Judge won't make Hagens Berman pay for discovery as decades-old birth defects are litigated

By Nicholas Malfitano | May 15, 2018

PHILADELPHIA – A federal judge in Philadelphia recently denied an attempt on the part of pharmaceutical giant GlaxoSmithKline to reallocate costs and fees incurred through still-pending investigative discovery, to the plaintiffs’ counsel in a thalidomide products injury action.

PHILADELPHIA – A federal judge in Philadelphia recently denied an attempt on the part of pharmaceutical giant GlaxoSmithKline to reallocate costs and fees incurred through still-pending investigative discovery exclusively to the plaintiffs’ counsel, in a long-running thalidomide products injury action.

On May 8, U.S. District Court for the Eastern District of Pennsylvania Judge Paul S. Diamond ruled until Special Discovery Master William T. Hangley had completed his discovery inquiry, he could not “determine which (if any) party is more responsible than other parties for the reference to [Mr. Hangley]” and denied the instant motion without prejudice.

From 2011 to 2014, 52 plaintiffs represented by the law firm of Hagens Berman initiated litigation alleging that 50 years before, they suffered congenital birth defects from exposure to thalidomide, a drug produced by defendants GlaxoSmithKline, LLC, GlaxoSmithKline Holdings (Americas) Inc., Sanofi-Aventis U.S. LLC and Grünenthal GmbH.

According to Diamond, though many of the cases were initially filed in state court, they were later removed to federal court.

The defendants believed the plaintiffs’ cases were time-barred due to the age of the allegations contained within (50 to 60 years), but the plaintiffs countered that the defendants’ alleged fraudulent concealment had tolled the running of the statute of limitations clock. Ultimately, Diamond allowed the claims to proceed and discovery to begin in earnest.

When the defendants complained the plaintiffs supposedly failed to comply with discovery requests as to exactly when they knew that thalidomide may have caused their birth defects, Diamond proposed appointing Hangley to the case and ensuring discovery in the case was being conducted appropriately.

At the time, no party objected to Diamond’s order that Hangley’s fees and costs would be split equally by the plaintiffs and defendants, 50/50.

In June and July 2014, GSK and Grünenthal asked Diamond to sanction Hagens Berman for alleged bad faith prosecution of three supposedly time-barred complaints, actions which the judge referred to Hangley.

“On Oct. 28, 2014, GSK’s counsel reported it had reached an extraordinary ‘agreement’ with Hagens Berman: GSK would withdraw its sanctions motions in exchange for all plaintiffs (save one) dismissing with prejudice their claims against GSK. GSK later clarified that—despite their prior representation that the ‘agreement’ included ‘all plaintiffs currently represented by Hagens Berman’ – the ‘agreement’ did not include the six plaintiffs as to whom Hagens Berman had filed motions to withdraw between May and October, 2014. Accordingly, on Nov. 14, 2014, Hagens Berman moved for voluntary dismissal of the claims 28 plaintiffs’ had brought against GSK,” Diamond said.

Diamond explained he felt the deal unfairly benefited GSK and Hagens Berman, to the detriment of the 28 plaintiffs, and ordered Hangley to investigate whether the plaintiffs had “knowingly, voluntarily and intelligently agreed to dismiss their claims against GSK.”

“Although defendants did not object, Hagens Berman objected vigorously, unsuccessfully seeking mandamus to stop Mr. Hangley’s inquiry. On Aug. 10, 2016, Hangley submitted a report in which he reluctantly recommended that I grant the dismissals, noting that Hagens Berman had at least partially obstructed his inquiry. I have not yet ruled on plaintiffs’ motions for voluntary dismissal or decided whether to accept the Aug. 10 report and recommendation,” Diamond said.

Hagens Berman then motioned to withdraw from representing the six plaintiffs who had not rescinded their claims, saying it could not continue to pursue their claims, in being consistent with their professional obligations. 

On Hangley’s recommendation, he anticipated questioning the six plaintiffs and their Hagens Berman lawyers about privileged communications and proposed proceeding in absentia of the defendants or their counsel – to which the defendants agreed, and the proceedings were conducted on Sept. 26-28, 2017.

That November, Hagens Berman’s counsel informed Hangley that the firm “had falsified an expert consultant’s report in an unsuccessful effort to persuade one of the six plaintiffs to withdraw her thalidomide claims.”

“To allow the full exploration of these troubling events, Hagens Berman has proposed re-opening the record with respect to its motions to withdraw, and I have granted that request. Mr. Hangley has announced the procedures he intends to follow during these proceedings. Defendants have asked to participate in these proceedings ‘in light of the Special Master’s expanded inquiry.’ I am awaiting Mr. Hangley’s report and recommendation on that request,” Diamond stated.

Subsequently, the defendants filed a motion saying the costs of Hangley’s investigations should be covered by the plaintiffs alone, since they were not responsible for the alleged malfeasance in question – but Hagens Berman responded that the defendants’ simultaneous request to participate in future proceedings doesn’t reconcile with wanting to be excluded from responsibility for paying the aforementioned costs.

As to the intent of the defendants’ motion, Diamond said he did not agree.

“The ‘scope’ of Mr. Hangley’s inquiry has not expanded in over two years. As I have discussed, because I immediately questioned the propriety of the GSK-Hagens Berman ‘agreement,’ in December 2014 I referred that question to Mr. Hangley without objection from defendants. In March 2016, I ordered (again, without objection) Mr. Hangley to advise me with respect to Hagens Berman’s pending motions to withdraw. There has thus been no expansion of Mr. Hangley’s inquiry since my March 2016 order,” Diamond stated.

“Mr. Hangley has received evidence that, in an apparent effort to convince a client that her thalidomide claim had no merit and should be withdrawn, Hagens Berman dishonestly altered a key expert report. Given the nature of the GSK-Hagens Berman ‘agreement’ – abandon your clients and GSK won’t pursue sanctions against the firm – those apparently wrongful actions and Mr. Hangley’s proposed response were entirely foreseeable. Indeed, Mr. Hangley foresaw them. Mr. Hangley has also suggested that any such misconduct “may have implications for other former Hagens Berman client-plaintiffs who consented to the dismissal of all their claims with prejudice,” the judge added.

Diamond said Hangley has merely done what the judge asked in 2014 and 2016 through his investigation, without the “expanded scope” to which the defendants referred.  

“Defendants’ suggestion that they ‘should not be required to bear the cost stemming from conduct about which they had no knowledge or involvement and bear no responsibility’ is thus, to put it politely, mistaken. Whether (and to what extent) Hagens Berman’s apparent misconduct was the inevitable result of negotiations leading to GSK’s distressing ‘agreement’ with the firm is something Mr. Hangley will likely address,” Diamond said.

As the relevant investigation remains pending, Diamond denied the defendants’ motion as “premature.”

“Defendants themselves acknowledge, however, ‘The special master has not yet made findings as to which parties may be found culpable for the matters outlined in his report.’ There has thus been no decision on the merits to warrant a reallocation. Only after the issuance of such a decision could I decide whether to reallocate Sanofi-Aventis’s and Grünenthal’s shares of Mr. Hangley’s fees and costs to GSK, whether Hagens Berman should bear the entire expense, whether some other reallocation is warranted, or whether no reallocation is warranted. In sum, because defendants’ motion is premature, I will deny it without prejudice,” Diamond concluded.

The plaintiffs are represented by Ashley A. Bede, Barbara A. Mahoney, Shelby R. Smith, Tyler S. Weaver, Craig R. Spiegel, Nick Styant-Browne and Steve W. Berman of Hagens Berman Sobol Shapiro in Seattle, Wash., plus Jeffrey L. Kodroff, John A. Macoretta and Mary Ann Geppert of Spector Roseman & Kodroff, in Philadelphia.

The defendants are represented by Michael T. Scott, Farah Tabibkhoei, Raymond A. Cardozo, Sonja S. Weissman, Stephen J. McConnell, Sandra Maria DiOrio and Eric L. Alexander of Reed Smith in Philadelphia, Washington, D.C., San Francisco, Calif. and Los Angeles, Calif., Amor A. Esteban of Shook Hardy & Bacon in San Francisco, Calif., Cindy K. Bennes, Lisa L. Smith, Martha M. Harris, Tamar P. Halpern, Thomas J. Sheehan and Thomas S. Wiswall of Phillips Lytle in Buffalo, N.Y., Craig A. Knot of Sidley Austin in Chicago, Ill., Kenneth A. Murphy of Drinker Biddle & Reath in Philadelphia, Bruce R. Kelly, Paige H. Sharpe, Anand Agneshwar, Daniel S. Pariser, of Arnold & Porter Kaye Scholer in New York, N.Y., Washington, D.C. and Albert G. Bixler of Eckert Seamans Cherin & Mellott, in Philadelphia.

U.S. District Court for the Eastern District of Pennsylvania case 2:11-cv-05782

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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Glaxo Smith Kline Hagens Berman Sobol Shapiro, LLP U.S. District Court for the Eastern District of Pennsylvania

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