A resurgence in product liability class actions has been predicted in Australia since May 2012.(1) Since then, new class actions have been filed in relation to Bonsoy soy milk, dopamine agonists, transvaginal mesh, hip implants and knee implants, among others. Some of these follow similar actions taken overseas, such as proceedings brought against DePuy in relation to its hip implants in the United States and against the manufacturers of dopamine agonists in multiple countries.
In line with this trend, two product liability class actions have recently been settled in Australia - a class action concerning faulty knee implants manufactured by DePuy and a case brought against Merck in relation to its VIOXX arthritis drug (although the latter still requires court approval under Section 33V(1) of the Federal Court of Australia Act 1976 (Cth)).
In December 2012 DePuy reached a settlement for a class action concerning faulty knee implants distributed in Australia. The proceedings brought against DePuy and Johnson & Johnson alleged that:
- the implants were not reasonably fit for the purpose for which they were supplied, within the meaning of Section 74B of the Trade Practices Act 1974 (Cth);
- the implants were not of merchantable quality, as required by Section 74D of the act; and
- DePuy was negligent in manufacturing the implants.
The settlement was approved by Justice Buchanan of the Federal Court on December 4 2012.(2)
It was discovered that some of DePuy's knee implants contained alumina particles that wore down articulating surfaces of the knee to a greater extent than the superficial wear ordinarily observed in well-functioning knee prostheses. Where it occurred, this situation reflected what the lead applicant, Pamela Casey, submitted was a "superadded risk of failure" of the implants.(3) The implants were recalled in Australia in late July 2009, seven months after the lead applicant had already been fitted with an implant, requiring further surgery.
The parties negotiated two protocols to settle the class action:
- the compensation protocol; and
- the liability protocol, which required the establishment of an expert panel of surgeons to act as assessors.
It was agreed that claims for compensation should be assessed by reference to criteria set out in the liability protocol, the overarching criterion being that compensation would be paid "if it is more likely than not that alumina particles from an Affected Implant caused Abnormal Wear (the Characteristic)".(4) 'Abnormal wear' of the articulating surfaces in the knee was defined as that which exceeded "wear that would generally be expected in a total knee replacement prosthesis that had been implanted for a comparable period of time".(5)
As part of the settlement, compensation to eligible group members for non-economic loss and gratuitous care was to be awarded in accordance with four categories:
- Group members who underwent one corrective procedure consequent on the affected implant, but required no further surgery, would be awarded A$30,000 in compensation;
- Group members who had undergone one revision plus one other surgical procedure consequent on the affected implant would be awarded A$40,000;
- Group members who had undergone one revision plus two or three other surgical procedures consequent on the affected implant would be awarded A$65,000; and
- Group members who had undergone one revision plus four or more other surgical procedures consequent on the affected implant would be individually assessed.
Discounts to compensation were also to be applied in the case of bilateral revision surgery as, among other things, the overall recovery period would likely be less than if a group member had undergone separate revision surgeries. Additionally, the compensation protocol provided for compensation to be paid to the estates of deceased group members. Compensation payable for financial losses, including out-of-pocket expenses and economic loss, was to be assessed under Part VIB of the Trade Practices Act.(6) Buchanan agreed with expert legal opinion that the settlement:
"represents an appropriate balancing of the interests of the group members who will be entitled to compensation against the prospects for achieving a litigated outcome, and the risks involved in failure of such litigation."(7)
In particular, he praised the protection afforded to group members who wished to take action against the respondents but were assessed as ineligible for compensation under the liability protocol as they did not exhibit 'abnormal wear'. For group members lacking this characteristic, the settlement as originally proposed would have extinguished their rights against the respondents. However, the final amended settlement agreement preserved their right to commence, continue or take any action, claim or proceeding against the respondents for "any other alleged mechanism of failure" falling outside the defined characteristic.(8) Buchanan noted that these changes were "important ones which address the rights of group members who will not be entitled to a payment under the compensation protocol".(9)
Delivering his final approval, Buchanan noted that "[t]here have been very few complaints among the more than 430 inquiries received regarding the proposed settlement".(10) He did not believe that the few objections that had arisen provided a reason not to approve the settlement. Guided by the evidence, the submissions supporting settlement and the parties' positive response to judicial concerns, he concluded that the settlement should be approved.
It has recently been reported that drug company Merck Sharp & Dohme (Australia) Pty Ltd has reached an A$540,000 settlement with Australians who claim that Merck's arthritis drug, VIOXX, gave them heart problems.(11) If approved by Justice Jessup of the Federal Court of Australia, the settlement will result in eligible group members (ie, those who suffered a heart attack after consuming VIOXX for a certain period) each receiving a maximum of A$2,000 in compensation (A$1,500 if deceased). This ruling would end the long-running class action against the pharmaceutical company that began in December 2005 and continued in May 2012, when the High Court refused special leave to appeal the 2010 decision of the Full Court of the Federal Court of Australia overturning a damages award in respect of the representative applicant in the action.(12)
Jessup expressed concern that an order approving the settlement would be binding on any group members who did not meet the eligibility criteria for compensation, notwithstanding that Section 33ZB of the Federal Court of Australia Act offers protection for group members by allowing them to opt out.(13) He also expressed concern that the proposed settlement did not take into account individual circumstances, in particular those of group members who may have a stronger case against Merck on causation:
"I must say that I'm having difficulty coming to grips with why the settlement should be regarded as fair and reasonable in the interests of all group members ... without any attempt to make a distinction between those who would be more likely to establish causation."(14)
Jessup has therefore reserved his decision.
For further information on this topic please contact Moira Saville, Mandi Jacobson or Katrina Geddes at King & Wood Mallesons by telephone (+61 2 9296 2000), fax (+61 2 9296 3999) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org).
(13) Sections 33ZB(a) and (b) of the act provide that a judgment given in a representative proceeding must describe or otherwise identify the group members who will be affected by it, and binds all such persons other than any person who has opted out of the proceeding under Section 33J.
(14) Merhab, B, Ibid.