(FORTUNE Magazine) – It usually begins slowly, almost imperceptibly, the first faint gust of wind that signals the coming storm. Somewhere in America, a plaintiffs lawyer files a lawsuit alleging that a familiar and widely used product harmed his client. Then, somewhere else, a second plaintiffs lawyer files a similar suit. A third is filed, then a fourth, until there are dozens of parallel "tort" claims across the country, all making the same accusation about the same product. Yet as long as these remain individual suits in individual jurisdictions, crawling along at their own pace, they don't necessarily pose a mortal threat to the product's manufacturer. They have no broader context, no larger meaning. Which is to say, the perception has not yet taken hold among the nation's plaintiffs lawyers that there is in these cases--or more precisely, in the accumulation of these cases--a tremendous opportunity to bring a company down, and to make a killing in the process.
Thus does Richard Mithoff, a lawyer based in Houston, recall the first case he ever brought against a manufacturer of silicone breast implants, a product that over a million women have used in the 30-plus years they've been on the market. This was 18 years ago, when Mithoff was still a young associate with the legendary plaintiffs attorney Joe Jamail. His client had undergone a series of operations after her implants had ruptured, and Mithoff was suing the manufacturer, Dow Corning. Mithoff wasn't claiming that the silicone gel from the implant had caused "auto-immune" disease; such frightening allegations were still years away. He was simply saying that the ruptures and subsequent operations had caused his client pain and suffering, for which she should be compensated. A jury awarded her $170,000. "Back in 1977, we thought $170,000 was a lot of money," says Mithoff. And then he starts to laugh.
Eleven years later, when the winds had gotten considerably stronger, Rick Laminack took on his first breast-implant client. Laminack was also a young Houston attorney working for a Texas legend, the flamboyant and wildly successful John O'Quinn; he, too, had no feel for the brewing storm--or his own future role in bringing it about. "One day a woman came into our office with a jar containing two ruptured implants and a dozen letters from other lawyers turning her down," recalls Laminack. "Because she was a friend of a friend, I got corralled into taking her case. So we sued the plastic surgeon, and as an afterthought, we sued the manufacturer"--a subsidiary of Bristol-Myers, the giant pharmaceutical company. He shrugs, and almost in spite of himself, a wicked smile forms. "And that's how we got into it."
Today, seven years after Laminack took that first case, no one can doubt that the storm has arrived with a fury. There aren't merely dozens of breast-implant lawsuits anymore, there are thousands of them--nay, tens of thousands. It has become one of the most fearsome waves of mass litigation ever to hit corporate America. Mithoff's first target, Dow Corning, has been laid waste by the litigation, driven into bankruptcy by the sheer impossibility of trying to defend itself against that many lawsuits. And its ordeal is not over. The plaintiffs lawyers who pushed it into bankruptcy court are now trying to move in for the kill; they talk boldly about taking the company over completely.
Laminack's first target, now known as Bristol-Myers Squibb, has spent the better part of the past three years begging for mercy, settling cases as they've come up and offering to pay huge sums of money to be rid of the lawsuits. The two other main defendants, Baxter Healthcare and 3M, have also been trying to settle the litigation, to no avail. In all, the defendants have offered more than $4 billion to the plaintiffs. Four billion dollars, and it's not even close to being enough.
Typhoons of litigation like this one have come to be known as "mass torts," and there is no more terrifying phrase in corporate law. It is well known, and largely accepted, that companies will often make a business judgment to settle lawsuits that have little merit, simply to be done with them. A mass tort is the ultimate abuse of this idea. The dynamics of a mass tort demand that companies try to settle litigation--regardless of the merits--if they want to continue in business. The volume of lawsuits, their oppressive weight, is what brings companies to their knees. This is no exaggeration; just ask any major asbestos defendant, almost every one of which has been vaporized by litigation. Or ask Peter Angelos, the Baltimore lawyer who feasted on asbestos cases and became wealthy enough to put together the syndicate that bought the Orioles for $173 million.
Over the past decade, as mass torts have grown in size and scope and audacity, they've become a kind of beast that needs periodic feeding. More and more plaintiffs lawyers have come to see mass torts as an essential part of their business, and they are no longer willing to wait for such cases to land on their doorstep. There are now scores of lawyers--lawyers whose collective pockets are deeper than the companies they're suing and who don't blink twice at pushing a company into bankruptcy if it can't meet their demands--who actively hunt for products they can build a mass tort around. Today it's breast implants. Tomorrow it will be the contraceptive device Norplant. The day after, it will be something else.
And if the evidence of the product's harm is largely nonexistent? That offers little protection. For the single most stunning fact about the breast-implant mass tort is this: There has yet to be published a single peer-reviewed study that supports the central allegation behind the lawsuits--that silicone breast implants cause disease. It's not proof the plaintiffs lawyers need, it's numbers. That's the cruel calculation behind a mass tort.
How can the plaintiffs bar demand billions of dollars in damages with no proof that what they are claiming is true? How does such a tempest get created? How is it that companies can be destroyed while lawyers reap millions? What perverse logic governs these unnatural disasters? Answers to these questions lie in the extraordinary experience of Dow Corning, the case in which mass torts came of age. Dow Corning did not play its hand as well as it might have, it's true. But really, once the plaintiffs bar had the company in its sights, it never had a chance.
Once a set of ordinary lawsuits mutates into a mass tort, it's the big boys who run the show--the high-priced lawyers with their resources and staying power and capacity to gather the thousands of clients who will give them leverage. But in the beginning, when there is merely one sick client convinced that a company's product has caused her illness, the big boys tend to stay away. There's too much risk in being the first to try to build a complex product-liability case, and that's especially true of lawsuits that aim to prove a connection between a popular drug or medical device and a disease. For one thing, in this early stage, it is the company that plays Goliath to the plaintiff's David--throwing up legal roadblocks, deploying squads of lawyers, and generally doing its best to grind down the other side. There's also a serious financial risk for the plaintiff's lawyer. It is he, after all, who fronts the legal expenses--expenses that can easily run into the hundreds of thousands of dollars--with no guarantee of a paycheck at the end of the road. Indeed, one of the chief tactics companies use in attempting to squash such lawsuits is to simply try to outlast the plaintiff's lawyer until he goes broke.
The kind of lawyer willing to tackle such a case in its virgin state tends to be a true believer, a zealot on a mission. He completely buys into the notion that his client has been grievously injured by a heartless corporation, and he's out for justice, the financial risk be damned. And if he doesn't yet have the proof, well, he thinks, it's just a matter of time. After all, evidence of A.H. Robins's problems with the Dalkon Shield intrauterine device wasn't exactly handed to plaintiffs on a silver platter. It is cases like that one that sustain the true believer, that fire his imagination. Rarely does he realize that he's laying the foundation for a mass tort. But that's what he's doing.
In the breast-implant litigation, the truest of true believers is a San Francisco lawyer named Dan Bolton. "There is no doubt in my mind," he says firmly, "that silicone breast implants cause auto-immune disease." He could not be more sincere in his belief that breast implants can have terrible effects--that the silicone gel in the implants somehow causes a breakdown in a woman's immune system, resulting in everything from achy joints and fatigue to such classic auto-immune diseases as lupus and scleroderma. That a flurry of recent studies have cast grave doubt on this theory does not move him. Like many lawyers in the breast-implant case, he views his clients' anecdotal evidence--they had breast implants, after all, and they also have an auto-immune disease of one sort or another--as far more compelling than any scientific study. And his belief that Dow Corning made and marketed a product that it knew could cause such problems is, if anything, even more firmly held. "Dan Bolton," says one defense lawyer, "hates Dow Corning."
Like all the other lawyers in the early days, Bolton fell into his first breast-implant case more or less by accident. In 1982 a woman named Maria Stern walked into a small plaintiffs firm in San Francisco, complaining of a ruptured implant. She also suffered from chronic fatigue and joint pains. Her doctors, unable to fix on the cause of her symptoms, told her that the leakage of silicone gel into her body might be at the root of the problem. Though no scientific literature supported this theory, her doctors thought that it might at least be a possibility.
Stern wanted to sue Dow Corning, which had made her implant, not just for manufacturing a defective product but for selling her something that had made her ill. No one had ever made that allegation before--at least not in a lawsuit--and the lawyer she went to see immediately understood the inherent difficulty in pursuing such a case. Nonetheless, he took Stern on as a client, and threw the case to Bolton, whom he had recently hired out of law school.
Though he didn't realize it at first, Bolton had two great advantages in gunning for this particular product. The first was that, even though they were put into the human body, silicone breast implants, like all medical devices at the time, were only loosely regulated. Even though they'd been on the market since 1964, they had never been put through the kind of premarket wringer that the Food and Drug Administration requires for, say, new pharmaceuticals.
Bolton's second advantage was, to put it bluntly, that he was going up against Dow Corning. Founded in 1943 by Dow Chemical and Corning (then known as Corning Glass Works)-which remain its sole shareholders--its only mission has been to find new applications for silicone, which is derived from silicon and is one of the most useful substances ever created. This it had done with great success, generating $2.2 billion in annual sales by 1994 and churning out some 8,700 silicone products. Its medical-devices division alone makes everything from pacemaker parts to shunts for relieving water on the brain. (Breast implants occupied a small and not especially profitable corner of the company.) Over time the company culture had instilled in its employees an almost childlike awe at the wonders of silicone.
Perhaps because it had to report to only two sympathetic shareholders, it was an insular, even naive company. Its Midland, Michigan, headquarters was filled with cheery Midwesterners who had never had to face down the threat of sustained litigation, let alone a bout of bad publicity. In this, it could not have been more different from its co-founder and neighbor, the much larger Dow Chemical, which had been toughened up over the years by exposure to both. Dow Corning was an innocent in a dangerous world.
This was perhaps never better illustrated than when Bolton finally got the court to agree--after the usual lengthy struggle with the company's lawyers--to his demand to visit Dow Corning and search for documents. For a lawyer with a theory he can't prove, this "discovery" phase of litigation can be a crucial fishing expedition. Ordered by the court in 1984 to give Bolton access to certain documents, Dow Corning actually bought him the airline ticket--first class, no less--and paid for his hotel room. That week, Dan Bolton found his case.
To this day, Bolton can remember his growing excitement as he realized what a treasure trove Dow Corning had opened up for him. In the 20 years it had been manufacturing silicone breast implants, Dow Corning had compiled thousands upon thousands of memos relating to every aspect of the product--including the question of whether the gel could cause an immune reaction. Many of those memos were written in language so strong as to border on the inflammatory. Bolton found a 1983 memo, for instance, that concluded: "As Product Steward...I must strongly urge that Bill's group be given an approval to design and conduct the necessary work to validate that these gels are safe...only inferential data exists to substantiate the long-term safety of these gels for human implant applications." Another 1983 memo said, "However, I want to emphasize that to my knowledge we have no valid long-term implant data to substantiate the safety of gels for long-term implant use." To Bolton, these were "classic smoking-gun-type documents. I was amazed."
He also stumbled upon a raging controversy within the company during the 1970s over a side effect called "contracture"--in which the tissue around the implant could harden--as well as over "bleed." Gel bleed was a phenomenon well known among plastic surgeons in which minuscule amounts of gel escaped through the implant shell. The controversy resulted from the fact that a number of plastic surgeons, feeling that Dow Corning implants both bled excessively and caused an unacceptably high rate of contracture, had stopped buying implants from the company. The salesmen were beside themselves about the loss of business, and the internal memos they wrote to their higher-ups provided Bolton with yet more ammunition. "Several of our customers," wrote the author of the most damning such memo, "asked me what we were doing. I assured them, with crossed fingers, that Dow Corning too had a 'contracture/gel migration' study under way. This apparently satisfied them for the moment but one of these days they will be asking us for the results of our studies."
Bolton was delighted. "With all our little goodies, we felt like Santa Claus," he recalls now. "We came back very, very up about the case."
One could argue, as Dow Corning later did, that these documents represented an ongoing internal debate, and that for every scientist who worried about the effect of implants on the immune system, there were others who were equally convinced of their safety. One could offer various innocent explanations for things that were in the documents. And one could point out that while the "Dow documents" (as they later became known) weren't exactly reassuring about the safety of breast implants, they didn't show them to be unsafe either. On the central question of the lawsuit--did silicone breast implants cause an immune reaction in women?--they were silent.
What Bolton understood, however, was that none of this mattered. In the hands of a good plaintiffs lawyer, the 800 pages of documents he came back with would make Dow Corning appear negligent while obscuring the fact that the central allegation remained unproven. Combined with the other elements he had put together--an ex-employee who had agreed to testify against Dow Corning; a handful of "experts" he had found who were willing to theorize that silicone affected the immune system; the sympathy that Stern herself was likely to arouse in a jury--the Dow documents gave Bolton the upper hand. Even Dow Corning could see that; in the spring of 1985, just before the trial was set to begin, it offered to settle. Bolton said no.
That July his bet paid off when a jury awarded Maria Stern $1.7 million. Of that, $1.5 million was punitive damages, meaning that the jury believed Dow Corning had done bad things that deserved serious punishment. (The company and Stern settled the case for less while it was on appeal, a very common outcome.)
Bolton had shown the way: You could allege in court that silicone breast implants caused disease, and you could win a lot of money.
To Bolton's surprise, though, the Stern verdict did not create much of a stir. It was the legal equivalent of a tree falling in the forest: If no one heard it, did it really make any noise? After the trial, the court ordered Bolton to return the Dow documents to Dow Corning and forbade him to talk about what was in them. In the plaintiffs bar, the belief endured that these were difficult cases and, Stern notwithstanding, not especially remunerative. That's because so much of the award was in punitive damages, which quite often get reduced or thrown out on appeal.
For any complicated lawsuit to sprout into a mass tort, something more is needed than a victory or two against a company. There has to be a climate of fear surrounding the product, and a group of angry users who want to make the company suffer as they themselves have suffered. Once potential claimants are on the verge of a stampede, then a big jury award can set it in motion.
Which is why, as important as the Stern case was, Bolton's second big breast-implant trial six years later was infinitely more so. It wasn't that the facts were especially different; Bolton's new client, a woman named Mariann Hopkins, had a ruptured implant and a history of joint pain, fatigue, and weight loss. And Bolton tried the case in much the same way he'd tried the Stern case, relying on the Dow documents (which he'd retrieved from Dow Corning), his "experts," and so on. But the context was different. And that changed everything.
By then, there had been an increasingly loud drumbeat of publicity, as reporters began to pick up on the charges that breast implants caused disease. Television magazine shows are particularly powerful purveyors of fear about products; to this day, everyone on both sides of the breast-implant litigation remembers a broadcast by Connie Chung in late 1990 about the breast-implant allegations. The show had a tremendous ripple effect, as women with implants started up support groups to share information and to vent their anger at the makers of breast implants. It was a tremendously emotional issue--how could it not be?--and there were instances when women with implants panicked upon hearing the allegations. In one infamous case, a woman tried to cut her own implants out with a razor. Meanwhile, Sidney Wolfe, who runs Ralph Nader's Health Research Group, was loudly calling for breast implants to be banned and selling litigation documents to plaintiffs attorneys for $750.
Added to this volatile mix was one other element, perhaps the most crucial of all in creating the atmosphere for this mass tort: The federal government began to bear down hard on breast implants. Having finally concluded that implants needed to be strictly regulated, the FDA was in the process of applying to them the same tough standards it applies to drugs. The process wasn't going well for Dow Corning, because it hadn't done enough science. And FDA Commissioner David Kessler appeared to be in no mood to cut the company any slack; according to an FDA source, he was continually pushing the FDA staff to finish up its breast-implant investigation quickly.
In November 1991, a scientific panel convened by the FDA held a widely publicized hearing on breast implants, which turned into a contentious, highly charged affair. Although the panel ultimately concluded that implants should remain on the market, its decision was barely noticed. For by that time the Hopkins jury had reached a verdict. In mid-December 1991, a jury awarded Mariann Hopkins not the $1.7 million Maria Stern had gotten but $7.34 million, of which $6.5 million was punitive damages. Suddenly there wasn't a plaintiffs lawyer in the country who didn't understand the rare opportunity in breast implants.
And Dan Bolton still had one last card to play. Enraged by Dow Corning's continued insistence that breast implants were safe, he decided that Kessler should see the Dow documents. Violating a court order that they be kept under seal, he managed to get them to Kessler, who was reportedly appalled. On January 6, 1992, the FDA commissioner, claiming that the documents contained information "that has increased our concern about the safety of [implants]," announced a temporary moratorium on their use (though, oddly enough, he said they could still be used for women who needed them for reconstructive surgery after breast cancer). "We owe it to the American people to see to it that these questions are thoroughly investigated," he added.
In a less litigious society, a government official would be able to say out loud that a medical device needed further study, and that's what would happen: There would be further study. Instead, Kessler's call for an implant moratorium became the spark that finally lit the blaze. Within weeks, 100 lawsuits had become 1,000 lawsuits. The stampede had begun.
VETERANS AT WAR
Among the handful of people who instantly understood the enormous ramifications of Kessler's decision for Dow Corning, two in particular stood out. One was Keith McKennon, a former president of Dow Chemical U.S.A. During his career, McKennon had been Dow Chemical's point man for several mass torts; he also sat on Dow Corning's board. McKennon was thus the most logical person to see the smaller company through the crisis. Afflicted with cancer, on the verge of retirement, but deeply loyal to the two companies, McKennon reluctantly agreed to become Dow Corning's CEO. His tenure began a month after the moratorium.
The second man was a well-known Cincinnati attorney named Stanley Chesley, whose tactics in big-time tort litigation have made him both rich and infamous. Three weeks after Kessler's announcement, Chesley filed papers in his home town with U.S. District Judge Carl Rubin asking that he certify breast-implant recipients (and their husbands!) as a "class."
Turning major tort cases into class-action suits--lawsuits he largely controlled as the lead attorney for the class and that virtually guaranteed him millions of dollars in fees once they were settled--was how Stan Chesley made a living. Created by an act of Congress, class-action suits were initially intended to allow large numbers of people to redress a fundamentally similar "harm," such as price rigging, or civil rights violations. Chesley, however, was the first to adapt class-action suits to complicated tort cases; in so doing, one legal publication later wrote, he "revolutionized tort law." In a Chesley class action, the money damages were potentially huge, while the harms suffered by the "class" of victims were often not even remotely similar. This latter is a particularly important point, for it allowed Chesley, and other class-action specialists who followed him, to create--and then settle--mass torts that included both plaintiffs who were so sick they were confined to wheelchairs and others whose symptoms were so minor they were barely detectable.
For Chesley, the light bulb went on in 1977, when, after a fire at a Kentucky supper club killed 165 people, he acceded to Judge Rubin's request that all the plaintiffs be declared a class. "Although I originally opposed the class certification," he says now, "it turned out to be an incredibly effective device." Because the club had minimal insurance--and because its records were destroyed, making it impossible to know who manufactured the aluminum wire that might have started the fire--other lawyers viewed the case as a loser. But Chesley devised a theory that all aluminum wire manufacturers were liable for making a faulty product, so it didn't matter whose wire was in the supper club. Chesley's theory generated an astonishing 1,100 defendants, the great bulk of whom had nothing whatsoever to do with the fire. But because the victims had been declared a class--and the companies therefore faced only one lawsuit instead of several hundred--many found it easier to settle than to fight. Chesley ultimately generated $50 million in settlements, of which some $6 million went to his firm. From that point forward, turning big disasters into class-action lawsuits, and then settling them before a trial ever took place, became Chesley's preferred method.
Though they had never met in person, McKennon and Chesley went way back. Like battle-hardened generals on opposite sides of a war, they had squared off in several previous mass torts. In fact, in their intertwined history one could find the seeds of the mass-tort phenomenon, for their first battle, in 1983, turned out to be the one that started it all: the Agent Orange case.
Looking back now, what is astonishing about the Agent Orange class action is the extent to which all the vital precedents it set appear to have been accidental. It was never meant to be the instigator of all the subsequent mass torts; on the contrary, it was supposed to discourage mass litigation. For instance, the very decision to certify a class of Vietnam veterans--who, you'll remember, were claiming that they had been made ill by the defoliant during the war--was a stunning precedent. If Chesley's disaster cases had stretched the definition of a class action, this distorted it beyond recognition--while opening up a whole new area for plaintiffs lawyers, who had never before been able to get class-action status for people with such varied symptoms, or even for people who were claiming a product caused disease. Yet the judge who ruled over the case, Jack B. Weinstein, was motivated in part by the most prosaic of reasons. He feared that if he didn't allow the class, Agent Orange cases would clog the courts for years, just like asbestos cases, which had never achieved class-action status and had become the black hole of the American legal system.
Weinstein strong-armed both the plaintiffs and the companies that had manufactured Agent Orange--chief among them Dow Chemical--to begin settlement talks. Again, his motives were mundane. If the companies and the plaintiffs fought a duel to the death, his court would be tied up for years. Amazingly, though, he was pushing for a settlement despite his vocal belief that the Agent Orange veterans had a weak case. Indeed, to show how weak he thought it was--and to keep the plaintiffs from bolting from the settlement process--he summarily threw out several cases brought by lawyers whose clients had "opted out" of the class to bring their own, individual lawsuits. No proof of causation, he ruled--meaning that, in his judgment, they had failed to prove a link between Agent Orange and their illnesses. It was all very Machiavellian, and it worked. In the end, the defendants paid $180 million to settle the lawsuits, in return for which the plaintiffs agreed that no veteran would ever be able to bring another Agent Orange suit. Here was the real breakthrough: The companies were paying millions of dollars to the plaintiffs even though there was no hard evidence that Agent Orange caused disease.
And what did McKennon think of this astonishing settlement? Actually, he thought it was fine; like everyone else, he missed the larger picture. To him, it was simple: Dow Chemical, faced with a potential multibillion-dollar liability, had erased the litigation with barely a scratch on its balance sheet. "The harsh reality," he shrugs, "is that if there is a critical mass of lawsuits, you're going to wind up paying some money."
Instead, it was the plaintiffs' lawyers who were irate. The settlement completely shortchanged their clients, they charged; the most a veteran could collect--no matter how disabled--was only $12,000. And it shortchanged the lawyers as well, for in perhaps the deepest cut of all, Weinstein allowed the plaintiffs' attorneys to take only 7.5% of the settlement instead of the 30% to 40% they usually command. (Once again, the judge was doing so to discourage future mass litigation.) The plaintiffs' lawyers knew exactly whom to blame: Chesley, who had been invited into the litigation specifically to negotiate a settlement. Out of the Agent Orange case came a perception that when Stan Chesley got control of a class-action suit, he would negotiate a quick settlement, selling everybody's clients down the river while ensuring himself a fat fee. (In Agent Orange, Chesley's firm was award-ed $525,000 for less than a year's work.) Over the years other lawyers have called him everything from "an economic broker" to "the ultimate grotesque, exaggerated perversion of what it means to be a lawyer."
Chesley calls his critics jealous, but even his own description of what he does makes him sound more a broker than a lawyer. "In this kind of business," he boasts, "you have to be resolution-oriented. Companies involved in mass torts are looking for resolution." He also talks about the need for "give and take" in mass-tort negotiations, just like in any other kind of business negotiation.
Do companies understand what Chesley's up to? Of course they do, which is why they are often willing to negotiate right from the start if they see him sitting at the table. They do want resolution, after all, as does Wall Street, which will often push up a company's stock when a piece of thorny litigation is settled, even if it's for hundreds of millions of dollars. More often than not, it's his fellow plaintiffs lawyers Chesley winds up fighting. These lawyers, who see themselves as trial lawyers rather than class-action specialists, believe that a company's need to "resolve" litigation is simply not their problem. They want individual trials, and they could not care less about clogging up the court system. To them, the implicit Chesley exchange--resolution in return for a hefty but nonrecurring sum of money--is anathema. For that matter, so is Chesley himself.
Dow Corning was a company in shock when McKennon arrived in early 1992. Feeling under siege, its employees hunkered down in their isolated headquarters, embittered and paralyzed by the lawsuits.
McKennon's first order of business was to erase the bunker mentality. He courted the press, appearing conciliatory. Even at the height of the Agent Orange battle, McKennon had always felt some measure of sympathy for the veterans, who were convinced that Agent Orange had made them sick. Women with breast implants had the same kind of conviction, McKennon knew, and he wanted the company to acknowledge that their anger was real. One of his first moves was to take Dow Corning completely out of the breast-implant business, an action that dismayed many Dow Corning employees, who saw it as an implicit admission of guilt. But McKennon knew it had to be done, if only to send a signal to women that this was not an uncaring company. He also hired from Dow Chemical a scientist named Ralph Cook and charged him with doing something Dow Corning should have begun years before. Cook was given the task of using Dow Corning's money to seed the broad, complex epidemiology that was required if the medical questions surrounding silicone breast implants were ever going to be answered. "I said publicly that we were willing to go wherever the science took us. And I meant it," McKennon says. "If there was a flaw in my assessment," he adds ruefully, "it was in not realizing that no matter how definitive the science, the other side wasn't going to believe it."
Finally, Dow Corning began retaining lawyers with mass-tort experience, including an animated, cigar-chomping Washington attorney named Kenneth Feinberg, who had been Weinstein's special master in the Agent Orange case and had etched out a career negotiating mass torts ever since. The demand for Feinberg's specialized services is such that he commands around $200,000 a month when he gets involved in a case-with a seven-figure bonus if there's a settlement. Needless to say, this gives Feinberg as strong an interest in "resolution" as it gives Chesley, with whom he had negotiated some half-dozen mass torts. Despite being on opposite sides of the table, the two men speak admiringly of each other--"Stan Chesley is a genius at what he does," says Feinberg--and one suspects that, like enemy fighter pilots, they prefer each other's company to the people in their own camps. McKennon's hope was that the two men could work their special magic and settle the litigation quickly.
What McKennon missed, however, were the hard feelings toward Chesley among other lawyers. There was simply no way that Chesley's many enemies in the plaintiffs bar were going to allow him to corner the market in the breast-implant litigation. Even as Judge Rubin certified Chesley's class, the trial lawyers began lobbying to have the case taken away from Rubin, whom they viewed as a Chesley ally. It quickly turned into a civil war between the trial lawyers and the class-action lawyers; meetings of the attorneys who had a piece of the mass tort invariably degenerated into shouting matches between pro-Chesley and anti-Chesley factions.
Ultimately, the federal class action was taken away from Rubin, primarily because of the revolt among the trial lawyers. There is now so much mass litigation in this country that there exists a panel of federal judges that does nothing but decide whether a particular group of similar cases has become so unwieldy that it needs to be "consolidated" in one courtroom. This is called the "multi-district litigation" panel, or MDL. Since there were now thousands of breast-implant cases being filed all over the country, there wasn't much doubt that they needed to be consolidated. But instead of Rubin, the MDL panel chose to give the cases to a highly respected federal judge in Birmingham, Alabama, named Sam C. Pointer Jr. It was then up to Pointer to decide which of the many plaintiffs' lawyers should be named to the all-important plaintiffs' steering committee. In any mass tort, it is those lawyers who essentially run the case and who reap the biggest fees when it's settled.
Had the class action stayed with Rubin, it was a foregone conclusion that Chesley would have run the steering committee; now Chesley had to angle for a spot like everyone else. But Chesley could angle with the best of them. Hearing a rumor that Pointer was enamored of computer technology, Chesley vowed to underwrite a state-of-the-art computer facility that would give all the parties easy access to the many documents and depositions that were collected; eventually the depository would hold nine million documents, all of them indexed and on CD-ROMs, at a cost to Chesley of close to $1 million.
In the end, Pointer, ever the careful jurist, balanced the steering committee with representatives of both factions. Not only did Chesley make it onto the committee, but he was also named its co-chairman. The other co-chairman was an Atlanta lawyer named Ralph Knowles--"an old-fashioned fender-bender type," sniffs Feinberg--who had emerged as a big Chesley critic. "This is not my idea of practicing law," Knowles says of the mass tort he found himself in. But with almost 200 breast-implant clients, he was in too deep to cede the field to someone else. Besides, somebody had to keep an eye on Chesley.
If Chesley understood this, he did not acknowledge it. After the hearing, he boldly proclaimed that all the bad feelings of the previous few months had vanished. "I see a very united front on the plaintiffs' side," he told the press. "There is one enemy," Chesley added. "The defendants."
Despite Pointer's attempt to be inclusive, there was a gaping hole in the plaintiffs' steering committee, and everybody knew it. No plaintiffs' lawyers from Texas were on it. This was no small thing, for once the stampede began, Texas quickly became breast-implant central; one out of every four lawsuits was filed in the state. Rick Laminack and his boss, John O'Quinn, had filed 78 lawsuits just during the week the moratorium was announced, and already had more breast-implant clients than any other law firm in the country. Another Houston attorney, Mike Gallagher, whose toll-free phone number was being deluged by potential breast-implant clients, was building a roster that would soon exceed 1,000 plaintiffs. Richard Mithoff, who'd had that first Dow Corning case back in 1977, had also gotten back in the breast-implant business. He had more than 400 clients.
And their absence from the plaintiffs' steering committee was no oversight. They had no intention of playing in Chesley's game and were purposely staying as far from Pointer's court as they possibly could. They had their own game to play. They were accumulating clients not to participate in some national settlement process, which they openly mocked, but to prepare large numbers of cases to take to trial in state court. The state court system was their refuge. As long as they could keep their cases in Harris County, the jurisdiction that encompasses Houston, and away from the federal judiciary, they would be able to get trial dates. Generating huge numbers of clients and then pushing their cases through the Texas court system, one after another, like quarters in a slot machine, that was the essence of their strategy. While Chesley's strategy lay in the consolidation of cases, which he could then settle en masse, the Harris County lawyers found their opportunity in the opposite approach: preventing consolidation (at least of their cases) and then using the implicit threat of 2,000 separate trials to extract money from big companies. That's how big-time trial lawyers like O'Quinn played mass torts.
There were tremendous advantages that came with this approach. One was the economy of scale that came with having hundreds, and even thousands, of more or less similar cases. There was also the potential domino effect should they win even one high-profile case, which would make companies think twice about risking another trial rather than settling future cases as they came up. On the other hand, a big win for the defendants didn't get them all that much: There were still 1,999 cases stacked up right behind it. This was a strategy of attrition, and it worked just fine. Even as Chesley awaits his first dime from the breast-implant litigation, John O'Quinn has grossed around $100 million in settlements from his breast-implant work. He keeps 40%.
Lawyers, it almost goes without saying, have big egos, but few have egos as big as O'Quinn's. A tall fellow with craggy, Marlboro-man features, he has a smile that is both disarming and ever so slightly malicious. In the years he has been practicing law in Houston, he has become a legend--something he himself is the first to point out. He likes to tell the story of how he won $8.5 million in damages for the death of a bull. ("A friend of mine had a paraplegic case against Exxon...at the same time. I told him, 'I'll get more for my dead bull than you'll get for your paraplegic,' and I did.") He is said to have lost only once in his entire career, and many of his victories have brought breathtaking damages: $650 million in one case, $517 million in another, $109 million in a third. He is regularly compared to the most famous of all Harris County trial lawyers, Joe Jamail, who won what may well be the most spectacular judgment of all time: Pennzoil's $11 billion victory over Texaco.
Even the scandals O'Quinn has been embroiled in have a larger-than-life quality. In 1989, when the State Bar of Texas tried to have him disbarred on grounds of improper client solicitation and fee splitting, O'Quinn responded by hiring seven of the best-known criminal lawyers in the state, whom he labeled "The Magnificent Seven." (He got off with a slap on the wrist.) Another time, he was accused of having an affair with a juror. He admitted to the romance but insisted that it had not begun until the trial had been concluded. This admission cost him his marriage but saved his career.
That O'Quinn believes his own myth seems beyond question; at staff meetings, he regularly declares that he has been "blessed by God to help the little guy." But there is another part of his success that he doesn't talk much about. O'Quinn and the rest of the Harris County plaintiffs bar operate in a county, and a state, where the deck is stacked in their favor. Texas is a plaintiffs' mecca. In Texas judgments are higher than they are practically anywhere else in the country--"the Texas premium," some lawyers call it--and the standards for evidence are far more favorable to the plaintiffs. In Texas people who've never so much as set foot in the state are able to try lawsuits in state court, using rationales that would be laughable in other jurisdictions. And in Texas it is much easier for plaintiffs lawyers to get large numbers of cases scheduled for trial than it is in most other places--cases in which the defense doesn't even know which of the many plaintiffs they will face in court until just days before the trial. "They control the docket," complains Dow Corning's general counsel, James Jenkins.
Finally, and most important, Texas state judges must stand for election if they want to keep their seat. Not surprisingly, the most prodigious campaign contributors in the state are the plaintiffs lawyers. O'Quinn donated $183,000 between 1990 and 1994 just to statewide political candidates--a figure that doesn't even include his contributions to judicial candidates. A Harris County judge named Carolyn Johnson received $6,250 from O'Quinn in the fall of 1993--just months after she had become a judge and had been handed one of O'Quinn's big breast-implant cases. It was her largest individual contribution. And as for judges who are not considered pro-plaintiff--and there are some--the plaintiffs bar is not above quietly working for their defeat. A source close to the firm says O'Quinn once mounted a "shadow campaign" to unseat a judge, bringing in a person "to look for dirt." (Laminack, speaking for the firm, denies it.)
Texas's pro-plaintiff reputation is widely known among corporate lawyers, and the standard strategy for dealing with it is to get cases filed in Texas "removed" to federal court. In most other states, in fact, breast-implant cases were being removed regularly to Judge Pointer's court in Birmingham--that was how consolidation worked. But the defense quickly learned that they could not remove the Texas cases. The rules governing removal state that if one defendant resides in the state, then the case can stay in state court. The texas "party" O'Quinn and the other Harris County lawyers found was neither plastic surgeons nor companies. Rather, they were the inventors of breast implants, Dr. Thomas Cronin and Dr. Frank Gerow, both Houstonians, and both dead. Amazingly, their estates constituted a legitimate party to the litigation.
In no small part because he has been able to apply his considerable talent in this most pro-plaintiff of jurisdictions, O'Quinn is today worth somewhere around $500 million. His reputation is so fearsome that many companies will settle quietly with him--for far more than they would settle with other lawyers--rather than face him in court. And his law firm is structured in such a way as to maximize his income. Although there are three other names on the door (including Laminack's), the firm is not remotely a partnership. It is, as O'Quinn himself describes it, "a benevolent monarchy." The other lawyers in the firm are paid a salary, plus a percentage of the income they generate--O'Quinn has called this giving them "a piece of what they kill." He alone decides what that piece is; he gets the rest.
UP AND RUNNING
For Dow Corning and the other defendants, the consolidation of breast-implant cases at the federal level was a mixed blessing. Consolidation saves companies millions of dollars, and even more in man-hours, because depositions (to cite one obvious example) have to be taken only once instead of hundreds of times. But consolidation also helps the plaintiffs. New attorneys can jump in knowing that a huge amount of work has already been done--instantly becoming, in Chesley's words, "armed warriors." Dozens, and even hundreds, of cases can be filed for the price of a single filing fee. Inevitably, the consolidation of litigation creates more litigation. Thus did 1,000 breast-implant lawsuits mushroom into 5,000 and then 10,000. The process had begun to feed on itself, as it always does.
The emergence of the Harris County strategy, on the other hand, was an unmitigated disaster for the companies. Lawyers like O'Quinn could get trial dates quickly. And any Texas trial, with its frightening prospect of Texas-size damages, had the potential to greatly raise the stakes. In effect, the companies found themselves caught in a kind of legal pincer movement, one at the federal level and another at the state level. Of the two, Harris County was by far the more dangerous.
O'Quinn and Laminack began building up their client base, which would eventually reach an astounding 2,500 plaintiffs. They did so partly by gobbling up referrals from lesser-known lawyers, who would get a small percentage of the "kill" once the case was settled, and partly by attaching themselves, barnacle-like, to some of the breast-implant support groups. Like most big plaintiffs firms, they also relied on advertising. Naturally, O'Quinn's ad stood out from the pack. Under a photograph of a well-endowed woman ran the headline: ARE DREAM BREASTS TO DIE FOR? Then they began preparing cases for trial, taking depositions and doing discovery, all the while sneering at the slower pace of lawyers on the federal track. Sure enough, by the fall of 1992, Laminack and O'Quinn had a case ready to try, against Bristol-Myers Squibb. On the eve of the trial, it was settled. O'Quinn and Laminack were up and running.
Chesley and Knowles were up and running too. Though their own case preparation was moving at a snail's pace, behind the scenes the two men were engaged in secret negotiations with Feinberg. By late 1992, these negotiations included not only those three men, but negotiators for Baxter and Bristol-Myers Squibb as well. As the negotiations progressed, Chesley and Knowles, the former antagonists, struck up a friendship that became firmer every day. Of course, neither the fact that negotiations were already under way nor the news of the Chesley-Knowles alliance was likely to bring joy to the other lawyers in the case. And sure enough, when word of the negotiations began to leak out in the spring of 1993, the trial lawyers erupted.
Once more there were angry meetings among the plaintiffs' lawyers, only this time there were 200 lawyers in the room instead of 50. Once again, the class-action lawyers and the trial lawyers hurled insults at each other. The climactic meeting was held in Pointer's courtroom in April 1993. A sheepish Knowles--the man who was supposed to be looking after the interests of the trial lawyers--admitted that he had gone along with a request for secrecy, but he insisted that Dow Corning, not Chesley, had imposed that condition. He also insisted, however, that he and Chesley were not giving away the store; in fact, he said, it was Chesley who had changed his ways. "Ralph calmed troubled waters," says one lawyer who was there. Still, the other lawyers were adamant that the negotiating committee be broadened, and Pointer agreed. He quickly named three additional lawyers to negotiate with the companies. One of them, surprisingly, was Mike Gallagher, of Harris County, Texas.
Why would Gallagher, a trial lawyer with all the advantages he had in Harris County, get involved in the federal case? One answer was that with so many cases in Texas, he felt it important that the "their" plaintiffs be represented at the negotiating table. He also got involved because he was sure he could negotiate a better deal for plaintiffs than Chesley could. He turned out to be right: Eventually he negotiated a deal so rich that it was bound to implode. But in the meantime, he became the Chesley watchdog.
A $25 MILLION FLU
After their first case was settled, O'Quinn and Laminack had immediately begun working up their second, also against Bristol-Myers Squibb. That was how they operated: Finish one, start the next, keep the pressure on. Their second client, however, was not exactly a dream plaintiff. Her name was Pamela Johnson, and she was 45 years old, with a ruptured implant and the usual symptoms of fatigue and joint pain. She had had implants put in for purely cosmetic reasons, which juries tended to frown on. She smoked a pack of cigarettes a day. She'd received her implants when she was 29 but didn't receive any medical treatment until she was in her 40s. She hadn't lost much time at work, despite her illness, which O'Quinn described as like having "a bad case of the flu all the time." O'Quinn's own research showed that juries were not likely to work up much sympathy for her. Perhaps that's why Bristol-Myers decided that instead of settling, it would try the Pamela Johnson case.
The case was shown on Court TV, and it became the best single advertisement O'Quinn has ever had. During breaks in the trial, the Court TV anchors would take calls from viewers--invariably implant recipients looking for some free advice. More than once, the anchors responded by referring the caller to O'Quinn's office. Viewers could also see O'Quinn in action, as he skewered Bristol-Myers with its own internal documents, gently guided Johnson through her testimony, and delivered his fire-and-brimstone closing argument.
And they could see the result. Two days before Christmas 1992, the jury awarded Pamela Johnson a staggering $25 million. That was Texas-style damages! Never mind that the case was settled while on appeal for considerably less. The $25 million was the number that stuck in the public mind. It was a number that created huge expectations among the thousands of women who had filed lawsuits. It put tremendous pressure on those negotiating the global settlement, who now had to cope with those expectations. And it guaranteed a whole new round of publicity. Immediately, the stampede started up again. Within a matter of months, the number of breast-implant lawsuits nationwide had doubled. And so had John O'Quinn's clientele.
END OF PART ONE. Next issue: How Dow Corning negotiated itself straight into bankruptcy.