The likely onslaught of lawsuits against Merck & Co. following the recall of its blockbuster painkiller Vioxx vividly illustrates the perils of momentous product liability cases.

Aside from the possibility of huge verdicts and spiraling legal costs, these suits can suppress the value of a company’s stock, jeopardize its reputation or even threaten its very financial viability. Merck’s potential exposure could reach up to $38 billion, according to some industry analysts, although it could very well be much less if plaintiffs fall short in proving a link between their injuries and use of Vioxx.

Precedents exist for both scenarios: Johnson & Johnson survived its recall of diabetes drug Rezulin, while Dow Corning Corporation was forced into bankruptcy in the wake of the silicone breast implant litigation.

To ensure survival in the face of major litigation, in-house counsel should team with experienced defense lawyers to rapidly investigate the matter and assess the merits of a case as early in the litigation as possible

“Be prepared – and be prepared early on,” said Janice W. Howe, a product liability litigator with Bingham McCutchen in Boston, noting such cases can become a “feeding frenzy.”

It’s also perhaps as equally important to develop a consistent message to win the all-important PR battle.

The aim of plaintiffs’ attorneys, according to Steven B. Hantler, in-house counsel at DaimlerChrysler, is to create shareholder disharmony by driving down share value, undermining customer loyalty and attacking companies in the media.

“When that perfect storm overwhelms a company, the most expedient solution might be to ‘make it all go away,'” he stated. “That’s a very expensive solution, and that’s why preparation is worth two tons of cure.”

Public Relations

“The plaintiffs’ bar started long ago to litigate their cases outside the courtroom,” Hantler observed. “Defense attorneys risk much if they are not prepared either to respond or be proactive in the court of public opinion.”

Companies should as a matter of course consult either with their internal or external PR consultants to effectively manage publicity surrounding a controversy

“It’s important for everyone to understand what the company’s position is concerning its product and to make sure it’s communicated consistently,” said business litigator Donald R. Frederico who practices in the Boston office of McDermott Will & Emery.

Often a company being sued will instruct outside trial lawyers to deflect any communication to the press to its inside professionals, said defense attorney Richard P. Campbell of Boston-based Campbell, Campbell, Edwards & Conroy.

However, “it’s a mistake not to integrate the trial team into the communications plans, said Hantler. A collateral benefit is litigators involved in developing the company’s message will have a sharpened case at trial, he added.

The public is often quick to accept adverse publicity, Frederico remarked, noting that while some companies might decide to mount an aggressive campaign, other companies may decide that they are better off saying little or nothing.

But avoiding public statements could be a major mistake. Sixty-two percent of Americans surveyed, according to Hantler, said they were less likely to trust a company accused of wrongdoing when they refused comment, and 48 percent are less likely to buy a product from a company merely accused of wrongdoing.

“When a business defendant says ‘No comment’ to media inquiries, that’s a very high-cost response,” he asserted.

As a consequence, both in-house and outside trial counsel need to receive extensive media training, Hantler suggested. For strategic advice, corporations should retain PR firms specializing in litigation communication, he said, particularly companies setting up a litigation communication program to guide them.

“The data show that it’s better for companies to have a designated person who can speak for the company, who gets out there early on and doesn’t duck from the press, so that people think something’s worse than it is,” agreed Howe. “Obviously circumstances sometimes change as a case proceeds, but you don’t want a scattered set of people who are saying different things and sending different messages.”

A good practice and prophylactic measure for companies, she continued, is also to educate employees to be responsible about communications they generate, be it on paper or electronically.

“What happens is someone creates a documents or sends a communication and is cavalier about what is said, speculating and musing,” Howe explained. “Sometimes those documents, because of document retention policies, find their way into litigation. They have no merit and no value, but can get spun and blown up.”

Move Fast

A critical first step in litigation is to conduct a factual investigation quickly, according to Frederico. This means identifying the individuals within the company who have the information relevant to the product, then arranging to interview those people and ensuring relevant electronic as well as hard documents are preserved, he explained.

Campbell advocates determining the nature and extent of a case within the 30 to 60 days after learning of a case to determine whether it is one to litigate or settle.

“The earlier the corporation does that, the better it is, because it then has its resources available to handle other matters,” said Campbell, who also noted that such an approach is mandated in the federal courts under automatic disclosure rules.

Sheila T. Kerwin, head of the product liability practice group at Halleland Lewis Nilan & Johnson of Minneapolis, pointed to the advantages of bringing in outside trial counsel as soon as possible, noting that the sooner the investigation is conducted under the management of outside counsel, the more the company is protected by the attorney-client and work product privileges.

It’s also essential to seek out the best experts early on once litigation appears imminent, according to both Frederico and Howe.

Formulating defense theories in conjunction with experts helps to establish facts at trial, Howe said. It also enables lawyers to develop Daubert-Lanigan challenges early on, she noted, which can trim down the litigation, if not eliminate it altogether.

And the sooner experts are assembled, the broader the spectrum of available witnesses will be, Howe said.

“If you wait until the point when you have to designate experts, it’s so far into the litigation that you’ve lost the value of the experts and fewer people are available,” she remarked.

“Getting an attorney involved at this stage is helpful, because the company may not know who the outside experts are who make the best witnesses,” added Kerwin. She teams an outside witness with an inside technician familiar with the product in question.

The facts to be established by a defendant company should focus on the story of the life of the product – from its design, to its manufacture, sale and beyond.

“You want to make sure you immediately get the serial number of the product, pull out the manuals and the initial designs for the product, make sure that you and your outside lawyers understand everything about that product, because you will learn it and understand it better than any plaintiff’s lawyer will,” Kerwin said.

Defense counsel should also gain a good understanding of other incidents related to the product, she added, and start crafting arguments as to why those incidents are not the same or similar, in order to challenge their admissibility.

Issues of spoliation of evidence are also of immediate concern at the outset of a claim, she remarked.

“In state courts around the country, the law that says a claimant has a duty to preserve evidence is becoming stronger and stronger,” Kerwin noted, warning of the wide range of sanctions that can be imposed, including the exclusion of expert testimony.

Hantler recommended conducting “situations analyses” early on, studying the consequence of varying outcomes in order to develop messages for each scenario. This enables companies to test each response and discover which ones resonate with the public, he stated.

“If a company waits until a large suit verdict is handed down by a jury, with the media and other stakeholders at the door, it may be too late,” Hantler cautioned.

Coordinated Actions

Effectively handling an expanding docket requires careful coordination of the various attorneys representing the company.

“If you don’t,” warned Campbell, “you’re going to be in big trouble, because the plaintiff’s bar, filled with incredibly skilled lawyers, is out coordinating against you across the country.”

In the context of mass torts, coordination becomes crucial in ensuring that strategies are consistent, Howe added.

The company should identify a point person internally, making sure regulatory counsel is available if the industry is regulated and appointing coordinating counsel if the litigation is nationwide.

Kerwin, who has frequently provided national coordination of litigation for corporate clients, stated that the value in such work is gaining an intimate understanding of a client’s product – the key to defending such cases.

“You don’t have to reeducate a lawyer every single time there is an accident,” Kerwin said, observing that she is able immediately to implement investigation plans used in earlier cases.

With an eye towards costs, Kerwin explained that as national counsel, she is careful to handle the substantive product issues while delegating the more procedural matters to local counsel.

“For example, when discovery comes in, I can draft answers to requests in an hour which would take local counsel five hours to complete,” she remarked. “I also make sure I am admitted pro hac vice in every case right away. Most states then allow me to serve everything directly from here.”

A system for keeping tabs on discovery and litigation across the country is necessary, said Frederico, noting that such monitoring is a function of having good local counsel available, as well as computer resources.

In cases involving multiple defendants, Kerwin pointed out that co-defendants can coordinate efforts, at least to the extent their interests meet. She noted that joint defense agreements could be drafted to address specific issues, such as damages.

Focusing on internal coordination, Hantler suggested that companies restructure their approach to litigation, to create what he calls an “issue platform.”

“Because there are several entities with a stake in the outcome of the litigation – shareholders, customers, analysts, the general public – the input of the government affairs office, public relations office and legal department should be in alignment,” he said.

“There may be initial expense in doing an alignment of different departments within a company, retaining a litigation communications professional and forming a litigation communication function, but the cost of not doing this is many-fold greater,” Hantler stated, pointing to Merck’s loss of share value.

Procedural Issues

To the extent that it is possible, lawyers should steer cases into favorable jurisdictions, consolidating actions and picking the right suits to settle, experts said.

Traditionally, corporate defendants have preferred to be in federal court, said Frederico, one reason being the applicability of the Daubert decision, which not all state courts follow.

“There is also a sense – whether justified or not – that cases will receive better attention in federal court because they’re not as overburdened as many state courts,” he said.

For converse reasons, Campbell noted, plaintiffs prefer the lower level of formality in state court and, in particular, do not like the “exquisite pleading” required by federal rules, which add to the costs of a case. Consequently, he reported, in the last 10 years plaintiffs have been adding nondiverse parties to their complaints to prevent removal to federal court.

Howe suggested taking a close look at the parties in order to assess whether they have been joined solely to keep the case in state court, which could be challenged and the case potentially removed to federal court.

Consolidation, while streamlining litigation, can be a difficult decision for attorneys because the benefits of aggregating claims often depends on the judge selected to handle the case, a critical piece of information not known in advance.

Whether to fight lawsuits or take the less costly alternative of settling depends on the nature of each claim.

Campbell draws a distinction between run-of-the-mill product liability cases and those involving “pattern” litigation, stemming from a single product manufactured and distributed the same way across the country.

In an ordinary product litigation case, where the stakes may not be as high, he remarked “there are only so many dollars in the pool and so many witnesses who can find the time to move away from their job and appear in a courtroom.”

Hantler stressed the need to send a message to plaintiffs’ attorneys that filing frivolous cases is a lousy investment. “When those cases are settled and the plaintiff’s lawyer recoups his time plus some bounty, that sends the wrong message,” he said.

Hantler distinguished between frivolous cases – in which there is no manifest defect or injury – and meritless cases in which there is a serious injury, but the wrong defendant is being sued.

While he seeks to try the so-called frivolous cases, meritless cases are treated differently if there is a good faith difference of opinion or a legitimate question of fact or law.

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