THE REVERSAL OF FORTUNE ON BREAST IMPLANTS
(FORTUNE Magazine) – DOW CHEMICAL DECEIVED WOMEN ON BREAST IMPLANTS, JURY DECIDES, screamed the Aug. 19 headline on the front page of the New York Times--and if you thought to yourself, "Here we go again," you could hardly be blamed. As the article went on to say, a Louisiana jury had found for the plaintiffs in "Phase I" of a class-action suit against Dow Chemical by women who claimed to be suffering from illnesses caused by their silicone-gel breast implants. The verdict raised the specter that, once again, a big corporation was being beaten into submission by the relentless assault of the plaintiffs lawyers working the breast implant beat. But think again. In fact, five years after allegations about implants exploded into a devastating mass tort suit--which drove the leading manufacturer, Dow Corning, into bankruptcy--it is the plaintiffs lawyers who are on the run. Who'da thunk it?
To step back into the breast implant morass, as I did recently, is to be struck by how much the landscape has changed. Two years ago, when I wrote a two-part story for FORTUNE on the subject ("Fatal Litigation," Oct. 16 and 31, 1995), the companies--which include Bristol-Myers Squibb, Baxter, and 3M as well as Dow Corning and Dow Chemical--seemed cowed by the thousands of lawsuits they faced. An effort to create a $4 billion settlement pot had collapsed; it wasn't enough money, the plaintiffs complained. In Texas, legendary plaintiffs attorney John O'Quinn was winning huge, multimillion-dollar judgments--and settling cases for a rumored $1 million a pop.
And now? Now it's the companies that feel emboldened. Take Bristol-Myers Squibb, which used to be one of O'Quinn's favorite targets. In the weeks prior to the Dow Chemical verdict, the company tried two breast implant cases, one in California and the other in plaintiff-friendly Houston, and won them both. In fact, during the past few years, the companies have won around 80% of breast-implant verdicts. Indeed, Bristol, as well as Baxter and 3M, view their involvement in the breast-implant litigation as rapidly winding down. The three companies have set up a claims process that pays out between $10,000 and $250,000 (depending on the severity of illness); well over two-thirds of the women who had brought claims against the companies have chosen to settle. And those who choose to continue? "They can sue us or not," shrugs John McGoldrick, Bristol's general counsel. "We're in litigation mode."
The reason for this reversal of fortune is fairly simple: the science on breast implants, which was murky when these lawsuits began, has largely vindicated the companies. Upwards of 20 studies have failed to find a statistical correlation between silicone implants and the so-called autoimmune diseases they supposedly cause. That scientific evidence has been swaying both judges and juries.
Dow Corning plainly views the emerging science as leverage in its efforts to get out of bankruptcy. In late August it put forward a reorganization plan that includes a $2.4 billion fund to be parceled out to the 200,000 women who have claims against the company. But it also makes clear that any woman who decides to "opt out" of the fund will be put through the litigation wringer.
The company wants a "causation trial"--in which the science will be the only real issue--with the results binding on any individual breast-implant trials that would follow. "It is a very coercive plan," complains Ed Blizzard, a Houston plaintiffs attorney. But Dow Corning clearly believes that with so much time having passed--and with the odds of winning in court having increased so dramatically--the company will get the two-thirds vote it needs from its plaintiff creditors to emerge from bankruptcy. "We're looking for closure," says a Dow Corning spokeswoman, "and we think a lot of these women are looking for closure too."
What's most surprising, perhaps, is that no one in the defense camp seems overly concerned about the Louisiana verdict against Dow Chemical. The company, you'll recall, was dragged into the suit on the slenderest of reeds: back in the 1950s--nearly a decade before Dow Corning made its first breast implant--Dow Chemical did some testing of silicones for the smaller company. (It is also a 50% shareholder of Dow Corning.) Only after it became clear that Dow Corning didn't have deep enough pockets to satisfy the plaintiffs' lawyers did Dow Chemical become a target.
But in three states, California, New York, and Michigan, judges have dismissed all the cases against the company--a total of some 4,000 lawsuits--precisely because Dow Chemical's involvement with implants was so tangential. In addition, with the sole exception of the Louisiana trial, all the other cases against Dow Chemical have been moved to the bankruptcy court in Michigan, where they are now, in effect, joined at the hip with Dow Corning's bankruptcy proceedings. "It's really quite possible there won't be any more trials against Dow Chemical," says Herbert Zarov, Dow Chemical's chief outside counsel.
Even the Louisiana verdict itself was less than devastating to the company. In the first place, one of Dow Corning's lawyers says, "We heard it was a circus down there." Apparently it was. At one point the judge, angered that plaintiffs' lawyer Thomas Pirtle was ignoring her strictures about "mugging" for the jury, declared a mistrial. The next day she overruled herself and ordered that the trial continue.
In the second place, the Louisiana verdict is far from this particular jury's final judgment. "Phase I" focused on whether Dow Chemical had a responsibility to the women who had Dow Corning breast implants--and whether it had acted negligently toward those women. The trial's next phase, scheduled to begin in October, will tackle the issue of whether the breast implants caused the illnesses claimed by the plaintiffs--which is to say, the issue the companies have been most successful with recently.
Most important, the Louisiana trial will almost surely fail at its real purpose: to force Dow Chemical to put up money to help settle the thousands of cases that have been in limbo ever since Dow Corning filed for bankruptcy. Dow Chemical insists that it will never ante into any larger settlement. Precisely because it seems so out of kilter with the general trend in breast implant cases, the Louisiana verdict was simply not the kind of hammer blow that the plaintiffs had originally hoped it would be.
Still, it's worth keeping this in mind: Even if everything plays out the way the companies hope, they will still wind up spending upwards of $4 billion in settlements, claims, lost lawsuits, and litigation costs. By any reasonable standard, that's hardly what one can call "victory." Which just goes to show, yet again, that if you're a company caught in a mass tort suit, you never really win. You merely endure.