April 11, 2017 / 6:42 PM / 9 months ago

Drug companies try again to expose outside investors in mass torts case

(Reuters) - Stymied in at least two previous attempts to expose outside investment in mass torts litigation, Johnson & Johnson – this time alongside Bayer – is once again asking a court to require plaintiffs to disclose whether litigation funders have an interest in their case.

On Friday, as The Legal Intelligencer was the first to report, Bayer and J&J filed a letter motion in the Philadelphia Court of Common Pleas, asking Judge Arnold New to order plaintiffs’ firms with prospective bellwether cases in the state-court litigation over the blood-thinner Xarelto to reveal whether any outside funder is backing the case. The motion also asks the judge to require the firms to disclose the identity of funders and to produce their agreements with outside investors.

Bayer and Janssen told Judge New they’re “entitled to know who is in control and who has a right to be consulted” in the prospective bellwether trial cases. They need to see the actual documentation, they said, to assure that funding agreements are not improper under state champerty law. (This ancient prohibition against encouraging or meddling with someone else’s litigation claim has generally not been an obstacle for litigation funders, but last year a Pennsylvania appeals court struck down a funding deal as champertous.)

The pharma companies previously requested the same disclosures in interrogatories sent to plaintiffs’ lawyers in two dozen so-called “core discovery pool” cases in the 1,200-case Xarelto litigation consolidated in the Court of Common Pleas. As you would expect, none of the firms – which include Weitz & Luxenberg, Levin Sedran & Berman and NastLaw – agreed to cough up information about how their clients’ cases are funded. I’m sure the firms will tell Judge New that Bayer and J&J are trying to intrude into privileged communications between them and their clients.

Pegging a demand for disclosure of outside funding to the bellwether process seems to be a new approach for J&J and other pharma defendants. To the best of my knowledge, J&J’s first such disclosure demand came a few years back in multidistrict litigation over pelvic mesh. In that case, J&J’s sweeping, mid-MDL motion was a response to allegedly improper client solicitation by telemarketers trolling for mesh clients. J&J asked to conduct discovery on how plaintiffs learned about the litigation, an inquiry that would presumably have led to the exposure of investors poised to profit from inflated mesh dockets. The company quickly dropped the motion, however, and nothing came of it.

Late last year, J&J called for plaintiffs’ firms that wanted to lead consolidated federal court litigation alleging a link between talc and ovarian cancer to disclose any backing by outside funders. Plaintiffs’ lawyers said J&J’s request for information was unjustified, untimely and unseemly. U.S. District Judge Freda Wolfson of Trenton, who is overseeing the talc MDL, agreed that “funding concerns” were not ripe when she appointed lead counsel in December.

But there’s some momentum toward disclosure of litigation funding deals. As you’re probably aware, in January, the Northern District of California amended its standing order for all judges of the district to require that lawyers in class, collective or representative actions reveal “any person or entity that is funding the prosecution of any claim or counterclaim.” The Fairness in Class Action Litigation bill passed last month by the U.S. House of Representatives would similarly require class action lawyers to disclose to judges and defendants “the identity of any person or entity, other than a class member or class counsel of record, who has a contingent right to receive compensation from any settlement, judgment, or other relief obtained in the action.”

Of course, litigation funders in the U.S. generally don’t back class actions so they’re not too worried about the Northern District disclosure requirement or the House bill. (Law.com had a good story about why funders didn’t bother lobbying against the legislation.)

But mass torts are another story. If J&J and Bayer make headway with their motion in the Xarelto case, there could be real consequences for hedge funds banking on supposedly failsafe personal injury litigation.

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