Class Actions - Opting in or out of the bandwagon
Author:
Lisa Broderick
The recent decision of a Texas Court to award in excess of US$250 million against Merck & Co the manufacturers of Vioxx, and the possibility of follow on class actions, has led to a re-activation of the debate in Ireland as to whether or not a class action type procedure should be adopted here. Currently our legal system does not provide for what are commonly known as ‘class actions’. However, multi-Plaintiff personal injury litigation is reasonably commonplace in Ireland as is demonstrated by the army deafness, blood product and tobacco litigation, amongst others.
DO WE NEED OR WANT US STYLE CLASS ACTIONS IN IRELAND?
In brief, a “class action” is a mechanism whereby one or more Plaintiffs pursue a case for themselves in a defined “class” against one or more Defendants. In order to fall within a class, members will qualify by having suffered an identical injury or damage in identical circumstances to that of the complainant. Technically, class members do not join into the litigation as named parties but decide to participate in it by “opting in” or not “opting out”. Supporters of class actions insist that the procedure avoids repetitious court hearings, a clogging up of the court system and ultimately results in a saving of legal costs to all involved.
In the Vioxx case a claim was brought by a widow (Mrs Ernst) who claimed that her husband had been fatally injured by taking Vioxx. Having heard the evidence, the Court came to the view that a causal link had been established between the taking of Vioxx and the heart attack suffered by Mr Ernst. Although Merck say they will appeal the decision, it is anticipated that class actions will be launched against Merck within the US and Worldwide by people who have taken Vioxx and suffered heart related illnesses.
In publicity generated after the verdict, solicitors representing Irish people who took Vioxx intend to bring their cases before the US Courts to avail of the class action procedure and, no doubt, higher levels of damages that are awarded there. There are obvious attractions to this strategy.
Firstly, the headline grabbing damages are on a scale that could never be achieved here, as we do not award punitive damages at the levels of our US cousins. The “punitive” damages represented $229 million of the overall Vioxx award. Irish judges in fact rarely award punitive or exemplary damages at all and, in the limited circumstances where they do they amount to a fraction of, rather than a multiple of, the general damages. Class actions in the U.S. are decided by juries who tend to be more generous than Judges sitting alone. In Ireland these types of cases proceed before a judge only.
Secondly, in the class action system all of the cases are run together on common issues of liability, fact and causation and it is unnecessary for each individual to prove their case. This can lead to situations where otherwise 'weak cases' will still manage to succeed as part of the overall class.
Finally, the US system also allows lawyers to claim contingency fees, a practice illegal in Ireland. Contingency fees are a fee arrangement in which the lawyer is paid out of any damages that are awarded. Typically, the lawyer gets between one-fourth and one-third of the overall award. If no damages are awarded, there is no fee.
Many class action jury verdicts are overturned
on appeal
However, the media coverage ignores the fact that a significant number of these class action jury verdicts are overturned on appeal, or reduced significantly in terms of the overall damages awarded. Furthermore, there is an increasing willingness of judges in the US, to decertify classes to avoid or control unmanageable 'mass tort actions'. Indeed, the day before the decision in the Vioxx case, the Supreme Court of Illinois reversed a US$1.2 billion damages award, made against an insurance company, State Farm, in a class action. The court also “de-certified” the class action, finding that the aggregation of 4.7 million claims against State Farm, in 48 US states, should never have been allowed. Many other cases exist where, having been initially certified as class actions, this certification has been reversed on appeal.
IS CHANGE NEEDED IN IRELAND?
Multi-plaintiff litigation proceeds in Ireland by way of a “test case” being heard by the Courts, which will have implications for all similar cases “waiting in the wings”. Importantly, however, each case is judged on its own merits (by a judge alone) and the fact that causation is proved in the context of one case does not necessarily guarantee the same outcome in all subsequent cases unless the facts, liability issues and causation are identical. That Irish courts take great pains to ensure that each case is judged on its own merits, is something that is seen to benefit Defendants, as Plaintiffs are put to the expense of having to fully prove their case despite the fact that numerous similar (but not necessarily identical) cases may have already been determined. In reality, however, if there has been a negative finding against a Defendant in a test case and liability has been established, where there are numerous similar cases yet to be heard, a Defendant (or its Insurers) will attempt to settle the outstanding claims unless they can be distinguished in terms of liability, causation or fact from the test case.
The Law Reform Commission (LRC) published a Consultation Paper in 2003 in relation to adopting class action procedures here. Their final Report is due to be published by year end and will make recommendations which the Government may choose to adopt by legislation. Whilst it its not clear what the LRC's final recommendations will be, they are likely to recommend some form of class action procedure. However, in circumstances where, in mass tort and personal injury litigation, the State has been and is likely to be a regular Defendant, it is predicted that the State will be slow to introduce a class action system.
Even if class actions do not ever form part of the Irish system, manufacturing and in particular pharmaceutical companies cannot ignore the impact a potential class action in another country could have on its business. The net effect of the punitive damages being awarded by US Courts is such that the whole area of product development has become fraught with risk. No matter how extensive the clinical trials are at drug development stage, it is impossible to identify all of the potential risks to the huge variety of ultimate consumers.
Furthermore, manufacturers and pharmaceutical companies in particular, also face the increased threat of investor lawsuits. Such claims are pursued by investors who claim to have relied upon initial data in relation to the growth or development of a potential product and then suffer a loss when the share price of the company falls when the product fails to perform. In all, there were 212 securities class actions filed in 2004 in the US. The average number of such cases filed annually since 1995 is 190. Manufacturers are therefore now finding themselves in a situation where they face the threat of legal action on a number of different fronts.
THE SCOURGE OF JUNK SCIENCE
A further issue, which often arises, in the context of class actions, relates to claimants relying upon what has become known as “junk science”. In the US, to avoid juries being misled about scientific evidence put before them, Courts have a preliminary “Daubert” hearing to establish:
- Has the theory used a scientific methodology?
- Has the theory been subject to peer review and publication?
- Has the theory specified the reliability of statistical information upon which it relies?
- Has the theory been generally accepted in the scientific community?
Only where all of these criteria have been satisfied can such evidence be admitted before a jury.
McTear v Imperial Tobacco
Closer to home it is interesting to consider the views of Lord Nimmo - Smith in the context of the Scottish, McTear -v- Imperial Tobacco case. This was one of the first smoking and health cases in Europe to proceed to a full hearing. Scotland, like Ireland, operates a common law system and as such, a similar approach would likely be taken here.
Mrs McTear had sued Imperial Tobacco Ltd arising out of the death of her husband from lung cancer allegedly from his smoking of Imperial cigarettes throughout his lifetime. To try to prove that cigarette smoking causes lung cancer Mrs McTear relied principally upon epidemiological evidence. Mrs McTear's own legal team accepted that the biological and chemical pathways for the development of lung cancer were not fully understood, or known, and therefore it would not be possible by looking through a microscope at a squamous cell carcinoma to tell that a particular cancer was caused by smoking.
In his judgment Lord Nimmo-Smith commented that the evidence
relied upon,
“is not simply that there is no basis in the literature relating to any branch of scientific enquiry other than epidemiology for holding that cigarette smoking can cause lung cancer, but that an enormous amount of effort, resources and ingenuity have been devoted to the pursuit of scientific enquiry on this issue with essentially a negative result.”
Although Dr Richard Doll, the world-renowned expert in epidemiology gave evidence on behalf of the Plaintiff, Lord Nimmo- Smith was not satisfied that the epidemiological evidence “stood up”. He complained that no attempt was made to show him the background data to any of Dr Doll's findings, and without this data he couldn't decide one way or the other, or on the balance of probabilities, whether cigarette smoking can cause lung cancer.
DIRECTORS IN THE DOCK
While plaintiffs may not have an 'easy ride' in progressing their case in Ireland it is important to remember that there are 'teeth' as regards how a negligent manufacturer will be treated by the criminal law in Ireland. In particular, there are criminal sanctions against individual directors if a product is found ultimately to be defective. Under the Irish enactment of the European Products Safety Directive, it is an offence to place a 'dangerous' product on the market. If a company is found guilty of an offence and the offence is proven to have been committed with the consent or approval of any director, or any other officer of the company (or indeed was facilitated by their neglect) that person may also be guilty of an offence and is liable
to prosecution.
Although we do not yet have the specific offence of “corporate manslaughter” it regularly comes up for consideration. A 2003 LRC Consultation Paper recommended that corporations should be subject to criminal liability for “corporate killing” and recommended the establishment of the statutory offence of “corporate killing”. To date, and despite the introduction of a Private Members Bill to this effect, the Irish Government hasn't introduced such an offence in Irish law. However any change in this approach will obviously have considerable consequences for corporate officers particularly in pharmaceutical and manufacturing companies.
CONCLUSION
In conclusion, therefore, it is clear that whilst we have not yet embraced a class action procedure in this jurisdiction there are, on balance, good reasons for not doing so. Our existing approach of running test cases has proven to be effective and although it may not be as user friendly as the Plaintiff's bar would like, it strikes a balance of mitigating against speculative claims whilst ensuring a full and fair hearing to genuine claimants. The law in this area is in a state of flux though, and it would be prudent for all corporate officers to watch this space closely as any change, either in respect of criminal or civil procedure, is bound to have substantial repercussions for companies and their representatives.