1 Lessons Learned from BTS:A Defense Lawyer's Perspective Let me tell you about the BTSstory. Some of it you already know, some of it is being played out as we speak. For each of you the most important part will be the postscript, the part you write for yourselves and your companies. The Part You Know Over 300 cases have been filed and are pending in 29 different state courts. An additional 200+ cases in federal court have been consolidated into a Multi-District Litigation. Many of these over 500 lawsuits seek class action status. Various plaintiffs' counsel claim they have hundreds more cases to file. They all stem from the actions of Michael Mastromarino and BioMedical Tissue Services, Ltd., in surreptitiously obtaining and distributing human tissue without consent. While there is no shortage of legal theories, they primarily contend that the defendant tissue banks knew or should have known of these transgressions but nonetheless participated and facilitated them. The Part Being Plaved Out As many lawsuits as legally possible have been gathered together in the federal Human Tissue Multi-District Litigation. There issues key to the fate of most of the suits are being investigated, information exchanged and testimony taken. These issues will soon be synthesized and handed to a federal judge for decision. His decision will have significant precedential value and influence heavily the state court actions. The issues are basic and central to the litigation. On the recipient side, can disease in fact be transmitted through properly processed and prepared allografts? If it cannot, is there any need to fund a program to medically monitor BTS allograft recipients for early detection and treatment of diseases which they cannot possibly get from those same allografts? Regarding the claims of the next of kin, are the telephone consents upon which the tissue banks relied in good faith sufficient under the Uniform Anatomical Gift Act laws of the various states to protect them from suit, even if in some instances those consents were later determined to have been fraudulent? It may take up to a year or more to obtain answers to those questions. We remain optimistic that in the final analysis the outcome will be favorable. The consequence will be the economic gutting of most claims and the collapse inward of the litigation. While some claims and lawsuits will remain, the momentum behind the litigation will be gone.
2 The Postscript: The Part You Write For Yourselves Does anyone here believe that an exoneration of these tissue banks will be reported? How many of you know the postscript to the silicone gel breast implant litigation, litigation which put Dow Corning into bankruptcy? Will the negative publicity already generated ever be counter-balanced by the press? I have spent my entire thirty year career as a lawyer handling adversarial situations as a litigator and trial lawyer, primarily in the defense of medical device and other product manufacturers and distributors. Every nerve in my body tells me that the end of the BTS litigation will not be the end of claims and litigation for this industry. Your industry has been successful and has grown. The number of allografts has risen dramatically as has their uses. Hopefully the industry will continue to grow and expand. The signs point in that direction. New medical advances and technology provide new opportunities. Your association and its individual members will continue to work cooperatively with the FDA to improve industry practices and standards. Though there will always be intrinsic differences, the move toward a regulatory framework akin to that of the medical device field in many respects will continue. What will also continue is media attention and public scrutiny, along with the claims and lawsuits they bring, the companion of success these days. The risk those claims and lawsuits pose can range from nuisance to catastrophic. For those of you feeling untouched or unconcerned, remember that BTS continued to conduct business as usual through several FDA visits. The contractual agreements some had in place to protect themselves have proven worthless. Much of the financial loss caused by BTS has been borne directly by the tissue banks involved, not their insurers. While the boldness of these events will not easily be exceeded, schemes more sophisticated in nature and execution may soon take their place. Business by nature involves risk. It cannot be avoided altogether. It needs to be managed. To do that you need to be aware of your risks. You can then choose which to accept and which to trade off. While there is no one right answer for everyone, everyone does need to find their own right answer. Those who have neither the time nor the money to undertake the exercise now will need to find more time and more money later to fix the problems when they confront a shortage of both. Preventive maintenance is almost always less expensive and more effective than emergency remedial measures. If something similar to this BTS situation happened to your company, what risks and losses would you bear and what risks and losses would others bear for you? If a controversy of a smaller magnitude arose involving one of your donors or allografts, what risks and losses would you bear and what risks and losses would others bear for you? Putting aside recipients and donors for a moment, how have you allocated among the entities involved in the process of distribution, the risk starting with recovery and ending in ultimate
3 distribution? What risks and losses will you bear and what will others bear for you? Will the contractual agreements you have prove as'protective in practice as they appear in print? Do you know the answers to these questions? Is what you think you know actually the case? If anyone of these things happened, how would you respond? The answers depend in large measure on who you are and what you do. What resources do you own or have access to? How much control will you keep and how comfortable do you feel ceding the rest to others? Which others? You need to address these issues and develop your own answers. Professionals can assist you. They should not answer for you. Your association can take a leadership and advisory role if it chooses. In your numbers you have strength and leverage if you choose to use it. If you desire the association to take a role here let them know. As far as I have seen, risk protection agreements tailored to the unique aspects and needs of your industry and to best serve you have yet to be written. No uniformity or industry standard exists. Insurance policies intended for other purposes and "borrowed" often lack clarity, not to mention at times coverage itself. The false sense of security they might provide can disintegrate into coverage conflict at just that time when certainty of coverage is most needed and its absence most traumatic and damaging. Risk protection options abound. They range from total risk retention to whole scale ceding of control and outcome to commercial carriers. There are self-insured retentions and deductibles of varying amounts; choice of counsel, control of the defense and right to settle clauses; risk purchasing and risk retention groups, captive insurers and more. Most medical device companies over the years have realized that their superior knowledge of their business and products makes them best suited to handle the claims and litigation peculiar to it. They retain control through self-insured retentions with choice of counsel, defense and settlement clauses, reserving commercial insurance for catastrophic losses beyond their capacity or risk tolerance. Claims and Lawsuits: Education. Negotiation. Litigation When claims and lawsuits come, and they will, you will want your team and approach in place and prepared to deal proactively, not just reactively, with them. Your team most often will include the in-house individual designated as your risk manager, the appropriate in-house technical advisor or liaison for that product or process and your counsel, either inhouse or out. Your basic approach will be education, negotiation and litigation, and in that order. That approach will be conducted in a manner consistent with dignity and respect for all those critical others involved in the process. My experience in the medical device and product fields, as well as a court appointed mediator, arbitrator and certified civil trial attorney, have all taught me this approach and
4 manner as the overall generally most cost effective and efficient approach and the one most likely to best serve your objectives. It complements the manner in which you conduct your business affairs in other respects and is tactically sound. While some may gravitate to and defend the role of the lawyer as hired gunslinger, it seems incongruous to initiate an aggressive, combative stance with an allograft recipient, donor family or business relationship who has come to you with a problem. Such a reaction is not only unnecessary, it is usually counter-productive and squanders an excellent opportunity to understand and resolve a problem at its early stages before positions and parties have hardened. Litigation is expensive and inefficient. It is typically a last, not a first, resort. A dignified and respectful dialogue with a claimant's attorney is an educational opportunity. You can learn far more quickly and in depth the nature of the problem and its consequences from those pursuing it than you ever would in the first year or more of litigation. You are further being handed the opportunity to educate counsel as to the fallacies or weakness in his factual understanding, including demonstrable misunderstandings by the attorney or his client about the product and process and its inherent limitations. Time and time again this exchange of information and process of education has short-circuited claims and lawsuits where there was no basis for liability or damages. I continue to be amazed at how many claimants and counsel in the medical device arena lack a fundamental understanding of the device and its limitations as well as the role of other factors in their situations. An early, clear and independently verifiable explanation from defense counsel can set the record, and claimant and counsel in turn, straight. Both sides benefit. Further needless effort and expense is avoided by a dialogue at a time and in a context where it can productively occur. You obtain savings in legal and claims expense, intrusion upon the time of key employees and public relations. When education cannot defuse and deflate a situation, there can be negotiation. There are program-style options for repetitive, similar type claims. Beyond education and negotiation there is always litigation. In some instances, the situation may not be as clear cut as one might like. The claim may have some colorable or valid aspects or the likelihood of being accepted by a trier of fact as valid. Depending upon the company's overall philosophy, it might be consistent to offer a small sum to resolve a claim rather than spend a large one contesting it. One medical device company with whom I work has a set publicized policy in place which serves as a pressure release valve of sorts for common but legally invalid claims which nonetheless ties in with an overall company philosophy of customer satisfaction and avoidance of unnecessary claims costs. The process seeks minimal verification of a common condition and complaint caused by the product as the prerequisite for their response. Even when a matter is brought to your attention through the filing of a lawsuit, the process remains the same. Education and negotiation are as natural in the first response to a lawsuit as they are to a claim. Litigation to conclusion is always an option. At its heart, litigation itself is persuasively educating an impartial third party to an understanding of the case you have been developing throughout. It is an evolution and progression to the court as a further result of the process, not a whole new start.
5 So when should education, negotiation and litigation start? As soon as possible. How long should it continue? Until the goal of resolution to the company's satisfaction has been achieved. Bob McGuirl is a Certified Civil Trial Attorney in private practice and an AA TB member. He counsels companies on risk and insurance issues and defends and resolves claims and lawsuits on their behalf. He is currently defending tissue banks in Multidistrict Litigation No. 1763, In re Human Tissue Products Liability Litigation, and related state court actions. He con be reached at and would welcome your thoughts and reactions.