Saturday, October 30, 2004
Impact of New Tax Law on Contingent Fee Awards
Letter to the Editor of New York Law Journal
Ellis Mirsky, October 22, 2004
Thursday, October 28, 2004
Snell & Wilmer Attorneys Win Defense Verdict in First BOTOX® Case
Snell & Wilmer product liability litigation partners Hoot Gibson and Ellen Darling led the successful defense of Allergan, Inc. (NYSE: AGN) in the Irena Medavoy vs. Arnold Klein, M.D. and Allergan, Inc. trial that concluded October 8, 2004, in the Los Angeles County Superior Court -- the first trial involving BOTOX®.
Plaintiff claimed she suffered life-altering intractable headaches, fibromyalgia, extreme neck weakness, difficulty breathing, difficulty swallowing, and extreme fatigue, among a long list of other symptoms, following her March 4, 2002, treatment with BOTOX® for cosmetic purposes and for her migraines. Both treatments were off-label uses of BOTOX®. Plaintiff alleged that she was bedridden for four months after her March 4, 2002, BOTOX® treatment, lost a reality television show opportunity, and that she continued to suffer from the effects of BOTOX® today.
In her complaint, plaintiff alleged negligence, products liability, fraud, negligent misrepresentation, improper promotion of unapproved uses of BOTOX®, intentional misconduct and violations of sections 17200 and 17500 of the California Business & Professions Code (the "B&P Code") against Allergan, Inc., and medical malpractice, breach of fiduciary duty, intentional misconduct, and violations of section 17200 of the B&P Code claims against her Beverly Hills dermatologist. Before the trial began, the presiding judge bifurcated the B&P Code claims from the jury trial and intended to hear these equitable claims at the conclusion of the jury trial.
During the jury trial, plaintiff alleged that Allergan, Inc. failed to warn her and her doctor about potential serious side-effects, such as life-altering intractable headaches, following the use of BOTOX®. She also claimed that Allergan, Inc. fraudulently concealed information about BOTOX® from physicians and patients, and that it engaged in the off-label promotion of BOTOX®. At the conclusion of plaintiff's case-in-chief, Judge Chavez granted a motion for nonsuit on the fraud, manufacturing defect, improper promotion of unapproved uses of BOTOX®, intentional misconduct claims, and as to punitive damages.
After six weeks of trial, the jury rendered a defense verdict for Allergan, Inc. and the defendant doctor. "The key elements of our defense were in the quality of our expert witnesses and the numerous falsities we exposed in the plaintiff’s arguments,” said Darling." "The jury’s decision is a major credit to the effort of Snell & Wilmer’s product liability team and BOTOX®'s documented safety and efficacy history."
The defense presented a multi-tiered strategy which included jury education regarding "off-label" terminology and use, analysis of plaintiff's extensive medical and psychological history, and examination of clinical studies involving BOTOX®. The jury's decision reinforces the ability for drug manufacturers and doctors to rely on valid scientific studies in jury trials.
Others on the Snell & Wilmer defense team included Samantha Feld, Shelley Lex, Alex Shepard and Amy Leinen, as well as an extensive team of project assistants and secretaries, who were essential to the success of this case.
Before the jury returned with the defense verdict, the Court dismissed plaintiff's section 17200 and 17500 B&P Code claims against Allergan, Inc. and her doctor. Those claims were based primarily on plaintiff's belief that Allergan, Inc.'s advertising and promotional materials were false and misleading.
Transatlantic traffic is all one way
But Asia could hold the key
John Malpas, Legal Week, 10/28/04
UK-based partners confirm that they refer most of their cross-border work on into Europe and receive most referrals from the US.
US Legal Market Consolidates Further
Legal Week (10/28/04) reports:
The consolidation of the US legal market has increased substantially this year, with 44 mergers so far in 2004 involving US law firms, nine ahead of the total for the whole of 2003. * * * Most deals involve modestly sized practices with the average size of the smaller law firms being 30 lawyers.
Tuesday, October 26, 2004
Hildebrandt Reports 2004 a Strong Year for U.S. Law Firms
Litigation and Financial Services Strong but M&A and IPOs Down
Clients Could Be Seeking Discounts in 2005
Associates' Salaries Could be on the Rise
"In our annual report for 2004, we forecasted a strong year for the legal profession. As we enter the fourth quarter, we reaffirm that projection as a sampling of our clients indicates that many firms were well ahead of their budgets at the end of the third quarter.
"In that sampling of clients, however, it is also clear that the first quarter upturn in corporate transactions did not continue past early summer. There was a clear slowdown in demand for M&A transactions and in IPO volume and the market remains choppy.
"There is no indication that there will be a change in the decline of corporate transactions for the remainder of the year. But because of the strong performance, especially in litigation and financial services work, this downturn should not have too much of an effect on this year's overall performance.
"Next year might, on the other hand, be a different story especially considering an increase in demand by clients for discounts and controls on fees. It is beginning to appear to us that 2004 may be a "spike" year requiring careful management of partner expectations for 2005.
"Lastly, we have seen sporadic associate salary increases and rumors persist of a starting salary increase in New York City. With escalating demands for discounts and client pressure on legal fees we wonder about the wisdom of more salary escalation. On the other hand, associate attrition rates have risen sharply this year sparking concern of associates looking for alternative careers."
Wednesday, October 13, 2004
New Tax Law To Wipe Out 'Double Taxation' on Contingency Fees
Tony Mauro
Legal Times
10-13-2004
Until now, the IRS required a victorious civil rights or other plaintiff who won, for example, a damage award of $100,000 to pay taxes on the entire amount, even though a contingent fee of $30,000 went to the plaintiff's attorney, and even though the attorney would pay taxes on that $30,000.
[Editor's Note: IMPACT ANALYSIS: Defense counsel should take interest in this development as it improves the net, after-tax award to plaintiffs and, in a perfect market, should therefore, reduce the cost of settling cases. In the above example with a 30% contingency fee, and assuming a 50% marginal tax rate for the plaintiff, a $100,000 settlement/award with no expenses would net plaintiff $20,000 (tax would be $50,000, fees would be $30,000) under current tax law. With the upcoming change, the same award/settlement of $100,000 would net the plaintiff $35,000 (tax would be $35,000, fees would be $30,000), an increase of 75%. In cases with a higher percentage contingency fee, the impact of the new law could be more significant -- see figure below:
However, since what frequently drives settlements is the amount of the plaintiff attorney's fees, and since the reductions seen above are accompanied by substantial reductions in plaintiff attorneys' fees, one should not expect to see the new law resulting in any reduction of settlement demands, since the plaintiffs' bar will most certainly not tolerate a reduction in income.
CONCLUSION: No change in cost to defendants, or fees to plaintiffs attorneys, but increased net after tax to plaintiffs.]
This double taxation has been challenged in court, with mixed success, as a powerful disincentive for public interest and civil rights litigation. A bill to fix the problem, the Civil Rights Tax Relief Act, has languished in Congress for nearly five years without success until this week.
Amidst all the corporate tax benefits enacted by the Senate on Monday, one little-noticed provision may turn out to be a boon for civil rights plaintiffs, public interest groups, whistleblowers, and even trial lawyers.
The American Jobs Creation Act of 2004, which now heads to President George W. Bush for signature, contains a section ending the "double taxation" of lawyer contingent fees in several types of litigation. The Internal Revenue Service has favored double taxation for years, and its policy is the subject of two cases set for argument at the Supreme Court Nov. 1.
Friday, October 08, 2004
As Malpractice Caps Spread, Lawyers Turn Away Some Cases
Limits on Awards for Suffering Create New Impediments; Insurers Defend Changes
By RACHEL ZIMMERMAN and JOSEPH T. HALLINAN
Staff Reporters of THE WALL STREET JOURNAL
October 8, 2004; Page A1
"Amid the fierce debate over limits on medical-malpractice suits, many states have enacted limits of their own that are having a sweeping impact. One of the most common types -- caps on damages for pain and suffering, or so-called noneconomic caps -- is turning out to have the unpublicized effect of creating two tiers of malpractice victims.
"Cases involving high earners or big medical bills move ahead. Lawyers can still seek economic damages for the wages these patients lost or to pay for continuing medical bills. But lawyers are turning away cases involving victims that don't represent big economic losses -- most notably retired people, children and housewives . . .."
Thursday, October 07, 2004
UK Survey: 90% of Top Lawyers Believe Fee Income Will Rise
53% Predict Double-digit Growth
Tim Newbold
Legal Week, Oct. 7, 2004
The Legal Week/EJ Legal quarterly business confidence survey found 90% of senior lawyers expect their firms’ fee income to rise (an 8% drop since the last survey in July this year).
Just 10% believe that law firm revenues will remain the same and nobody is expecting a fall.
Fifty-three percent of partners predict double-digit growth over the next 12 months, a slight fall on the last survey in July when 56% of respondents were counting on growth of at least 10%. The latest poll also found nearly one in five respondents expects revenue to grow by more than 15%.
Law Firms Use Electronic Research to Snag Clients
Kevin Stehr
Legal Times
10-07-2004
In minutes, lawyers can view a company's recent litigation history, what firms represent the company, and even what individual lawyers work on specific cases and have argued in front of particular judges.
With this information, firms can match companies' needs and specialities, identifying client-development activities. Firms also can identify their share of total available business from a client.
* * *
Lawyers can also research court records by the specific nature of suits to detect growth patterns nationally and to identify the companies affected. Firms even can monitor case types on the decline to flag emerging risks.
For example, a search of federal civil litigation trends over the past five years reveals that the practice areas with the largest growth are products liability, securities, intellectual property, antitrust, and employment.
Products liability cases have surged since 2001 to an anticipated 25,700 cases in 2004 and now make up nearly 10 percent of all federal civil filings. In particular, the estimated 24,100 cases dealing with personal injuries continue to grow and now account for 94 percent of all products liability cases.
In addition, the pharmaceutical industry faces numerous claims, with those against Wyeth, Glaxo, Bayer, and Bristol Meyers providing a glimpse into a projected growth.
Given this trend, firms may want to invest further in their products liability practice, especially as multinational products liability is staged for growth. The International Association of Defense Counsel says an increasing awareness of consumer rights and a growth in available information will lead Canada and the European Union to increase products litigation.
Patent litigation is also on the rise. Research reported in The National Law Journal in August finds that litigation between generic drug makers and patent holders has increased dramatically in recent years. From 1984 to 1994, 30 suits were decided. From 2002 to the present, 127 cases were filed and 36 decided. As a result, several firms have boosted their patent practices to meet the demands of the pharmaceutical industry.
Court records also reveal patterns in where cases are filed. Firms specializing in securities litigation should note that while settlements of securities cases have grown in volume and value, state enforcement has begun to outpace federal claims.
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Kevin Stehr is vice president for strategic market planning at LexisNexis.
