Lawyers say Actavis, Mylan tricked them out of fees
Steve Korris Apr. 29, 2011, 3:00am
CHARLESTON – Lawyers who led national litigation against drug maker Actavis and distributor Mylan suspect the defendants tricked them into signing away their fees.
The plaintiff steering committee reported fraudulent inducement to U.S. District Judge Joseph Goodwin on April 22, stating they had no current intention of claiming it.
"The critical element of a fraudulent inducement claim is an oral promise that is used as an improper enticement to the consummation of another agreement," wrote Fred Thompson, of Motley Rice in Mount Pleasant, S.C. "The fact that the agreement is later reduced to writing does not negate the occurrence of a precedent oral promise that was the motivating factor for the making of such agreement.
"Nor will an integration or merger clause in a written contract which seeks to limit one party's liability to the other prevail when the agreement was procured through fraud."
He filed it along with Carl Frankovitch of Wheeling and Harry Bell of Charleston.
They insist the agreement doesn't allow defendants to propose an award of zero. They seek about $6 million, for efforts that produced a $10 million settlement.
Litigation started in 2008 after Actavis recalled a batch of heart medicine Digitek from a plant in New Jersey due to fears it had produced pills of double thickness.
The first class action sought $1 billion in damages.
The U.S. Judicial Panel on Multi District Litigation consolidated federal cases and transferred them to Goodwin.
No lawyer produced a double thick pill that any client received, and the case shriveled.
Goodwin granted Actavis and Mylan early disclosure of basic facts, and they found suits with no medical basis at all.
Plaintiffs proposed a class action on economic losses, and Goodwin denied it.
The parties settled about 3,200 claims for $10 million last September, with up to $3 million for claims in state courts.
In February, the plaintiff committee petitioned for $4,400,041.75 in fees and $1,338,260.91 in expenses.
The committee separately sought $340,073.50 in fees and $7,848.39 in expenses for the class action Goodwin denied.
In March, Actavis lawyer Richard Dean of Cleveland recommended little or nothing.
"If you weave a carpet that no one buys, the weaver should bear that loss," he wrote. "If the Court should somehow conclude that there is a basis for the petition, any award should be extremely small."
He wrote that plaintiffs never produced evidence that they possessed or ingested defective Digitek.
"Encouraging attorneys to take on massive fishing expeditions like the Digitek litigation is not in the interest of the public," he wrote.
He wrote that the committee could have negotiated fees and expenses with colleagues.
He wrote that they could have provided terms in the settlement agreement to award fees and expenses from the settlement fund.
"Defendants are not responsible for the choices that put the plaintiff steering committee in their present position and should not have to pay for them," he wrote.
He wrote that if the committee took a typical fee from the settlement, the average plaintiff would receive about $2,000.
He wrote that Actavis, Mylan and insurers spent more than $30 million on defense.
On April 22, Actavis filed a brief on fees just ahead of the committee's brief.
Dean wrote that the parties agreed "to proceed with the settlement and to fight about the plaintiff steering committee's fees and expenses another day."
"The settlement agreement is not ambiguous – it says exactly what was intended by the parties, and nothing more," he wrote. "Had the parties intended the court to determine merely the amount of reasonable fees and expenses, the PSC would have negotiated more explicit provisions detailing their alleged entitlement to fees and expenses."
He wrote that as their demands diminished, so did their chances of obtaining enough participation to achieve a settlement.
"Any amounts paid to the PSC out of a common fund would only reduce those chances further," he wrote.
He compared it to a blank check for Goodwin to complete.
"They had two years to think about how they were going to get paid and to assure it was going to happen," he wrote. "Defendants can only speculate about why the PSC did not secure their compensation by some other vehicle.
"In all forms of business, including the risky business of contingent fee litigation, there is the chance that one will lose money on a deal. Perhaps they believed that cutting their losses and moving on to greener pastures had value."
While Goodwin ponders the fee, he must also pore over 165 pages of expenses that five committee members want Actavis and Mylan to pay.
He ordered documentation after the committee sought reimbursement without it.
Thompson added an expert's $42,000 bill to Motley Rice's bill on April 21, raising the total of the firm's expenses to $414,997.98.