Friday, November 16, 2007

The Classical Agency Problem-4

"Plaintiffs in litigation over the painkiller Vioxx are supposed to be able to decide whether to enroll in the ubersettlement announced last week or take their cases to court. But due in part to what lawyers say is an unusal provision in the settlement agreement, many plaintiffs in effect may have little choice but to accept the deal ... If a client decides not to take part in the settlement, then the lawyer, according to the deal, must take 'all necessary steps' to withdraw from representing that client. It is relatively rare for a settlement to require lawyers to cut ties with their clients, but it appears to be happening more often, lawyers say. ... The way the deal is structured, Merck has a huge incentive to get as many plaintiffs enrolled as possible. ... The lawyer-withdrawal rule was a negotiated point between Merck and the lead plaintiffs lawyers, and it was vetted by ethics professors, according to people involved in the discussion. Withdrawals will be supervised by judges", WSJ, 16 November.

I don't care if all United States "legal ethics" professors vetted this settlement. I think it stinks for the plaintiffs and shows the plaintiffs' attorneys were not their fiduciaries. On 9 November Merck announced the settlement. On that day, Merck stock rose $1.13 per share. With 210 million shares outstanding, the market concluded that the settlement was good for Merck, to the tune of $2.5 billion. Who do these plaintiffs' lawyers really work for?

See my 29 September post quoting Lester Brinkman. That judges will supervise the withdrawals does nothing for me.

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