Four women have filed a 37-page complaint against two Houston-based law firms involved in transvaginal mesh litigation alleging they failed to fulfill their fiduciary duty and defrauded clients to the tune of hundreds of millions of dollars.
The named firms are Clark Love & Hutson (CLH) and the Lee & Murphy (LM) law firm. Also named individually are Clayton Clark, managing partner of CLH, Scott Love, and Shelly Hutson, both partners of CLH. Also named are James Lee a partner of LM along with Erin Murphy, another partner of LM.
The women allege the lawyers failed to file their cases in a timely manner, instead filing outside of the statute of limitations, and defrauded the women for failing to disclose that information. Settling a case that has exceeded the state-mandated statute of limitations for personal injury can seriously reduce its value. The women say they were not informed about their settlement options or the firms’ alleged failings.
That didn’t stop the law firms from collecting at least $250 million in legal fees.
This failure was done to potentially for thousands of clients, the women allege, citing upward of 26,000 individual cases handled by these firms in transvaginal mesh litigation.
Attorney fee forfeiture is one of the remedies available for breach of fiduciary duty.
** Late Add * A lawyer for Clark Love Hutson, Dale Jefferson, of Martin, Disiere, Jefferson & Wisdom, says there is a glaring problem with the lawsuit.
“Conspicuously absent from the plaintiff is the mischaracterization about the statute of limitations are the facts regarding tolling agreement entered into between the plaintiff counsel and the mesh manufacturers. Those are the actual facts. Plaintiffs can’t ignore what’s in a real court rather than the court of public opinion.”
The lawsuit was filed June 13th in the District Court for the Southern District of Texas in Houston, (Case no. 4:19-cv-02148, Use Pacer, So District of Texas) by Beggs Landers Law firm of Irving, Texas.
The women who have filed this action represent four of the thousands of transvaginal mesh plaintiffs, many of whom are filed in federal court in multidistrict litigation in Charleston, West Virginia. Judge Joseph Goodwin is overseeing the largest mass tort ever consolidated in one court which at last count was 107,000.
So far, 26 cases have been tried in state or federal court resulting in jury verdicts against mesh makers totaling more than $545 million. That makes the average jury award $20.9 million.
But those are the exceptions.
The vast majority of transvaginal mesh (TVM) cases were lined up for an aggregate settlement. A large law firm would advertise and attract thousands of clients then settle for a lump sum with one of seven mesh makers, the larger being Boston Scientific, Ethicon ( Johnson & Johnson), American Medical Systems, and C.R. Bard. More than 90% of the women in the settlement would have to agree before it would be funded.
A lump sum settlement includes both the high value and lower value cases, some with a blown statute of limitation (SOL). (Check your state’s SOL on personal injury cases here.)
The complaint says time-barred cases were included in aggregate settlements, essentially lowering the value of the settlement and reducing the firms leverage to negotiate.
Women were not informed of this, says the complaint, which is a breach of fiduciary duty and fraud by omission.
Thousands of women allegedly responded to the television advertising placed by CLH and LM, which had formed a joint venture to collect cases. Women would call into the call center and sent a packet if they qualified as a client.
Instead of hiring a third party vendor, the firms formed a litigation support group, Litigation & Records Services (LRS) for which they also billed.
Altogether CLH and LM retained over 26,000 TVM clients, who agreed to pay 40% of any recovery.
To increase the value of a claim the complaint alleges that CLH and TM would convince the clients to undergo a revision surgery if they had only a mesh-in-place. A case is considered more valuable depending on the number of mesh removal surgeries.
The complaint does not address whether these plaintiffs wanted their mesh removed and did not have to be convinced to undergo surgery.
Women would be referred to a medical lender such as MedCare Manager affiliated with MedStar. The surgeon sells his bill to MedStar which in turn recovers the entire cost of the client’s care from any legal settlement while paying the doctor a discounted rate. Private insurance may pay a doctor $6,000 for a surgery while MedStar would acquire the bill and try to collect up to $37,000 for the same surgery and travel costs. It could be reduced if the client complained.
Converting 10% of your client list, which are non-revision cases, to 25% revision cases could raise legal fees from $10 to $20 million, the complaint says.
This is what allegedly happened to Plaintiff Tammy Alvardo.
She had been implanted with a Bard sling in December 2008 and underwent one revision. By November 2011 she hired CLH and was referred to MedCare/MedStar for a revision surgery which was performed November 22, 2014.
She was charged $37,297.75 for the partial removal surgery. Eventually she settled with Bard for $137,943.00, but after attorneys’ fees of 40% were subtracted Alvarado netted $48,448.10.
Clara Redmond had an Ethicon transvaginal mesh implanted in March 2008. Fifteen months later she underwent a revision surgery. By November 2011 she hired CLH and had two more revision surgeries.
According to the complaint, the law firm filed her case in New Jersey in January 2014, a violation of Georgia’s two year SOL. She was never told her statute had run out, says the lawsuit. Eventually she settled with Ethicon for $123,000 but after attorneys' fees and case expenses, Clara received $68,597.00
Tammy Haga received an AMS mesh in July 2009 and three years later had a revision surgery. It does not appear that her case was ever filed in any court. She retained CLH in October 2011 and her case was settled for $98,000. After attorneys’ fees were subtracted, she received $55,419.
Tammy’s claim was put into an aggregate settlement which included claims that had never been filed and were outside of the statute of limitations, therefore of less value.
Amy Ruminski received a Boston Scientific transvaginal mesh in March 2007.
By 2011 she saw an ad on television and ultimately retained CLH as her attorneys. However, according to the complaint, CLH did not file a case on her behalf. She too settled her case in an aggregate settlement which included other claims that had allegedly not been filed. Her net settlement was $11,000.
In 2013, Judge Joseph Goodwin mandated that law firms fill out a short form complaint to handle the thousands that were being filed. That date would serve as the court filing date for purposes of the statute of limitations, providing the complaint was subsequently filed in the MDL by a certain deadline.
That November 2013 filing deadline was changed to January 2014, then February 14, 2014, Valentine’s Day.
That meant the law firms with a large number of cases had about three and a half months to file those complaints to benefit from the delayed filing order.
But CLH and LM were thinly staffed and would have to spend about $2 million to file 7,000 cases at $400 each. The complaint says CLH managed to miss the deadline for hundreds and potentially thousands of cases.
Realizing their error, the complaint says CLH and LM submitted bulk filings in state courts, allegedly to conceal the issue. Filing in bulk allows the firm to pay a single filing fee for up to 99 plaintiffs and potentially could mask a blown statute of limitation.
But there was a problem.
Some of these cases had already been filed in the MDL through a short form complaint!
For example, the complaint cites Barnes et al. v Boston Scientific, (92 plaintiffs, 41 had short forms filed in the MDL but their cases were never filed there); Stevens v Johnson & Johnson, where CLH filed a single case with 87 plaintiffs with the bulk already filed in the MDL; Heredia v Johnson & Johnson, CLH filed a single case with 63 plaintiffs in California state court, but 56 already had short form complaints in the MDL, essentially double filed!
“The Sheer volume of bulk court filings undercuts any claim of inadvertence.”
To add to their problems, the complaint says CLH and LM began settling cases they represented in the MDL over cases other firms had filed. In mid-2014 to 2015 upward of 20,000 TVM cases were settled for $750 million to $1 billion with attorneys’ fees in the range of $250 to $330 million.
CLH was designed to receive and an additional $45.5 million, a portion of the common benefit fees for work to benefit the MDL. Clayton Clark is on the Common Benefit Fees and Cost Committee.
CLH initially worked on the AMS settlement which averaged a gross settlement of approximately $41,000. Failure to accept the settlement meant the client would be dropped by the law firm however women were not told their SOL had expired which would be important information if you were shopping for another law firm.
A failure to disclose is considered fraud.
Rather than have settlements resolved in the MDL, CLH reportedly took them to state court in Wharton, Texas a small town with a population of less than 9,000. There they allegedly were filed under seal where they would not be scrutinized and the SOL problem would be concealed.
It is against the Texas Rules of Professional Conduct to represent more than one client and not disclose to each client the nature of all claims.
Plaintiffs will seek the attorneys’ fees which are reported to be $250 million to $330 million along with interest and damages.
A pretrial conference is set before US Magistrate Judge Frances H. Stacy, Houston, on November 7, at 10 am. Late Add ** CLH has requested and Judge Andrew S. Hanen on Monday July 1 agreed to seal the Complaint after CLH filed an Emergency Motion.
The Plaintiffs have to file a request to unseal the Complaint no later than July 31, 2019. ###