To most people, Johnson & Johnson (J&J) is a respected company and the maker of popular consumer products. However, J&J has taken quite a hit lately with both its reputation and finances.

Specifically, J&J has been accused of causing cancer in thousands of individuals due to the alleged presence of asbestos in its baby powder products. As a result, tens of thousands of plaintiffs have sued J&J, with notable results amounting to billions of dollars.

Even though J&J has successfully survived or settled many of these cases, it only takes a handful of plaintiff wins to cause serious financial damage to the company. Because of this, J&J employed a sneaky and ambitious plan called Project Plato.

What Is Project Plato?

Project Plato worked by allowing J&J to create a new company (officially known as LTL Management) that would take on J&J’s talcum powder legal liabilities. LTL Management would then declare bankruptcy and treat any potential plaintiffs relating to the asbestos talcum powder lawsuits as creditors. This maneuver has been referred to as the Texas Two-Step.

Because LTL Management would have a relatively small amount of assets, these plaintiffs/creditors would likely receive less money than if they sued J&J directly. As for J&J itself, it would be free of the legal and financial risks from these talcum powder lawsuits.

It’s an ingenious plan, and you can read more about it in an earlier blog post I wrote. Yet the cleverness of the plan doesn’t stop it from being very unfair to potential asbestos baby powder victims. As you might imagine, plaintiffs weren’t happy about Project Plato and opposed its use.

Legal Opposition to Project Plato

LTL Management filed Chapter 11 bankruptcy in North Carolina, given the success of earlier schemes similar to Project Plato that were filed there. At the time of the filing, there were more than 38,000 lawsuits against J&J alleging its baby powder products contained asbestos which caused the plaintiffs’ ovarian cancers.

Fortunately for the plaintiffs, the North Carolina bankruptcy court moved the case to a bankruptcy court in New Jersey. Once the case got to bankruptcy court in New Jersey, the plaintiffs asked the court to dismiss LTL Management’s bankruptcy petition claiming it was not filed in good faith.

Turns out the “good faith” bankruptcy test that the New Jersey bankruptcy court would use was more generous to the plaintiffs than the equivalent test used by the North Carolina bankruptcy court. Coincidence? Probably not.

Despite this more lenient standard, the New Jersey bankruptcy court refused to dismiss LTL Management’s bankruptcy petition. The plaintiffs appealed the decision to the U.S. Court of Appeals for the Third Circuit (Circuit Court), which ruled in their favor and dismissed LTL Management’s bankruptcy petition.

Why the Circuit Court Struck Down Project Plato

If you’d like to get into the weeds and read about the nuanced legal arguments, feel free to take a look at the Circuit Court’s opinion. But in essence, the Circuit Court concluded that LTL Management did not file its bankruptcy petition in good faith because it was not in “financial distress.”

The Circuit Court recognized that a company can be in financial distress even though it wasn’t yet insolvent. By way of (strained) analogy, you didn’t have to be on the verge of death before you were allowed to go see a doctor.

But how much financial trouble did a company need to be in before it could file for bankruptcy in good faith? Answering that question was tricky, and in finding that LTL Management wasn’t in financial distress, the Circuit Court noted the key fact that despite LTL Management’s legal liabilities, it had access to $61.5 billion from J&J.

In other words, J&J was like a super-rich co-signer on a debt that LTL Management had to pay. So even though LTL Management’s creditors might not be able to get much from LTL Management, they could still recover money from J&J.

There was also the fact that despite a few notable legal losses, J&J handled many of the asbestos baby powder lawsuits against it. For example, J&J settled about 6,800 claims for a little less than $1 billion.

To put this in perspective, the $4.69 billion (later reduced to $2.1 billion) that ovarian cancer plaintiffs won against J&J was divided among 22 women. So while J&J was spending a lot of money to resolve the talcum powder lawsuits against it (J&J’s legal costs totaled between $10 million and $20 million per month), it wasn’t nearly as bad as J&J wanted the bankruptcy court to think.

What Happens Next?

J&J indicated that it would appeal, although it’s not clear if it will appeal to the U.S. Supreme Court or for an en banc review of the decision by the full Third Circuit Court of Appeals. Either way, J&J will face an uphill battle.

Assuming J&J’s appeal is unsuccessful, the dismissal of LTL Management’s bankruptcy petition is a major win for mass tort plaintiffs. However, things may not be over just yet.

For instance, despite ruling against the use of Project Plato, the Circuit Court left open the possibility of defendants in mass tort lawsuits using a variation of Project Plato. Any new approach would need to strike a delicate balance between giving the debtor company enough assets to avoid a fraudulent transfer claim, but not too much where it’s deemed to not be in financial stress.

Finally, we need to keep in mind that the Circuit Court’s decision, assuming it stands, only applies to federal cases in New Jersey, Delaware and Pennsylvania. Despite this limitation, the decision should still have some influence in other courts across the country.

For now, claims against J&J for alleged injuries caused by its baby powder products will likely continue. If you have any questions about bringing your own claim for injuries due to talc-based products containing asbestos, feel free to reach out to me.

Although talcum powder studies are ongoing, it has been established that some products that use talcum powder may contain small amounts of asbestos. And there’s a well-known link between asbestos and cancer (especially mesothelioma).

So where does Johnson & Johnson come in? Well, they’ve been one of the more prominent defendants in these talcum powder/asbestos cancer lawsuits. Let’s take a quick look at the baby powder litigation and then examine how Johnson & Johnson is planning to use something called “Project Plato” to deal with their recent legal and financial losses.

A Brief History of Johnson & Johnson’s Baby Powder Litigation

In 2018, Reuters published a story claiming that Johnson & Johnson (J&J) knew its baby powder products used talc that contained asbestos. In 2019, J&J voluntarily recalled some of its baby powder being sold in the United States.

A lot of people sued J&J and/or related entities claiming the products they used containing talc (such as baby powder) caused their cancer. Many of these cases are currently in the Johnson & Johnson Talcum Powder Litigation MDL, or multidistrict litigation, which is currently in New Jersey federal court.

A few of the cases against J&J have resolved, resulting in massive verdicts in favor of the plaintiffs. One of the most notable was a case from St. Louis where 22 women successfully sued J&J in 2018 and were awarded more than $4 billion in damages. On appeal, this amount was reduced to about $2 billion. Still, a remarkable amount.

As of 2021, J&J faced approximately $3.5 billion in legal settlements and judgments relating to its baby powder. This was bad enough, but it was just the beginning for J&J, with tens of thousands of cases still remaining. Seeing the writing on the wall, J&J allegedly thought of a new strategy to handle these lawsuits and gave it the code name Project Plato.

How Project Plato Works

Project Plato is a very clever strategy that takes advantage of federal bankruptcy and state corporate laws. The goal is to pay off baby powder cancer litigants for pennies on the dollar and prevent J&J from having to worry about future plaintiffs. The plan is still ongoing and it’s unclear if it’ll work as J&J plans, but here’s a rough overview of the process.

For step one, J&J shifted its headquarters to Texas. The reason would be to take advantage of one of Texas’ corporate laws that allows a corporation to divide itself into two or more companies through a process called a “divisive merger.”

In step two, J&J created a subsidiary called LTL Management. This would take on J&J’s legal liabilities relating to the baby powder asbestos litigation. However, it would have a relatively small number of assets to pay any legal awards or settlements. The rest of J&J would continue operating as the second company, yet it would no longer have to worry about any lawsuits from the talcum powder litigation.

The third step required LTL Management to file Chapter 11 bankruptcy, which it did almost immediately after being created.

Project Plato is currently in step four, which involves getting the automatic stay to temporarily halt the talcum powder litigation against J&J. It’s also during step four that J&J hopes the bankruptcy judge will approve LTL Management’s Chapter 11 bankruptcy reorganization plan which has a few special terms.

Namely, all baby powder cancer plaintiffs against J&J would have to make their case in bankruptcy court (instead of regular court) and fight for their share of $2 billion that J&J would give LTL Management to compensate the almost 40,000 current plaintiffs.

J&J would also get a non-debtor release, which would immunize it from getting sued by any future plaintiffs claiming they got cancer from using J&J’s baby powder or talcum-based products. So the $2 billion wouldn’t just be split among the almost 40,000 in current plaintiffs, but it would also be all that’s available for future plaintiffs, too.

J&J reasons that this plan makes it more likely that plaintiffs who go to court for financial compensation for their injuries will get at least something. J&J contends that getting an almost guaranteed small amount of money is better for plaintiffs because they can avoid the risk of losing at trial. It would also give J&J finality to its baby powder legal woes. If successful, Project Plato would allow J&J to move on without constantly worrying about another talcum powder lawsuit decades from now.

Project Plato is a slight variation of something called the Texas Two Step, which has been successfully used by several companies (like Georgia-Pacific) looking to reduce and offload their mass tort legal claims.

Will J&J’s Plan Work?

No one knows for sure. Right now, the case isn’t going as well as J&J would have hoped. When LTL Management filed Chapter 11 bankruptcy, it chose to do so in North Carolina. Why? Because of that state’s history of favorable judicial rulings involving the Texas Two Step strategy. However, the North Carolina judge transferred the case to New Jersey.

As you can imagine, the plaintiffs aren’t happy about Project Plato and are doing everything they can to stop it. The New Jersey bankruptcy judge has scheduled a hearing for February 14, 2022 to listen to arguments from the plaintiffs (who are technically creditors in this bankruptcy proceeding) as to why the court should dismiss LTL Management’s request for bankruptcy.

Their primary argument would be that LTL Management filed Chapter 11 bankruptcy in bad faith. Specifically, that it was done as a way for J&J to avoid paying out the massive legal settlements and court judgments that have already been handed down, and with many more anticipated in the future.

A possible good omen for plaintiffs in the J&J litigation is what’s been happening with Purdue Pharma’s litigation involving its alleged role in the opioid epidemic. Late last year, a judge rejected Purdue Pharma’s proposed settlement and bankruptcy reorganization plan. The settlement and reorganization plan involved non-debtor releases that would have protected key individual defendants from personal liability. While Purdue Pharma’s strategy wasn’t the same as Project Plato, it was similar in that it tried to use the Bankruptcy Code to limit its legal liability in its civil lawsuits.

What Happens Next?

Over the next few months, we’ll see if Project Plato works for J&J. If it does, it would create a blueprint for any other company that faces mass tort lawsuits. This would make it much harder for plaintiffs to obtain compensation for their injuries. There’s even a proposed law in Congress to ban what J&J is trying to do.

In the meantime, if you have any questions as to whether you can receive compensation for injuries potentially related to using baby powder or other talc-based products, don’t hesitate to get in touch with me. And I’ll let you know if there are any major developments in J&J’s Project Plato.

Most of us pay our bills on time. If we break a neighbor’s rake, we promptly purchase a replacement. If our child dumps fruit punch on a friend’s carpet, we pay to have it cleaned. In fact, we don’t really think about these unwritten rules often; it’s just the right thing to do, so most of us do it instinctually: if we cause damage, we pay for the damage. But too often companies refuse to pay fair settlements to resolve product failure cases, even in the face of a mountain of evidence that (1) the product clearly failed and (2) the failure physically injured the person. For example, let’s say a sixty-eight year old retired schoolteacher learns her metal-on-metal artificial hip implant has failed; her doctor tells her that, in addition to the pain she feels in her hip and leg, she now suffers from dangerously high cobalt and chromium levels (a condition called “metallosis”). Thousands of other injured people have similar claims, but the manufacturer of the failed hip product simply won’t pay. Why not?

Well, I can’t know all the reasons, but let’s look at a few theories:

Companies Don’t Like to Pay Settlements

Companies do not like to pay claims, period. Companies are in the business of making money, not paying out money. Corporations are under enormous pressure to maximize value for their stakeholders, primarily those people who buy their stock. Paying out two billion dollars in settlements for a failed artificial hip is never good for the bottom line.

Companies Can Get Away with Not Paying

The playbook is no secret: when a company first receives complaints about a failing product, it almost always denies that the product is defective. When scholarly, peer-reviewed studies establish that the product is defective, the company invariably commissions its own studies on the product, and often those studies conclude that the product is safe or that the dangers have not been proven. When litigation begins, the company defends itself vigorously, because it is always the case that the company has much more money than any injured plaintiff and can use its superior financial position to grind down injured plaintiffs, even thousands of them.

Settlement Delays Are Profitable

Let’s say a defective product injures 12,000 people, and the company negotiated three billion dollars in a global settlement for the injured plaintiffs. And let’s say the company could pay today or, through artful delays, two years from now. Eight percent interest on three billion dollars for two years is four hundred and eighty million dollars ($480,000,000). That’s real money. If a corporation can delay settlement discussions for two or four or six years before finally paying out claims, the company comes out ahead.

Another positive result of delays is this: some injured people just give up. Some plaintiffs may walk away, or accept a reduced offer, or lose interest, or may even grow old and die. There is no question that justice delayed is justice denied for injured people. Corporations understand this.

One Example: Johnson & Johnson

Recently, Johnson & Johnson has taken a harder line against paying settlements. One Johnson & Johnson defense attorney said that J&J is inundated with lawsuits and that if the company paid every claim it could get a reputation as an “easy mark.” In 2018 alone, J&J spent two billion dollars on settlements and attorneys’ fees. According to reports, J&J is defending 100,000 lawsuits involving hip implants, surgical mesh, baby powder, prescription drugs, and other product cases. One school of thought holds that the massive number of pending lawsuits is actually a deterrent to settlement for J&J.

Medical device and drug companies like J&J can get burned with aggressive no-settlement policies. DePuy Orthopaedics, owned by J&J, lost several huge verdicts in the DePuy Pinnacle hip litigation. And last year a jury awarded damages of $4.7 billion to a group of women who used J&J’s baby powder and were later diagnosed with cancer. There is no question that J&J could have settled with these 22 women years ago for a fraction of that jury verdict. (Of course, J&J has appealed.)

Then there is the loss of goodwill in this scorched-earth litigation strategy. According to a report in Law360, in 2016 J&J was considered the sixth most reputable company in the United States. By 2018 it had dropped out of the top 100. Goodwill matters.

Finally, one important reason for companies like Johnson & Johnson to pay valid claims is this: it is the right thing to do. When corporations offer safe products that improve people’s lives, they should make a lot of money selling the products. But when one of their products turns out to be flawed and harmful, companies should want to do the right thing and pay all the valid claims, promptly.

Note: References to individuals in this article are fictional and hypothetical and do not represent any current or former clients, or any other person. Information about Johnson & Johnson was distilled from online news sources, including Law360, which own their content.

Three years ago I wrote this column: My Challenge to Medical Device and Drug Companies: Put Me Out of Business! The point was straightforward: if companies would do the right thing, and properly test their medical devices, and carefully monitor the drugs they sell, and try to help patients instead of merely chasing profits, then I will stop being a product liability lawyer. Well, turns out my line of work may be safe for a long time. This week several executives from Insys Therapeutics were found guilty of racketeering. The jury found that these executives conspired to push sales of a deadly fentanyl drug, by increasing dosages and prescriptions. These guys are going to jail. And they should. The story that emerged from the two-month trial was hideous, and it proves yet again that without careful oversight companies will often harm public health in their pursuit of massive profits.

Before I bullet point some of the evidence developed at trial, start with this: the Centers for Disease Control estimates that well over 200,000 people have died from prescription opioids since 1996. Sit with that for a moment. More than 200,000 people have died from opioid overdoses. It is heart-wrenching. Now, add to this tragic statistic the narrative that several opioid companies, and not just Insys Therapeutics, pushed for more prescriptions and higher doses for decades, solely to increase sales and profits and employee bonuses.

Let’s take a look at the evidence from the Insys criminal trial:

• Insys pushed an aggressive marketing scheme for its sales representatives.
• Insys paid doctors for speeches they never gave; instead these doctors were getting paid for prescribing Insys’ fentanyl-spray, “Subsys.”
• Doctors were also enticed to prescribe more opioids with other perks, like lap dances. (Classy.)
• Insys hired a stripper, Sunrise Lee, to serve as a sales rep for the company. One witness testified that Ms. Lee gave a doctor a lap dance as part of her sales work for Insys. (Ms. Lee was eventually promoted to regional sales director.)
• Insys executives pushed doctors to prescribe opioids to patients for whom the fentanyl-spray was not intended.
• Sales representatives testified that their bonuses were tied directly to the dosages the doctors in their sales territory prescribed. The higher the dose, the more money the sales rep would make. (Why? Because a higher dose would almost ensure addiction and thus more sales.)
• Sales reps had to report to their bosses within twenty-four hours if one of their doctors prescribed a low dose.
• Insys purposely directed its marketing efforts to doctors with a history of prescribing large amounts of opioids.
• Insys pursued doctors and medical providers who were considered “pill mills.”
• Insys also pushed insurance companies to cover the cost of the drug for the patients they insured. These costs often reached thousands of dollars per month for a single patient.
• In 2015, two jackasses who worked for Insys produced a rap video cheerleading for increased sales of the fentanyl product. (The US Department of Health and Human Services estimated that in 2015, 12.5 million people abused prescription opioids, causing over 33,000 deaths.)
• Insys generated annual sales of $300,000,000.00.

Insys is not the only bad actor. Not even close. Investigations are underway against the Sackler family, founders of Purdue Pharma, makers of Oxycontin, and private doctors have been criminally charged with taking kickbacks from opioid manufacturers. There is no doubt that more criminal prosecutions and thousands of civil lawsuits will occur in the coming months and years. The opioid epidemic has been a massive failure of the American people, and corporate greed is at the center of it all.

Opioids are synthetic forms of opiates. Opioids are manufactured chemicals that operate in a similar way to opiates like morphine. Opioid products include OxyContin, Vicodin (hydrocodone), and Fentanyl. While temporarily effective at relieving pain, opioids can be extremely addictive and often lead to overdoses and deaths.

If you or a family member has been a victim of opioids, you are welcome to call me to discuss: (919) 830-5602. Either way, good luck.

Note: Information in this post came from several news sources, including NPR, The New York Times, other newspapers, and my previous posts.

So the FDA gives the multi-billion dollar corporation 510(k) approval to sell the device. In the first year the company sells one billion dollars’ worth of the device. In the second year it sells $1.5 billion in new devices, but it also begins to receive an alarming number of “adverse event” reports. This means patients are reporting problems and injuries after receiving the device. The company undertakes an internal study but does not report its findings to the FDA. In the third year it sells even more devices, but by now hundreds of adverse reports are rolling in. The injuries finally get the attention of the FDA, and the company reluctantly hands over its data on the many serious injuries caused by the new device.

In the fourth year a woman with the implanted device is forced to undergo “revision surgery” to remove the device, and her recovery is lengthy and painful. She calls me and tells me her story. It is awful. She was once a competitive tennis player, but now she walks with a cane. She hasn’t played tennis in two years. She had to take time away from her job. Even with decent health insurance she has thousands of dollars in out-of-pocket medical bills related to the failure of the device.

I take her case. I file a lawsuit in the new “multidistrict litigation” organized to handle the hundreds of cases involving injuries from this new medical device. I move the case along, handle the discovery and make sure my client’s case complies with all Case Management Orders from the MDL judge. Eventually we secure a good settlement for my client.

Later, at a press conference, a spokesperson for the corporation breezily refers to lawyers as ambulance chasers.

So after that narrative of events, I am the ambulance chaser?

As John McEnroe might scream, “you cannot be serious!”

I understand in this age of constant spin, the primary defense to a bad act is to attack. We see it in business; we see it in politics. We see it so often on social media it seems social media was invented for the purpose. And it is very frustrating. But that’s why it is vitally important not to let agents of spin control how you understand any subject. If a corporation can manipulate you into considering whether I am an “ambulance chaser,” it does not have to defend itself for introducing a harmful medical device into the marketplace, seriously hurting thousands of people.

Fighting spin is necessary to appreciate the excellent work so many plaintiffs’ lawyers are doing for injured people across the country.

There is no doubt there are unscrupulous lawyers out there. Some are opportunistic. A few lawyers wade into a new area of law simply because it appears profitable. Some lawyers produce ridiculous and creepy television commercials. A few may even hand out business cards at hospitals like Danny DeVito did in The Rainmaker. I understand that. And I don’t like it. It hurts all lawyers when a few lawyers do incompetent work or play fast and loose with ethics rules.

But the large majority of plaintiffs’ lawyers are doing good work for their clients. And in a world where the 510(k) fast-track approval pathway exists, it is critically important that good plaintiffs’ lawyers keep holding companies accountable for selling flawed, defective medical devices. In fact, it is one of the only defenses a patient has against unscrupulous device manufacturers.

So if an “ambulance chaser” is considered this way, then count me as a proud ambulance chaser. Because taken in this context, ambulance chasers are consumer protection heroes.

You scratch my back, I’ll scratch yours. Favors are often exchanged among friends and family. But what most people don’t know, or don’t want to know, is that questionable “favors” are also exchanged in professional and business relationships. Over the years, there have been reports that favors, or benefits, are too often exchanged between drug manufacturers and doctors and hospitals who prescribe medicines.

Recent studies have explored this relationship and compared data to see if drug makers are, effectively, paying doctors to prescribe their medications.

In 2010, the Affordable Care Act included a section called the Physician Payment Sunshine Act. This Act requires drug and device manufacturers to report any and all payments made to physicians and hospitals. Since 2013, 40.74 million records have been published and $24.92 billion dollars have been given to doctors and hospitals from drug and device manufacturers. The Sunshine Act has been successful at exposing these payments.

Open Payments is a website that provides a listing of doctors who receive money or incentives from drug manufacturers. The website is very easy to use; you can visit the website and simply type the name of a doctor or hospital in the search bar and see if they are receiving money – how much, from whom, and when.

Recently, UNC-Chapel Hill conducted a study to determine if there was a correlation between the amount of money doctors received from drug companies and the frequency with which doctors prescribe that company’s drugs. Put another way – are doctors more likely to prescribe a company’s drug if that company is giving them money?

The study used information and data from the Open Payments website as well as from the Centers for Medicare & Medicaid Services to answer that question. Turns out, the answer is “yes.” Focusing specifically on cancer doctors, the research study found that there are “increased odds of prescribing a manufacturer’s drug among physicians receiving payments.”

Unfortunately, this study is not the first of its kind. Research has shown this correlation, an increased likelihood of prescribing a company’s medicine if that company pays the doctor or hospital, for many different types of medications.

For example, in 2016, a similar study was performed, this time focusing on cholesterol medicines. The same conclusion was made – manufacturer payments to doctors and hospitals correspond with higher rates of prescribing that manufacturer’s cholesterol medicine.

While all medicines are supposed to help patients, there is a potential concern that doctors might not be prescribing a medicine that is best for the patient, but rather prescribing a medicine that is best for their bank account.

If you are wondering if your doctor is receiving payments for prescribing specific drugs, ask your doctor or go to the Open Payments website. As I always advise, it is important to do your homework on your doctor, your medications, your medical devices, everything related to your health. (Of course, you should also do your homework on your choice of attorney as well.) If you would like to discuss any prescription medication that gives you concern, give me a call and we can sort it out.

But let’s back up.

What is Risperdal?

Risperdal is an anti-psychotic drug that was approved for limited use in 1993 to manage the symptoms of schizophrenia. According to multiple sources, in the years that followed Johnson & Johnson pressed the FDA for approval to treat other conditions, such as bipolar disorder and autism, and to permit use in children. Risperdal was soon prescribed for adults and children to treat attention deficit hyperactivity disorder, anxiety and depression. Treating these conditions using Risperdal is considered an “off label” use, which is the use of a drug in a manner unapproved by the FDA. Off-label use could involve using a drug to treat a condition which is not authorized by the FDA, or prescribing the drug to an unapproved age group. Shockingly, Risperdal has had horrific side effects in children. Among other symptoms, Risperdal can cause the growth of female breasts in male children, a condition known as gynecomastia. I have written about Risperdal often in this blog. You can check out those articles here.

The Case of Andrew Yount

Andrew Yount is a boy from Tennessee who was prescribed Risperdal in 2003 to treat attention deficit hyperactivity disorder (ADHD) and oppositional defiant disorder. At the time the FDA had not approved the drug for use in treating behavior disorders in children. Andrew was just five years old when he began taking the drug. A year after taking Risperdal, Andrew grew female breasts.

Andrew Yount is now in his late teens. He has had to deal with this embarrassing disfigurement for most of his life.

At trial, the lawyers for Andrew and the Yount family argued that Janssen Pharmaceuticals and its parent company Johnson & Johnson were aware of the risks of children growing female breasts but worked to downplay the risk involved. Despite the data showing a connection between use of Risperdal and the growth of female breasts in vulnerable boys, Janssen and Johnson & Johnson kept pushing the prescription to doctors and parents and children.

What the Jury Saw

The jury reviewed the evidence and concluded that Janssen and Johnson & Johnson failed to warn the Yount family about the risks of taking Risperdal. The jury also seems to have concluded that the defendant companies intentionally buried or falsified scientific evidence showing a link between Risperdal and gynecomastia. If this is true (and evidence supports the view), then it represents hideous behavior from the companies. The jury in the Yount case clearly saw this horrific corporate behavior and awarded Andrew Yount a huge monetary award. But just as likely, the jury got angry and awarded this money as a signal to Johnson & Johnson that this kind of corporate greed will be severely punished. The hope is that jury verdicts like this one will discourage Johnson & Johnson and all pharmaceutical companies to recommit to developing and testing and marketing safe and effective drugs.

Naturally, Janssen and J&J have stated they will appeal the verdict.

Other Risperdal Cases

I wrote about the Austin Pledger trial from last fall, which resulted in a $2.5 million verdict and which you can read about here. Other Risperdal trials have yielded jury awards ranging from $500,000.00 to $1.75 million. One jury trial ended in a defense verdict for Janssen and Johnson & Johnson, though I would not put much stock in that outcome, as plainly the plaintiffs are winning many more of these cases than they are losing. After this latest huge loss in the Yount case, Johnson & Johnson would be wise to consider settling many of the more than 1,500 cases still in the pipeline. Another Risperdal case goes to trial in Philadelphia later this month. I’ll let you know how it turns out.

The Takeaway

For much of my life I have mainly believed that pharmaceutical companies develop and market drugs with the overarching goal to improve and extend the lives of patients. But this is not always the case. Sometimes a company can become blinded by greed. Companies may then push an untested drug onto the market, or even sell a drug it knows to be unsafe. So be skeptical. Do some research. Ask your doctor many questions about the latest drug she wants to prescribe for you or your child. Get a second or a third opinion. You can never eliminate all risk, but you can at least learn how a product reached the market, whether it was adequately tested, and even whether lawsuits have been filed against the drug maker.

The case is titled A. Y. v. Janssen Pharmaceuticals, Pennsylvania Court of Common Pleas (No. 130402094)

Photographs for illustrative purposes only.

There is an unsettling criminal case being tried in Massachusetts federal court this week. Two executives of a company called Acclarent are being prosecuted for fraud in the marketing of a medical device known as “Stratus.” The Stratus was a device that was supposed to relieve symptoms of sinusitis using saline. It consisted of a tube with a balloon attached to a sharp pin. The device would be implanted in the patient’s sinus, where it would be left in place for two weeks. It was reported to work as similar devices which created space in the sinus area using saline, which allowed patients to breathe easier. But according to testimony in the criminal trial, Acclarent had other intentions for the Stratus. Instead of using saline, the Stratus was intended to deliver “Kenalog,” a steroid found in medications like Nasacourt.

But I should back up.

more Again, The Flawed 510(k) Medical Device Approval Process

The Stratus was first approved for sale by the FDA utilizing the 510(k) process. The Code of Federal Regulations allows a manufacturer to notify the FDA of its intent to market a device (like the Stratus). It then allows the company to apply for market approval without rigorous testing or clinical trials. The company must explain how a new device is “substantially equivalent” to an existing product that did undergo testing. Many of the medical devices that have led to thousands of lawsuits (metal-on-metal artificial hips, artificial knees, transvaginal mesh) reached the market under the 510(k) process. In the case of Stratus, Acclarent reported to the FDA that the device was similar to other devices on the market which utilized saline to open the sinus area and to relieve pressure in the sinus. On the basis of these representations, the FDA approved the Stratus for sale in 2006.

The Allegations Against Acclarent Executives

Federal prosecutors allege that two executives committed fraud by obtaining market approval from the FDA under false pretenses. The claim is that Acclarent represented the Stratus was much like devices on the market which used saline, but then intentionally marketed the Stratus instead to deliver the steroid Kenalog. There was virtually no testing of the Stratus and its safety and effectiveness in delivering Kenalog directly into the sinus of patients. Prosecutors state that this intentional misrepresentation defrauded the FDA, the doctors who prescribed the device, and Johnson & Johnson, which purchased Acclarent in 2010 for $800 million. J&J pulled the product in 2013.

Evidence From The Acclarent Criminal Trial

One surgeon testified that he was very concerned that Acclarent had not properly tested the Stratus as safe when using the drug Kenalog. Dr. Michael Armstrong testified that he believed the marketing jumped ahead of the research on the medical device. Although it got approval for the Stratus using saline, Acclarent gave presentations to doctors focusing on the device delivering the steroid. This was not the proper use the FDA approved. Training materials developed by Acclarent showed a white liquid which was not saline (and believed to be Kenalog).

Prosecutors also called to the stand a former sales rep of Acclarent. She testified that the major emphasis in her sales training was in promoting the off-label use of the device and the steroid Kenalog. Because sales reps are not allowed to suggest off-label uses of drugs, the sales reps at Acclarent joked that they wanted to make buttons stating: “Ask me about Kenalog.” The sales rep also testified that Acclarent representatives told her the device was approved only for use with saline, but that doctors would probably not use saline with the Stratus.

At least from this testimony, it seems clear that Acclarent wanted to press ahead (recklessly) to sell the Stratus as a device to deliver the steroid Kenalog, which was not approved by the FDA and which had not undergone sufficient testing. This does not mean the executives will be found guilty of criminal fraud. But it does suggest a rush to market and a dangerous promotion of an off-label use of a drug.

The Takeaway

As consumers, we cannot presume that companies will always act ethically and responsibly. We all need to be vigilant when obtaining products and services. If you are planning to hire an attorney or a home builder or an accountant, check client references. If you are undergoing surgery, do some research in advance on your physician, and check with other people who know the doctor in your community. Is he a good surgeon? Is he responsive? Does he explain the procedure in helpful ways? Does he have a decent bedside manner? And if you are undergoing a procedure where a medical device is being implanted, investigate before the surgery. Ask your doctor about the specific product being used. Get a second opinion from another physician if possible. Ask your doctor why she chose one medical device product over another. Check out the articles on the medical device at the FDA website. Do a check on pending lawsuits against the manufacturer of the device. I know it sounds paranoid, but you may find some useful information and avoid a bad result or even an injury. No one can eliminate all risk in this life (especially when surgery or medical care is involved) but we should never blindly trust doctors or medical device companies.

The criminal case is titled: United States v. Facteau et al, 1:15-cr-10076 (U.S.D.C. Massachusetts). I will let you know the results of the trial when the jury reaches a verdict.

I don’t drink the Kool-Aid. I distrust simple answers, group-think, zealotry. I can’t stand when people make sweeping generalizations about the absolute evil of one side and the unconditional good of the other side. I don’t usually spend much time with plaintiffs’ attorneys who think every corporate decision is an act of violence and malfeasance. I am convinced there are two sides to every story (even if, often, one side of the story is weaker).

Medical Devices and Drugs Have Saved Many Lives

So it is with my law practice. I do not believe major companies are evil, that they are out to hurt people, that all the conspiracy theories are true. I am convinced the life-cycle of a medical device or drug begins with a beautiful idea: to develop a product that will save lives, that will make people more active, that will help people and not hurt them. In fact, virtually all medical devices or drugs are first developed by one or a few smart people attempting a solution to a pressing health problem.

And these medical devices and drugs have saved lives. And as a society we have to create an environment where doctors and scientists and corporations have the freedom and the opportunity to build new medical devices and new drugs to solve vexing health problems.

more But Corporate Greed is Real, and Dangerous

But something sinister occasionally happens on the road from inspired surgeon with a new idea to the release of 100,000 medical devices into the marketplace. Greed happens. Corporations rush products onto the market without proper testing (you can read about the flawed 510k medical device approval process here). Sales departments see huge profits on the horizon if only the product can get to the market right now. Marketing departments spend massive amounts on television commercials, Internet advertising, print ads, and access to doctors. Corporate leaders occasionally ignore clinical trials which show alarming evidence of harmful side effects and instead push the product to market with the knowledge that the product may hurt innocent people.

My Fight This is what I fight against. I fight for the people injured by the negligent or intentionally harmful acts of big corporations. I hate reading yet another white paper about a product that was released to the public even though the company had compelling evidence that the product had design flaws that could injure or kill patients. I hate this. And I will keep fighting corporations who do this to people.

My Challenge

So when corporations across the board do the right thing, when they properly test their devices and drugs, when they make decisions on new products based primarily on public health and not on immediate corporate profits, then there will be no work left for me to do. I will be out of business. I can then go back to teaching or maybe start a new career renting windsurfers at the beach. It would be an easy trade-off.

When corporations consistently put public safety and the public good over naked profiteering, I will stop representing individuals injured by flawed medical devices and drugs. I will stop practicing product liability law. I truly hope they put me out of business for good.

Job Security

Sadly though, I believe I have chosen a career path with job security. Each year, products flood the market that are inadequately tested and seriously flawed, and as the months pass hundreds of people come forward with horrific stories of permanent injuries, debilitating pain, lost jobs, and diminished lives. I hate these stories. When these people are no longer unfairly injured by failed products I will gladly “find myself a rock and roll band / That needs a helping hand.” Until then, I fight.

Call me if you need to talk about a possible product liability case: (919) 830-5602.

Abraham Lincoln had this to say about frivolous lawsuits: “Never stir up litigation. A worse man can scarcely be found than one who does this.” I agree.

I agree with Lincoln that we should never “stir up” litigation, for many reasons, the main one being that “creating” litigation is simply the wrong thing to do, it is harmful to the client, and it creates ill-will and distrust in the world and within the legal profession. But I also agree with Lincoln for completely selfish reasons: it does not lead to good results and it can easily destroy a person’s law practice. Reports of the filing of frivolous lawsuits are greatly exaggerated.

Filing a lawsuit you believe to be frivolous or even weak is a terrible thing for everyone involved: the client most importantly, but also for the defendant, and for the reputation of the bar, and for the lawyer bringing the weak lawsuit.

“Ambulance Chasers”

Most of you know about the concept of frivolous lawsuits. Many corporations, defense lawyers, pro-business politicians, and critics of personal injury law refer to personal injury lawyers as “ambulance chasers.” It suggests a half-crazed army of greed-drunk lawyers who chase down any lead to find a new case; it also implies a group of attorneys who will file a lawsuit no matter how weak is the evidence.

I still recall the painful scene in The Rainmaker when Danny DeVito brazenly storms into the hospital and carefully wedges his business card through the fingers of the poor guy whose arm is in a cast and suspended in mid-air. I must say, it was a comical and hilarious scene.

The Battle for Public Opinion

Major corporations and critics of injury lawsuits have mostly won the battle for public opinion with respect to personal injury law. I have had so many unfairly injured clients call me and say, “I have never sued anyone before. I’m not that kind of person. I’m not greedy. I hate ambulance chasers . . . .” Somehow they have come to understand that anyone who sues another person or another company must be immoral, money-hungry, and flawed. It is astonishing, and it is false.

Companies Make Terrible Mistakes

People make mistakes. Good doctors occasionally have very bad days. Sometimes the doctor’s bad day leads to a severe injury for a patient. Corporations do not set out to harm customers with poorly-designed medical devices or dangerous drugs. But sometimes companies rush a product to market, a bit too eager to make billions of dollars on the latest metal-on-metal hip, or artificial knee, or transvaginal mesh, or prescription medication, and those products turn out to be unreasonably dangerous, and cause problems for hundreds or even thousands of patients. The cases that are filed because of the harm done from these flawed products are not frivolous lawsuits. And no plaintiff in these cases owes an apology to anyone for bringing these valid claims.

Frivolous Lawsuits Can Quickly Destroy a Law Practice

But here is the strongest argument against the position that frivolous lawsuits are a rampant problem in our legal system: a frivolous lawsuit can absolutely destroy an attorney’s law practice. Nothing will send a lawyer to bankruptcy faster than bringing one or more frivolous or weak lawsuits against a multi-billion dollar corporation or against a well-financed and well-defended surgeon. The lawsuits can take years to try, and can cost thousands of dollars in out-of-pocket costs alone. And when the frivolous case is finally lost the plaintiff’s firm could well be crippled or out of business altogether. Therefore, most personal injury lawyers I know are extremely cautious in filing each and every case. If the evidence does not support a winning result, the plaintiff’s lawyer should not bring the case. And almost always doesn’t.

Flawed Products Hurt People

Sadly though, companies too often market products that are inadequately tested, defectively designed, negligently manufactured, and/or flawed in some other significant way. And these products have caused horrific pain and suffering to thousands and thousands of innocent people. Some of these victims need multiple revision surgeries; others suffer heart attacks or stroke, or worse. I am very proud to represent these people.

Abraham Lincoln was exactly right: a lawyer should never “stir up litigation.” A frivolous lawsuit is a terrible thing for everyone involved. Yes, some lawyers are not competent and don’t realize certain cases are frivolous or weak; and yes, occasionally unethical lawyers will bring lawsuits they know to be frivolous, presumably in the hope of arranging a quick settlement with a company which does not want to defend itself in lengthy litigation. But the steady financial pressures on personal injury lawyers make bringing and litigating a weak case a terrible idea, and most PI lawyers run from such cases.

I received a court filing from the Depuy ASR multidistrict litigation last week, and it reminded me to caution you about the serious financial threat you can face when dealing with artificial hip failures and hip litigation (and of course, other medical device failures like artificial knees and transvaginal mesh). Sadly, this threat comes from third-party companies that appear legitimate, even helpful, but mainly have a naked profit motive for getting involved in your case. These companies often cash in unfairly from all the suffering you endured from you failed artificial hip or failed medical device.

What is Medical Funding?

Think of it as a lawsuit loan, or a loan against your future settlement recovery. Medical Funding is a medical care financial assistance “service,” and occurs when a third-party company offers to pay the medical bills of a person who is injured by the negligence of others. This could be a car crash case, a failed medical device like a hip, or any other situation where the negligence of someone else caused the injury. If you accept the offer, the company will pay the medical care provider—the surgeon, the hospital, etc.—a percentage of the provider’s billed charges, but usually more than the provider would have been paid by private health insurance, Medicare, or Medicaid. The company then receives an “assignment” from the medical provider that allows the company (potentially) to receive the full amount of the billed charges, which are often much higher than what the company paid for the medical care and higher than what private insurance would have paid. The third-party company will then file a medical expense “lien” on the proceeds of the person’s settlement or jury award.

This is How it Works

Let’s say “Andrea” had hip replacement surgery in 2010, and fourteen months later the artificial hip components failed. Her doctors advised her to undergo revision surgery, but in the past year Andrea lost her job and her health insurance. She simply could not afford the new—and necessary—revision surgery. Enter “Trust-Us Medical Funder, Inc.,” a third-party medical funding company. Andrea meets with “Brad,” a vice-president at Trust Us, and he explains that his company is there to help. Brad says that Trust Us will pay for Andrea’s revision surgery, and will even pay for Andrea to spend three nights in a hotel near the hospital where the revision surgery is to be performed.

Andrea accepts. The revision surgery is a success. Trust Us advances costs for the medical care to the surgeon and to the hospital. A year later, Andrea’s attorney files suit against the manufacturer of the artificial hip. Her claim qualifies under the settlement agreement, and she accepts the terms of the settlement offer. However, she then learns that Trust Us has filed a medical lien for $68,000.00. This figure is larger than the amount Trust Us actually paid for Andrea’s medical care. (In fact, the difference between what Trust Us paid the actual medical providers and the amount of the medical lien is the profit Trust Us stands to make by advancing the medical costs—it is the only reason Brad showed up at Andrea’s house in the first place.)

Medical Funding Can Severely Reduce the Money an Injured Person Receives

In many cases, the large medical lien will be paid from the proceeds of the settlement or jury award. For example, if Andrea settles her case for $200,000.00, she may have to pay the $68,000.00 out of her share of the settlement funds. After legal fees and hard-cost expenses are paid, Andrea will be left with a net amount much less than $100,000.00, which is less than half the gross settlement amount. Let’s say that Trust Us paid half of the $68,000.00 lien to actual medical providers for Andrea’s care; this means that Trust Us will walk away with a cool $34,000.00 profit for advancing costs of the revision surgery. (It should come as no surprise that a backlash on medical funders has occurred, and several lawsuits have been filed against medical funding companies.)

In some master settlement agreements, the defendant-manufacturer agrees to resolve the medical liens for the injured plaintiffs, meaning that the settlement amounts to the injured person will not be reduced by the medical lien payments. In these cases, medical funding companies like Trust Us can threaten the settlement for the person or jeopardize the entire global settlement agreement. At the very least it could delay the injured person’s recovery of needed funds (a speedy recovery is important for most people, but especially “Andrea,” who as you’ll recall lost her job through this period).

That’s where last week’s court document came in. In that case Depuy filed a “motion to compel” against one medical funding company, asking the court to compel the company “to produce information necessary for Depuy to review the company’s lien demands.” Depuy alleges that the medical funding company failed to provide key information in the litigation for Depuy to determine if the medical liens are reasonable. It is just one of many battles that take place in any failed medical product litigation, but the skirmish highlights the financial pitfalls that individuals can fall victim to when moving through a products liability case.

The Takeaway for You

The takeaway is simple: if at all possible do not engage the services of a medical funding company in your products liability case (or any personal injury case). Exhaust every other funding source possible first: private health insurance, Medicare, Medicaid, a kind and generous uncle, even a small loan. If you do not have insurance, or access to Medicare or Medicaid, and no other ability for pay for the necessary corrective surgery, and you are forced to engage the services of a medical funding company, please review the contract carefully (even two or three times), understand the terms of repayment, ask questions, and shop around.

Note: The information provided in this post is not intended to be legal advice and should not be misconstrued as legal advice. No attorney-client relationship has been created through the presentation of this information. The information provided is publicly available.