On 26 February 2015, Justice Jessup of the Australian Federal Court approved a settlement which brought to end the long-running representative (class) action brought on behalf of consumers of the arthritis drug, Vioxx. The settlement approval follows an earlier judgment of Justice Jessup in 2013, in which he had refused to approve a settlement.
The case has had significant implications for product liability class actions, especially actions involving pharmaceuticals and medical devices. In particular, the Vioxx litigation has highlighted the difficulties in prosecuting healthcare product liability cases as class actions given the importance of varying individual patient factors, notably on issue concerning causation of damages.
This article looks at the key aspects of the decision and provides commentary on the implications for life sciences companies and insurers which cover product risks.
History of proceedings
Vioxx was alleged to have caused adverse cardiovascular side-effects in several arthritis patients.
One such patient, Graeme Peterson, was the lead applicant in Federal Court proceedings brought on behalf of Vioxx consumers. In March 2010 Peterson was awarded damages against the supplier of Vioxx by Jessup J on the basis of a finding that a myocardial infarction (heart attack) suffered by Peterson was caused by Vioxx. Jessup J also made a number of findings on issues common to the remainder of the class.
In October 2011 the Full Court of the Federal Court allowed an appeal against the judgment for Peterson and in May 2012 the High Court refused special leave. This resolved the individual claim of Peterson but did not resolve the claims of other group members of the proceedings (being other patients who alleged they had taken Vioxx and consequently suffered adverse cardiovascular effects).
In April 2013 Peterson (through his lawyers, Slater & Gordon) brought an application in the Federal Court for approval of a settlement agreement to resolve the claims of the remaining group members. Under theFederal Court of Australia Act 1976, a representative proceeding can only be settled with the approval of the Court.
The proposed settlement agreement involved establishment of a scheme by which group members needed to satisfy two sets of criteria, the first being a diagnosis of myocardial infarction, and the second being proof of use of Vioxx within a certain number of days prior to the myocardial infarction taking place. Satisfaction of the criteria would entitle group members to a share of the settlement. The settlement was capped at total payments by the respondents for the entire class of living group members of $497,500 and for the entire class of deceased group members of $45,000. A total of 1660 group members of Peterson’s proceedings had registered their intentions to advance individual claims. The settlement also involved the respondents abandoning their claim for costs against Peterson arising from the trial and the appeals.
On 20 May 2013 Jessup J declined to approve the settlement. Among other things, Jessup J took issue with the fact that the settlement made no discrimination between group members who had risk factors for myocardial infarction other than Vioxx consumption, and group members who might have had no other risk factors (one of the issues in Peterson’s case was that he had risk factors other than Vioxx use). Jessup J also expressed misgivings concerning a potential conflict if the lead applicant’s lawyers, Slater & Gordon, would have an ongoing role in determining whether group members satisfied eligibility criteria.
Modified settlement agreement and its approval
In November 2014 the parties put forward a modified version of the settlement agreement for approval by the Court.
In his judgment on this application, Jessup J indicated that he considered the amount of the settlement (which was unchanged from the previous version) to be small – he noted the maximum any individual group member would receive would be $4,629.36. However, he considered that the amendments had addressed his concern about the lack of discrimination among patients with different circumstances. From the judgment, this appears to have been done though the introduction into the settlement agreement of a points system, recognising different circumstances of different group members and damages being allocated accordingly.
Jessup J was also satisfied on the issue of conflict of interest of the lead applicant’s lawyers having a role going forward in determining which patients qualified. This was because the relevant determinations had now taken place and were part of the settlement being submitted for approval.
Even with these issues addressed, Jessup J expressed ongoing concern with the settlement and made a comment suggesting he had anticipated that individual cases of group members other than Peterson may have been brought forward to be tested against the answers to the common issues (noting that Peterson’s individual claim had failed largely on individual causation issues).
Despite these concerns, Jessup J noted the following considerations which favoured the approval of the settlement:
- All group members had been informed of the terms of the proposed settlement and there had been very few objections. The objections which were made were not sufficient to stand in the way of approval of the settlement.
- No group member had applied to step forward to replace Peterson as the lead applicant. Jessup J commented that he did not see why Peterson, having run the case in the interests of other group members but having failed in his individual claim, should continue to be exposed to risk “in the interests of others who are content to remain below the parapet”.
- The applicants could not be compelled to prosecute the case. If the proceedings were not resolved and were not prosecuted, the result would be that sooner or later the proceedings would be dismissed, meaning group members would get nothing and the lead applicant would still be faced with substantial costs orders.
The approval of the settlement finally brings to a close an action which has been before the Australian courts for the best part of decade.
Both the substantive action in Vioxx and the settlement applications highlight many of the difficulties in prosecuting product liability claims as class actions. In particular, individual causation issues are frequently at play, meaning that neither the parties, nor the court, can have absolute confidence that the finding on causation in a lead applicant’s case is likely to be replicated in the cases of all group members.