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Firm Must Pay 7 Percent to Common Benefit Fund in Avandia MDL

July 28, 2015 | Posted in : Contingency Fees / POF, Fee Agreement, Fee Dispute, Fee Jurisprudence

A recent Legal Intelligencer story, “Federal Judge Has Say in State Court Avandia Fee Dispute,” reports that a plaintiffs’ law firm that settled Illinois state court Avandia suits must pay 7 percent of the settlement proceeds to the common benefit fund in the federal MDL over the diabetes drug, the MDL court said.  The Law Offices of Steven M. Johnson was bound by the pretrial order (PTO) that included an attorney participation agreement assessing a 7 percent gross recovery contribution in exchange for the MDL work product, U.S. District Judge Cynthia Rule of the Eastern District of Pennsylvania said.

Rufe followed a recent unpublished decision by the U.S. Court of Appeals for the Third Circuit that said plaintiffs’ firms Girardi Keese must contribute its share of settlement proceeds from California state Avandia suits into the MDL common fund.  The appeals court said the participation agreement was incorporated into the PTO.

Therefore, the Third Circuit said, the district court had jurisdiction to consider whether Girardi Keese was bound by the agreement and required to contribute 7 percent of the recovery from the settled California cases because it had used MDL work product.  Federal Avandia cases were consolidated in the MDL, but thousands of suits were filed in state court by plaintiffs alleging the diabetes drug increased the risk of heart attack.

In the case before Rufe, the Johnson firm argued that the federal court had no jurisdiction over the firm’s clients, who according to the order must pay 3 percent out of their recovery with the law firms paying 4 percent for the total of 7 percent the order required be paid for use of the MDL materials.

"Consistent with the guidance provided by the Third Circuit in its recent opinion, the court holds that it has jurisdiction to order GSK to withhold from the Gabel settlement funds the full 7 percent assessment contemplated by PTO 70, as Third Circuit held that counsel for the settling state-court claimants 'promised to contribute the entire [common benefit] assessment, and the district court could ensure that it complied with the agreement and Pretrial Order 70.  Whether [counsel] must reimburse its clients for that share of the assessment is a question governed by the representation agreement between [counsel] and its clients,'" Rufe said.