Fat Fees for Diet Drug Disaster

Remember Fen-Phen? Two little words, shorthand for diet drugs. It now seems, well, so 1990s, doesn't it?

The drugs were pulled from the market in 1997, following the discovery that they could cause heart valve disease. Then an inevitable wave of class action lawsuits inundated the courts.

The original settlement with the drug's maker, Wyeth, dates back to 1999. That turned out to be just the beginning of litigation that has now dragged on three years longer than any other of the "super-mega-fund cases" with valuations of $1 billion or more. (Think WorldCom.)

On Monday, Chief U.S. District Judge Harvey Bartle III of Philadelphia issued a 125-page ruling on the final payday for 70 class action law firms that handled the case. Bartle awarded them more than $412 million in fees, in addition to a 2002 "interim fee" award of $156 million, for a grand total of $568 million.

Wyeth's original settlement was valued at $3.75 billion, but that was more than eight years ago and was just an estimate. Over the years, the settlement has been amended seven times. The seventh time, in 2005, apparently was the charm: It was valued at $5.29 billion.

The class action lawyers wanted credit for another $2.3 billion in settlements by 60,000 to 70,000 plaintiffs who opted out of the class action and got a global settlement of individual cases.

The original settlement provided heart monitoring and refunds to all members of the class -- a very large number, as it turned out. Bartle, a judge not prone to exaggeration, wrote that the "sheer volume" of claims filed "caused great alarm to everyone involved in the litigation, including this court."

"To say that this case is complex is to seriously understate the fact," Bartle wrote. "It was nothing short of a Herculean effort spanning almost a decade." In fact, he described the complexity as "indeed unparalleled."

How unparalleled? Bartle did the math: 175 "significant decisions" from the court; the plaintiffs' lawyers defended 33 appeals; another 53 motions were dismissed by the court with prejudice, meaning they could not be refilled.

Best of all was the auditor's report on the lawyers' hours: He found they logged 553,020.53. That doesn't include another 25,027.65 hours disallowed under a 2001 audit of legal fees — time later found to be well spent.

"In total, 578,048.38 hours of eligible time have been expended," the judge concluded. "Just to put this time into perspective, it is the equivalent of 24,000 days, or almost 66 years, of around-the-clock work on this litigation."

In the end, Bartle credited the plaintiffs' lawyers with just half of the $2.3 billion obtained by those plaintiffs who opted out of the case. He reasoned that the class lawyers got "an extremely important benefit" by precluding Wyeth from asserting statute-of-limitations defenses against those plaintiffs.

Do the math — $568 million divided by 578, 048.38 hours — and you find that the lawyers received about $982 an hour. You might think that's nice work if you can get it, but the sum of all fees is 6.5 percent of the settlement value. Plaintiffs' lawyers have gotten a much higher percentage of settlements in other cases.

Anyway, it would sure be fun to watch the lead lawyers once they get in a room to divvy up the fees.

The lead lawyer was Arnold Levin of Levin, Fishbein, Sedran & Berman in Philadelphia. The Plaintiffs Management Committee included a pride of class action heavyweights, including Stanley Chesley of Waite, Schneider, Bayless & Chesley in Cincinnati; Michael Hausfeld of Cohen, Milstein, Huasfeld & Toll in Washington; and Elizabeth Cabraser of Lieff, Cabraser, Heimann & Bernstein in San Francisco.

by Karen Donovan