Trends in Product Liability Defence 2016

The main challenge affecting product liability lawyers today is cost. Clients on both sides of the bar remain conscious of legal fees, with the lack of available funding hitting parts of the plaintiff bar hard and changing the way in which cases are put together and handled. New technology liabilities have been identified as the next big source of work: it’s not known exactly how cases involving 3D printers and driverless cars will be handled. Medical device and pharma cases are still a steady source of work, while regulatory lawyers have seen an increase in compliance-based work. Many of the issues that affected the sector last year are still present, and the addition of new trends in the coming year is likely to see practitioners enjoying an active market.

Funding and Class Actions

The funding of litigation cases and the rise in alternative fee arrangements and structuring has been a major topic during this year’s research. It is noted that even in the US, where funding is generally more readily available than in other jurisdictions, lawyers have commented on a rise in cost-consciousness on both sides of the bar. In the UK and Europe, the lack of legal aid means that most cases “never get off the ground”, with only the biggest cases able to gain backing from private investors. On the defendant side, alternative fee arrangements are becoming the norm, with many practitioners stating that “the days of billable hours are almost gone” and designing new fee structures to suit clients is the new norm. This cost-consciousness has also led to a rise in alternative dispute resolution, with clients increasingly on the lookout for ways to avoid costly litigation. Arbitration clauses are more common as practitioners – particularly outside the US – expect the use of these, along with mediation, to take the place of all but the highest-profile liability cases over the next 10 years.

There has also been a notable rise in the number of consolidated class actions in the US, merging what would have previously been multiple cases across different states into a single multi-district proceeding. This has particularly been seen in recent pelvic mesh litigation, with over 80,000 cases being combined into multi-district proceedings. This new strategy, aiming to save both costs and time, limits the number of lawyers involved. From a client standpoint this could be seen as a real bonus, dramatically cutting their outlay on legal counsel; for lawyers on both sides of the dispute, however, it means an increasingly competitive marketplace as lawyers chase fewer roles in cases. The change in strategy has a more marked impact on defendants to product liability actions: fighting a single case, rather than multiple smaller actions, leads to a “winner takes all” scenario, where the stakes are much higher than in normal proceedings. The result has been a “flight to quality” as defendants seek the best legal counsel they can find, with some even putting together “dream teams” from multiple firms or jurisdictions, to best defend their position.

Practitioners also noted that the shift towards larger class actions appears symptomatic of the ease with which plaintiffs and their lawyers can now find others who have been similarly affected by a product. This is in large part down to the growth of social media, which makes it far easier for those in a similar situation to connect with one another and, subsequently, with legal counsel. Although this trend has to some extent been seen in Europe and elsewhere as well, the contrast to the US in terms of availability of funding means that it has had less of an impact on these markets.

Life Sciences

Pharmaceutical and medical devices still provide lawyers with a steady stream of work, with a pre-emptive ruling case at the end of 2015 expected to have an impact on pharma cases going forward. Following a sixth circuit judge’s ruling that design defect claims are pre-empted by federal law in most instances, it is expected a number of other similar cases will be fought in the wake of this decision.

Despite some reports that litigation numbers are dropping due to the difficulties around funding, it was noted that medical device litigation is still well funded, with backers expressing confidence in the “tried and tested” nature of such cases. Those outside the US have also commented on new sources of funding, with venture capitalists more called-upon than in previous years: a trend that is expected to continue. As the UK and European product liability markets seem to follow on from major issues in the US, these investors’ decisions over what to back are frequently informed by prominent cases that have been successful in US courts.

One of the highest-profile cases in this regard relates to pelvic meshes, and is expected to keep lawyers busy into the coming year. With multiple manufacturers currently facing claims and trials, work stemming from these matters is expected to continue for the time being. Johnson & Johnson – Ethicon are currently facing the highest number of federal suits in relation to pelvic mesh complications, with competitor C R Bard forced to pay out $200 million in mid-2015 to settle around 3,000 cases. This only settled around a fifth of the suits, however, highlighting the amount of work that remains.

Despite the seemingly buoyant disputes market in the sector, there has been a high level of deal activity lately, which has had a marked effect on the legal marketplace. One of the largest proposed deals was Pfizer’s merger with Allergan, which would have been the largest merger in the sector to date; however, this was abandoned in April 2016 amid plans to change US tax laws. The spate of mergers and consolidations has seen the market shrink in terms of potential clients for lawyers. This, combined with continued cost-consciousness and a preference for alternative dispute resolution over traditional litigation, is a cause for concern for some. The trend is expected to continue for the next five years or more, with some practitioners putting the shift down to a “cyclical market”, while others predict this could be a more definite departure from the “product liability market of old”.

New Trends

New technologies are noted as the “next big thing” in product liability, with cases involving 3D printers, driverless cars and drones expected to “skyrocket” in the coming years. In the case of 3D printing especially, it has been suggested that current laws and regulations are not suitable to cover potential cases. Who is liable for different issues is still fairly unclear, with the blame for product faults potentially attributable to printer manufacturers, modelling software designers or those using the printer. There are also many questions surrounding product testing standards, with no set rules currently governing the production or sale of software and goods. One practitioner stated, “Until there is a benchmarking case tried, there remains a lot of uncertainty in the 3D printing sphere.” It is expected that heavier regulations will be introduced over the next year. With 3D printers now used for medical procedures and treatments, these types of cases will likely become a major source of work over the next decade.

Another “hot topic” for the future is food liability cases, with food labelling matters expected to see the most activity in coming years. Many practitioners we spoke with pointed to growing interest from the plaintiff bar on food-related matters, following several 2015 cases concerning mis-sold and misrepresented products across the US. It is widely believed that, following several successful class actions, “the floodgates will open” to more food cases, and that it is “only a matter of time” before this becomes a major source of work.

Regulatory Action

Practitioners also reported on a rise in regulatory activity over the past 12 months, with the emphasis now on ensuring compliance for clients. The European Parliament is in the process of finalising a new medical devices regulation, which is likely to introduce additional pre-market scrutiny of higher-risk medical devices. Existing exemption for “in-house” devices that are manufactured and used within the same health institution will probably be removed, leading to large amounts of work for regulatory lawyers and their clients. The US Food and Drug Administration is also seen to be increasingly vigilant of manufacturers, and there’s no sign of this changing anytime soon. Some see this as a reaction to the impending emergence of new technology cases in the market, with regulators hoping to clamp down on legislation to help prevent an insurmountable number of cases. In a response to this new trend, firms have started marketing product safety and risk-management teams, offering clients a “comprehensive compliance service” to ensure that they are not exposed to potential future liabilities. Following the death of a participant in a French clinical trial, in February 2016, European practitioners are anticipating new restrictions on such trials, with more scrutiny on the safety of drugs and suitability of volunteers.

***

With consolidation in the market, both in terms of client mergers and multi-district class actions in the US, the coming year is likely to be a more competitive one for firms. The cost-consciousness of clients and the move towards alternative dispute resolution are both expected to continue into 2017, with lawyers persistently adapting to these changes. The steady stream of pharmaceutical and medical device work, and new cases stemming from new technologies, will also keep the market busy. Despite potential issues, practitioners are optimistic for the coming year. 

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