You’re the CEO of a medical device company that manufactures implantable orthopedic devices. Your company has enjoyed years of success with limited FDA involvement. But then the Warning Letter arrived. It was followed by a recall notice. The lawsuits came pouring in soon thereafter. How will your company manage the expenses associated with this flood of litigation?
This article will briefly describe different types of litigation expenses and the various strategies used to manage them. Some of these strategies include:
Litigation expense management continues to be an area of scrutiny for companies, as management of expenses is crucial to the successful outcome of a claim or lawsuit. Your input in these discussions is critical because developing a strategy to keep expenses in check is most effective when done at the outset of litigation.
Most insurance carriers have litigation guidelines for their outside counsel. These guidelines set forth the expectations of counsel in terms of billing and reporting to you and the carrier. Litigation guidelines assist in controlling costs by specifying how litigation should be staffed, what activities can be billed to the "file," and what information is needed to assess the exposure of a particular claim.
Litigation guidelines are evolving documents and should be updated to reflect a company’s changing litigation landscape. At Medmarc, for example, our Guidelines have evolved over the years to address specific needs of our company, such as Medicare reporting, as well as the needs of our insureds, including confidentiality and trade secret considerations.
Litigation guidelines generally provide specific requirements for legal billing. For example, when an attorney is traveling on business, what time should be billed to the carrier? What tasks are considered administrative or overhead? How descriptive should the time entries in the legal invoice be?
Litigation guidelines also address counsel’s reporting duties on a claim, which may include an analysis of the important facts, a summary of the applicable law, and counsel’s recommendations for further handling. The guidelines may specify how frequently you receive these reports and the content of such reports. It is important that you have an opportunity to review counsel’s evaluation of the case and participate in the development of the case strategy so that you can evaluate the impact of the claim on your business. For example, is the plan to file a dispositive motion to get your company dismissed from the case? Or, do you plan to seek disqualification of one of plaintiff’s experts who is not qualified to render opinions about the device? If so, what documents or information does counsel need to accomplish that goal?
Importantly, litigation guidelines also generally require a budget. This budget will be helpful for you not only to assess the overall financial impact of the litigation on your business but also will identify the people who will be working on your case(s). In law firms, employees bill at different rates depending on their skill and training, and the budget will identify the appropriate employee who will perform the task. Often, the delegation of certain tasks to lower level timekeepers can result in significant savings. For example, does the firm have a skilled paralegal or associate who can be the “point person” for discovery or motions? This will reduce any duplication of efforts on the part of counsel.
Selection of counsel and attorneys’ fees
As a rule, once an attorney is involved, expenses will rise dramatically. The selection of counsel to represent your company, and the rate charged by that counsel, will have a significant factor in expense management.
Selection of counsel
Claims involving your insurance policy with Medmarc generally concern bodily injury or property damage related to a medical device or pharmaceutical. It is crucial to retain counsel knowledgeable about life sciences matters. Attorneys who specialize in life sciences matters are generally regarded as trial or litigation attorneys and should be distinguished from counsel who practice in transactional or regulatory matters.
Life sciences matters are generally complex and involve legal issues ranging from federal regulatory approval to the learned intermediary doctrine to distributor relationships. It is not cost-effective to pay for counsel to get “up to speed” on these legal issues. Rather, it is more cost-effective and strategically advantageous to hire counsel who deal with these issues on a daily basis. For example, your claim may present issues of federal preemption. Your company is better served by counsel who has written legal briefs and argued these issues in court.
In our hypothetical case, your company is facing multiple lawsuits filed in various state and federal courts across the country, so you will have multiple law firms representing your company’s interests. You (and your insurance carrier) should consider national counsel to oversee and manage the litigation nationally.
The use of national counsel can greatly streamline litigation costs. National counsel, which is generally composed of a dedicated team of attorneys and paralegals within a firm, will spend time learning the product line, identifying important company witnesses, and compiling relevant company documents. National counsel will also develop a position for your company’s defense and ensure that it is carried through in responses to written discovery and in testimony by company witnesses. National counsel may also hire and supervise local counsel, who will defend the individual lawsuits in each jurisdiction.
Even where national counsel is hired, you will need to retain local counsel licensed in the individual states. Skilled local counsel are essential to the management of a case. State laws vary widely and local counsel will assist national counsel in identifying strategies and defenses that can be used in your case. In addition, the relationship of a local attorney to the judge and other members of the community should not be underestimated. For example, the local attorney (or that attorney’s firm) may have deposed the implanting physician previously and will have access to prior deposition transcripts. Or, the local attorney may have tried cases in the past with your judge and will have a good understanding of how the judge likes to conduct a trial.
Attorney rates for services
Attorney rates for services vary geographically and are tied to the expertise of the attorney and firm. For example, you can expect an attorney in New York City to charge more than an attorney in Buffalo, New York. However, insurance carriers often have (or can) negotiate lower rates with counsel based on a past relationship or possibility of a future relationship.
Firms also charge different rates for the type of professional handling a matter (sometimes called the “timekeeper”). Often, for an individual case, there will be a different rate for a partner, associate and paralegal, who will each have different responsibilities for work on the case. For example, the partner or associate, depending on the complexity of the witness, may take the lead at deposing all the medical providers. The paralegal, who bills at a lower rate, can identify and organize all the documents needed for the attorney to prepare and conduct the deposition. As such, it is important that the lowest-level timekeeper most qualified to perform a certain task be the one billing for that task. This can be addressed in the budget, discussed above.
Ask any personal injury lawyer or claims examiner where the bulk of litigation expenses are paid and you will likely get the answer “discovery,” which generally includes written questions and document requests, electronic document collection, medical records and depositions of the parties, treating physicians and experts.
In your litigation, the plaintiffs' attorneys are likely serving a variety of types of discovery requests. These may include interrogatories (written questions), requests for admission and requests for production of documents. Further, discovery likely encompasses documents and information in both paper and electronic formats. The topics that may be covered in discovery requests include regulatory filings, communications with FDA, design documents, complaint investigation reports related to this incident, similar complaints and corrective action documents, and communications between employees about the product. As you can see, the net is cast wide so the list of individuals with knowledge of these subjects could be quite long.
At the initiation of a new claim or lawsuit, there may be a request for you to preserve certain types of materials to ensure that they are available for future litigation (generally called a “litigation hold” or “preservation order”). This process can be time consuming and costly. The preservation of documents and electronically stored information (“ESI”) requires the identification of the appropriate “custodians,” or individual(s) having control of a document or file, as well as the scope of the documents and ESI to be preserved. Counsel can assist you in crafting an appropriate litigation hold.
The failure to comply with the litigation holds can have dire consequences. In a recent court decision referred to in legal circles as “the Actos decision”, a federal judge in Louisiana instructed a jury that because a pharmaceutical company had failed to preserve certain records, even though the records may not have been useful in the lawsuit, the jury could infer the documents would have been helpful to the plaintiffs or detrimental to the company. The jury went on to award a $6 billion punitive damages verdict. While this verdict was subsequently reduced, it is a clear warning sign that litigation holds and evidence preservation should be taken seriously and considered with due care.
E-discovery is the collection of ESI and can include the preservation, collection and review of email, voice mail, databases, metadata, and digital images. The high cost of e-discovery is well-known, but costs can be minimized with adequate preparation and proper staffing. Once you imagine the number of emails and databases that mention the product at issue in your litigation, you will have a good sense of the magnitude of this process. There are proposed new rules that govern discovery in federal courts and these rules may help reduce the burden of preservation, but they certainly will not eliminate it. The proposed rules emphasize the proportionality of the requests to the issues at stake in the litigation, the parties’ resources, and whether the burden or expense outweighs the benefit. While the proposed rules will provide additional arguments to limit the scope of e-discovery, e-discovery will remain an expense to be addressed carefully. The use of skilled life sciences attorneys, in conjunction with an experienced e-discovery vendor, is the most effective approach to managing e-discovery expenses.
Litigation support vendors
The use of outside legal vendors can assist in litigation management. Services provided by litigation support vendors include surveillance, structured settlement, electronic discovery, legal bill auditing, court reporting, and medical records collection/analysis. Given the depth of experience in assessing costs, many carriers, such as Medmarc, are actively selecting vendors who can provide quality service at a competitive price.
There may be hundreds of depositions taken in your litigation all across the country, including plaintiffs, corporate representatives, treating physicians, and experts. (You can read a more detailed analysis of the deposition process in the next installment of the Litigation 360 series.) A court reporting vendor can compile all the deposition transcripts taken in your cases and make those available to you electronically. Likewise, there will likely be (at least) hundreds of exhibits used in your litigation. A national vendor can track and compile these important exhibits to avoid duplication. In addition, national vendors can also offer “bulk discounts” on transcripts and related services so that your company will realize an overall cost savings.
Medmarc’s Litigation Management Program
Medmarc provides exceptional claims solutions for its medical technology and life sciences customers. We continue to utilize the latest litigation management practices and regularly look for ways to manage, monitor, and mitigate claims-related costs. In the event of a claim, we work with you to bring it to resolution and mitigate its impact on your business.