Appel-Hole v. Wyeth-Ayerst Laboratories, 700000/98
Decided: March 27, 2007

Justice Charles Edward Ramos

NEW YORK COUNTY
Supreme Court

Justice Ramos
In motion seq. no. 007, Parker and Waichman LLP (P&W), on its own behalf and on behalf of its clients, moves pursuant to CPLR 2221 for leave to renew or reargue its motion to intervene (previously denied by order dated November 24, 2003). In addition to P&W, proposed intervenors referred to as the "Abramova Plaintiffs," also seek leave to intervene. In the event intervention is granted, P&W and the Abramova Plaintiffs seek disclosure of certain documents referred to as submissions in support of the amended order dated November 7, 2001, which approved the settlement of this action and will then seek to vacate that settlement order.1

In this action, known as the New York Diet Drug Litigation,

New York County Index No. 700000/98, plaintiffs asserted claims of personal injury and loss of consortium allegedly due to the ingestion of "fen-phen" diet drugs.2 Some of those plaintiffs and others are here challenging a settlement approved by our predecessor court (Freedman, J.) by her order dated November 7, 2001, which, inter alia, held that the terms of the settlement were fair and reasonable and conformed with all ethical requirements. In that settlement, defendant, American Home Products ("AHP"), offered a large sum of money3 to settle virtually all claims.4

The ethical issues raised in this case arise out of one of the thorniest areas in tort law – the process to be applied in the settlement of mass tort litigation. Because of the large number of claimants whose cases are settled at one time (in this case over 5,000), mass tort settlements often take the form of collective settlement structures. The alternative to a collective settlement would require the piecemeal analysis of the merits of each claim and individual settlements thereafter, as contemplated when the classic case dominated tort law (one injured plaintiff and one or more allegedly responsible defendants). This would consume the lifetime of many of the claimants themselves when there are thousands of claims to be compromised. As a consequence, counsel and the courts have devised means of settlement expedition, such as the placing of claimants in objective categories of severity of injury, age, gender, economic status, and each claimant’s relationship to the acts of the defendant, and then entering into a mass settlement. Because of the large number of clients, great care must be exercised to insure that each client understands the settlement offer and is treated fairly. Ethical rules guide the actions of counsel in these circumstances.

This mass settlement was further complicated by the need to pay a portion of the attorneys’ fees earned by settling counsel to other attorneys who referred additional clients. Therefore, claimants who were the original clients of the settling attorneys, Napoli Kaiser & Bern ("Napoli Firm"), would generate greater net legal fees for the firm than would clients who were referred to them by other attorneys (e.g. P&W and others).

The record on this motion, which includes a number of previously sealed documents and an affidavit of a former member of the Napoli Firm, has unfortunately raised serious questions regarding the settlement process herein, including claims that:

(1) claimants who were Napoli Firm clients were offered disproportionately larger settlements because the firm unfairly inflated settlement offers for its clients so that the attorneys’ fees earned by the firm would be greater;

(2) unknown to the claimants, their cases were not settled for an amount negotiated for each claimant with AHP, rather their claims were settled based upon the Napoli Firm’s own evaluation of the value of each claim in light of a lump sum offer;5

(3) the Special Master6 appointed by the settling court did not make individual evaluations of the settlement offers in each case as was represented by the Napoli Firm to its clients and to the settling court; and

(4) the ethics opinion submitted in support of the settlement was flawed and based upon less than a full understanding by the expert of the circumstances surrounding the settlement and the applicable law.

Notwithstanding the Napoli Firm’s protestations to the contrary, no court, trial or appellate, has ruled on these issues in a contested hearing. This is explained by the fact that the order of compromise sought to be vacated here, dated November 7, 2001, was submitted to our predecessor court and executed, ex parte.7