 2023).

[20] In re Plant Insulation Co., 734 F.3d at 906 (“[I]f such companies collapse and liquidate, untold numbers of future claimants will be left without recovery. Present claimants, however, want to get paid quickly and efficiently.”).

[21] See In re Aearo Techs. LLC, Nos. 22-02890-JJG-11, 2023 WL 3938436 (Bankr. S.D. Ind. June 9, 2023).

[22] Id. at *3.

[23] Id. at *4.

[24] See id. at *17.

[25] Over five years, lawyers have filed nearly 39,000 claims against Johnson & Johnson claiming that its talcum powder products led to development of a client’s ovarian cancer or mesothelioma. See U.S. Jud. Panel on Multidistrict Litig., MDL Statistics Report – Distribution of Pending MDL Dockets by Actions Pending, Aug. 15, 2023 (providing statistics for MDL -2738, In re: Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Liability Litigation). The bankruptcy court found that the value of all present and future claims may exceed tens of billions of dollars.

[26] Ingham v. Johnson & Johnson, 608 S.W.3d 663 (Mo. Ct. App. 2020), cert. denied, 141 S. Ct. 2716 (2021) (reducing $4.69 billion verdict to twenty plaintiffs to $2.24 billion).

[27] See U.S. Jud. Panel on Multidistrict Litig., MDL Statistics Report – Distribution of Pending MDL Dockets by Actions Pending, Aug. 15, 2023 (providing statistics for MDL -2885, In re: 3M Combat Arms Earplug Products Liability Litigation).

 

 


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