Tepezza Litigation: MDL Establishment and Updated FDA Warnings
Significant advancements have transpired in the ongoing Tepezza litigation.
Formation of an MDL: On June 2, 2023, the Judicial Panel on Multidistrict Litigation (JPML) mandated the formation of multidistrict litigation (MDL) concerning Tepezza. The JPML selected the Honorable Judge Thomas Durkin of the Northern District of Illinois to preside over the MDL, which, as of August 15, 2023, comprises 46 individual cases.
FDA Warning Label Update: After this, on July 24, the U.S. Food and Drug Administration (FDA) revised the warning label guidelines for Tepezza, mandating the inclusion of a warning pertaining to the risk of hearing impairment or hearing loss. This update reflects concerns regarding the potential adverse effects associated with the medication.
Plaintiffs’ Allegations: The plaintiffs have presented allegations suggesting that Horizon Therapeutics, the manufacturer of Tepezza, was cognizant of the substantial risks associated with the drug, particularly in relation to hearing loss and tinnitus, but did not adequately communicate these risks to the FDA prior to or following the drug’s approval, nor did they sufficiently update the drug’s labeling to inform healthcare providers and patients. They contend that this omission constitutes a “failure to warn” and also assert that the drug possesses inherent safety issues, aligning with the “design defect” theory of liability.
Horizon’s Stance: Horizon Therapeutics has countered, asserting that the warnings provided upon FDA approval in 2020 were adequate and that the subsequently identified concerns regarding hearing loss and tinnitus were not substantial enough to warrant an immediate change to the drug’s labeling.
Impact of FDA Label Change: The FDA’s decision to modify the label on July 24, 2023, to include the exact warnings regarding hearing loss and the necessity for vigilant physician monitoring that the plaintiffs argued should have been included initially, is noteworthy. The revised labeling now clearly states the risks of severe hearing impairment, potentially altering the landscape of ongoing and future claims associated with the drug’s use.
The change in labeling is likely to have a dual effect: it may limit new “failure to warn” claims post-July 24, 2023, and it is expected to prompt more thorough discussions between physicians and patients about the risks associated with Tepezza. Moreover, this amendment fortifies the position of individuals who used Tepezza prior to these warnings, challenging Horizon’s defense against “failure to warn” claims before the label change.
Horizon’s legal strategy regarding these preemption defenses remains unchanged as the briefing period continues. Upcoming oral arguments will be pivotal in discerning Judge Durkin’s perspective on these preemption issues and Horizon’s approach considering the updated warning.
Progress Toward Bellwether Plan: According to a Joint Status Report filed on July 24th, the involved parties have expressed their intention to convene and forge a path toward a mutually agreeable Bellwether/Briefing Plan. This plan will encompass motions to dismiss and the initial selection of bellwether discovery cases. The subsequent status conference is scheduled with Judge Durkin on August 31, 2023.
Amgen’s Proposed Acquisition of Horizon: In a related development, Amgen has expressed an intent to purchase Horizon for $27.8 billion (about $86 per person in the US). The transaction was initially deferred due to a lawsuit filed by the Federal Trade Commission (FTC) aimed at blocking the acquisition. Following a settlement with the FTC, the companies are now progressing toward finalizing the acquisition. The outcome of this purchase is anticipated to have a significant influence on the Tepezza litigation and its potential resolution.
Potential Claimant Pool: Current data indicates that the pool of potential claimants is relatively limited, with only 14,500 patients having undergone treatment with Tepezza, as stated on the official product website. The treatment involves a series of infusions over approximately five months. The smaller number of potential claimants may influence the average settlement amount in any prospective collective settlement arrangement.
Talcum Powder Lawsuits: LTL’s Second Bankruptcy Dismissed!
The future of talcum powder litigation is at a crucial turning point. LTL Management LLC (the subsidiary J&J created to limit exposure to talcum powder lawsuits by seeking bankruptcy protection in October 2021) shockingly filed for bankruptcy a second time on April 4, 2023. This new filing came after the Third Circuit Court of Appeals dismissed LTL’s initial filing on January 30, 2023 as lacking the requisite “good faith” because LTL was clearly not in “financial distress.” The primary factor, among others, was that LTL was supported by a J&J-created funding agreement valued at up to $61 billion dollars.
This new filing occurred merely two hours after LTL’s additional efforts in the Third Circuit failed. The new effort was premised on ripping up J&J’s previous funding agreement in favor of lower value back-up funding support and a new surprise settlement proposal for victims allegedly worth $8.9 billion dollars in net present value. This proposal negotiated with and supported by several highly reputable law firms representing a a large number of claimants, became embodied in a Chapter 11 plan and touted as a solution for both victims and LTL alike.
Many law firms, which have collectively fought the talcum powder litigation tooth and nail against J&J in the New Jersey MDL and elsewhere for many years, along with the US Trustee’s Office, State AGs and others, steadfastly opposed this new LTL filing and underlying plan, arguing that J&J and LTL could not runaway from the fundamental point of the Third Circuit’s ruling because (1) LTL is now even further away from “financial distress” alleged in its April 4, 2023 petition; and (2) the filing was otherwise specious or in bad faith because of the intentional “voiding” of the $61 billion funding agreement, and J&J’s continued backing of LTL only for the purpose of siloing liability away from J&J. In other words, financial hardship “by appointment” is not the type of distress envisioned by the drafters of US Bankruptcy Code or established through the courts.
New Jersey Bankruptcy Court Judge Michael Kaplan (who in February 2022 had previously denied the various motions to dismiss LTL’s first bankruptcy filing) heard four days of testimony and contentious arguments from both sides during the final week of June 2023. As promised, Judge Kaplan issued a swift ruling on Friday July 28th, days before his stated August 2nd deadline.
Judge Kaplan, cautiously and with apparent reluctance, dismissed LTL’s April 2023 bankruptcy petition, holding it was not made in “good faith” — because LTL was not in imminent and apparent “financial distress” at the time of the filing. Despite his expressed concern for how talcum powder victims could be compensated en masse going forward without the benefit of a structured Chapter 11 settlement plan and his clear belief that bankruptcy court was the right venue to resolve their claims, he seemingly felt constrained by the guardrails set by the Third Circuit’s opinion and the lack of sufficient evidence of imminent financial distress.
This is a reversal in Kaplan’s approach as he appears to have made his decision despite the stated “keep LTL in bankruptcy” factors strongly affecting him before, during, and after the hearings.
While it is too soon to predict how this fight will proceed , the potential paths forward for talcum powder victims and J&J include the following:
First, J&J said on July 28 that it would promptly appeal to the Third Circuit — but the chances of a reversal of Judge Kaplan seem slim given the Third Circuit’s prior ruling and Kaplan’s adherence to the guardrails set forth in that ruling in granting the dismissal motions.
Such an appeal could theoretically give J&J a chance to keep the existing partial stay of trials and non-bankruptcy appellate proceedings in place pending the Third Circuit’s ruling on J&J’s appeal — though LTL’s opposing law firms will surely oppose any such J&J request.
The potential downside of an appeal for J&J is that it gives the Third Circuit a new opportunity to issue an even harsher opinion against J&J than its original ruling — thereby creating an even narrower path to any successful LTL bankruptcy outcome.
Second, J&J could conceivably reach its hand out to opposing law firms and propose a good faith settlement and plan which provides much higher, and specifically disclosed, compensation to ovarian cancer and mesothelioma victims (versus the non-specific “point system” proposed in LTL’s current Chapter 11 plan).
The goal would be to persuade present objectors to join in a completely consensual plan, file LTL in bankruptcy one last time, preempt all motions to dismiss because of enough money on the table for all, and allow all claimants’ representatives and the US Trustee to move forward with a completely united front before Kaplan.
This may not be feasible given the extreme rancor exhibited by all sides in the courtroom in recent hearings, but the victory secured in front of Kaplan by the tacl committee, UST and other stakeholders might be enough to give them cushion and comfort to agree — if the compensation is raised sufficiently for all. The second bankruptcy fight was likely necessitated for reasons going beyond the LTL case and outside Kaplan’s courtroom, and an LTL initial win would have heightened the existential risk that other litigation-entangled companies would try to copycat J&J and use the same tactic to gain a litigation advantage in bankruptcy court (as 3M’s Aearo subsidiary tried, but failed, to do in July 2022).
Given the stature of the law firms negotiating and supporting LTL’s settlement and plan, there is certainly a possibility that negotiations with LTL’s opponents could continue and result in a winning settlement for all stakeholders and claimants.
Third, J&J could consider and pursue inventory settlements outside bankruptcy with the lead law firms it fears most in the MDL and state court litigation (which will begin to accelerate again in the wake of Kaplan’s ruling), as well as with the law firms which supported the present LTL plan. J&J has already disclosed (during the LTL bankruptcy) that it settled almost 6000 cases with Mark Lanier (and certain other smaller firms) in 2021. Such a divide and conquer strategy could prove perilous for claimants not presently represented by stakeholder firms and lead litigation counsel.
Fourth, J&J could consider a global settlement of all claims but given the uncertainty of the true number of claimants, and the hostility engendered by the second LTL filing, that would also likely be a hard lift.
Fifth and finally, J&J could simply decide that its LTL Texas Two-Step strategy has failed and just revert to defending itself in scorched earth litigation in the MDL and state court with all law firms. This would of course be the least satisfactory outcome for all sides, with few benefits besides an occasional trial victory for some victims, but it cannot be discounted.
If the litigation ends up yielding new large-dollar verdicts which survive appeals, and many new claims, J&J might even try a third LTL bankruptcy down the road and try to persuade Kaplan that now LTL is in imminent and apparent financial distress. The law firms opposing the second LTL bankruptcy raised that concern with Kaplan and asked him to enjoin such a third future filing but he declined to do so at the August 2 hearing in which the issue was raised.
How can law firms potentially benefit from Kaplan’s dismissal? Under the proposed plan, LTL would have paid ovarian cancer and mesothelioma claimants a presently unspecified amount (based on a complicated points system). Moreover, the plan proposed a demarcation line wherein anyone diagnosed after June 1, 2023 would be a “future claimant,” not a “present” claimant — and thus subject to a potentially lengthier timeline to payment. That would obviously be an unjustifiable negative to that subset of claimants. These factors raised the risks for law firms’ present talc clients and likely hindered the pursuit of new clients.
A new bankruptcy settlement, supported by all stakeholders, would likely increase and make concrete and increase the amounts payable to present clients, while eliminating the capricious June 1, 2023, line drawn between present and future claimants.
An inventory or global settlement outside bankruptcy would also likely benefit many firms’ existing and new clients.
Both scenarios warrant a re-examination of, and approach to, the still-viable pool of unrepresented clients.
Watch this space for discussion of future developments.
Citation – to be edited according to lawsuits.org cadence before posting
Here is the quote shown on page 52 of the 2021 Syngenta Annual Report — with the paragraphs preceding it for context.
Illinois State Court Claims. In September 2017, a complaint was filed in St. Clair County, Illinois state court on behalf of plaintiffs Thomas and Diana Hoffmann. On October 6, 2017 an amended complaint was filed in the same court on behalf of 12 plaintiffs, including the Hoffmanns. Syngenta’s Motion to Dismiss was denied in July 2018. Syngenta filed its answer to the amended complaint in October 2018. On July 16, 2020, the state court dismissed without prejudice the claims brought by four plaintiffs pursuant to a motion for withdrawal filed by those plaintiffs. On April 27, 2021, all of the claims besides the Illinois Consumer Fraud & Deceptive Business Practices Act and corresponding Loss of Consortium claims were voluntarily dismissed by plaintiffs. Also, in 2021, additional cases were filed in state court in Cook, McLean, and Vermillion Counties. The McLean county case was voluntarily dismissed in November 2021, and the other pending cases remain at the pleading stage, with fully briefed motions to dismiss pending.
In addition to the above, lawsuits have been filed in the state courts of California, Florida, Pennsylvania and Washington.
Settlement. On June 1, 2021, Syngenta and a third party co-defendant reached a settlement agreement with paraquat claimants represented by the lead counsel in the Hoffmann cases that were set for trial in St. Clair County, Illinois, and in most of the then-pending California state court cases. In exchange for (and contingent upon) dismissal of all pending cases represented by the lead counsel and a broad release from the covered claimants, Syngenta agreed to pay $187.5 million. Syngenta paid its share into the Qualified Settlement Escrow Fund on July 21, 2021 for purposes of third party verification and allocation among the claimants. The settlement expense is reported within Other general and administrative in the income statement.
On June 2, 2023, Dupont and Chemours announced an AFFF/PFAS proposed class action settlement potentially covering approximately 7,000 public water systems for $1.185 billion, and in July filed a motion seeking MDL Judge Gergel’s preliminary approval for a proposed class action settlement. Three weeks later on June 22nd, 3M announced a similar AFFF/PFAS proposed class action settlement potentially covering a pool of approximately 6,000+ public water systems for a net present value amount of between $10.3 billion and $12.5 billion, to be paid over 13 years. Here too plaintiffs’ counsel and 3M’s counsel filed a motion in July in the MDL seeking Judge Gergel’s preliminary approval of the proposed class action settlement. At an MDL hearing on July 14, 2023, Judge Gergel was told these settlements “are the largest drinking water settlement[s] in history” and that the potential settlement money is on top of “grants” from the federal government available to water entities nearing $10 billion. Gergel emphasized to counsel the potential advantages of the settlement compared with the risks of continuing individual entity litigation and trials in the MDL. The City of Stuart trial has been adjourned and the settlement documents show that the City of Stuart is a specific settling party in the larger settlement document (receiving its own unique but confidential amount).
The proposed settlements certainly have limitations including the fact that other entity plaintiffs, like State AGs, are not included in the agreement, precise dollar allocations for each water district are not yet known, objectors might seek to derail approval, and if too many water systems opt out the companies could theoretically back out of the agreements; but Judge Gergel said that (1) the standard for preliminary approval of the settlement is “a pretty low threshold”; and (2) such preliminary approval could happen within the next 60 days. A settlement fairness hearing could occur in October or November of 2023.
These announced settlements are a potential major positive for existing and potential new AFFF and PFAS personal injury claimants, for the following reasons: (1) the settlements potentially move many other “entity” plaintiffs and claimants out of the MDL and into the settlement structure, substantially clearing and opening the way for the personal injury phase of the MDL litigation to move forward more quickly; (2) attorneys for personal injury claimants may move to accelerate timelines after those set forth in Judge Gergel’s May 5, 2023 order, entitled “Second Bellwether Program: Initial Personal Injury Claims,” which provides a general structure and timeframe for selecting bellwether plaintiffs; (3) the settlements give 3M, Dupont and Chemours vital breathing room to get relief from the market pressures they have faced regarding “unquantifiable” PFAS/AFFF liabilities by changing the narrative through the ability to quantify at least some portion of their liabilities.
Just as important, the companies’ willingness to reach these big dollar settlements right now — not many years down the road after costly multiple “entity” bellwether trials — signals a potential willingness to strike deals at the right price. Accordingly, the door is theoretically open for some type of potential future settlement negotiations regarding certain categories of personal injury claimants — whether primarily victims (firefighters and others) with Leach-study-backed diseases (e.g., kidney cancer, testicular cancer, ulcerative colitis, thyroid disease) or possibly an even broader group of victims with a wider range of cancers and other injuries.
As the water systems class action settlement works its way towards potential preliminary approval by Judge Gergel, additional court filings and hearings may reveal further information on the personal injury litigation front.