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Posted January 30, 2008

Cohen Lodges Antitrust Complaint on Vioxx Settlement

Cohen

University of Virginia law professor George Cohen has lodged an informal complaint with the Federal Trade Commission regarding potential legal ethics and antitrust violations triggered by what could be a multibillion-dollar settlement agreement over the controversial painkiller Vioxx.

Cohen, a business law expert and legal ethicist, was recently quoted in the Wall Street Journal, the New York Times, and other publications discussing pharmaceutical manufacturer Merck’s possible $4.85 billion payout for claims alleging that the Merck painkiller caused heart attacks among people who used the drug. Cohen e-mailed his complaint earlier this month.

“I think the Vioxx ‘settlement’—it's really just an offer of settlement at this point—has several troubling features,” Cohen said. According to Cohen, one of the settlement’s provisions requires a lawyer representing clients who agree to the settlement to withdraw from representing a client who refuses to sign on to the deal. Not only is this a problem under ethics rules, Cohen says it’s an antitrust violation.

The settlement goes into effect only if 85 percent of the qualified plaintiffs agree to the deal, and Merck wants to ensure that the greatest number of plaintiffs sign on. The more claimants who agree to the settlement, the fewer the number of potentially expensive, lengthy cases Merck has to pay to defend in court, or settle separately.

“What you effectively have is what in antitrust law is called a ‘group boycott,’ which means a group of competitors agreeing not to deal with a customer or supplier or a group of customers or suppliers,” Cohen explained. “The customers in this case are the clients who don't like the settlement and are effectively being shut out of the market for legal services. They can't get the top-notch lawyers with the most experience and expertise on to represent them in their individual Vioxx cases. Sure, they could probably find other lawyers, but the point is they will be disadvantaged. And that's exactly the aim of the provision—to coerce people who don't want to be in the settlement to join it.”

The deal also violates professional ethics rules that bar attorneys from agreeing not to represent clients against a defendant in exchange for settling with that defendant, Cohen told the New York Times.

In addition to disqualifying lawyers who put clients in the settlement from representing clients who choose not to settle, the arrangement could put attorneys in a situation that encourages them to give their clients bad advice, Cohen said while speaking in early January on a panel coordinated by the American Enterprise Institute for Policy Research.

“The temptation will be, I fear, that lawyers will want to recommend this to [their clients] even when they don’t think it’s necessarily in their best interest,” Cohen told the panel.

Cohen also pointed out that one of the judges before whom a large number of cases are pending has agreed to act as a kind of private administrator of the settlement.

“That's not judicial oversight in my book. The judge could be fired if he doesn't do what the parties want,” Cohen said. 

“Another problem is the role of the plaintiff lawyers who negotiated the deal and signed it. What authority did they have to sign the agreement?  What exactly are the obligations of these people? They are not class counsel—this is not a class action. The ‘settlement’ does not spell out what, if any, obligations they owe to the plaintiffs who sign up for the settlement, as opposed to their own clients.”
 
Cohen has not received a response about his complaint from the FTC. He was, however, contacted by a lawyer in Kentucky who represents several plaintiffs.

“He and other Kentucky lawyers may raise these issues in a motion objecting to various aspects of the proposed settlement,” Cohen said.
 
Cohen said there have been provisions that attempt to limit lawyers' ability to represent clients against a defendant in the future in a number of class-action settlements and other cases.

“There is an ABA ethics opinion on the subject that says you can't do these things, but obviously parties are still trying to do them.”

Cohen, who holds a Ph.D. in economics in addition to his law degree, is on leave from teaching this semester to serve as a consultant to the in-house legal department of Ellington Management Group, LLC, an Old Greenwich, Conn.-based hedge fund focused on mortgage-backed securities.
• Reported by Dena Sloan Kessler