Chamber, Big Pharma Ask FTC to Rein in Lawsuit Ads

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By Samson Habte

The U.S. Chamber of Commerce is taking aim at the advertisements attorneys use to recruit plaintiffs for lucrative mass tort cases against medical device and pharmaceutical companies.

The double-barreled legislative and public relations campaign—which will include a push to have the Federal Trade Commission “prohibit” certain lawsuit ads that are ubiquitous on daytime and late-night TV—was previewed at the Chamber’s “Legal Reform Summit,” an annual event at which business leaders gather to discuss legislative priorities and litigation developments.

An Oct. 25 session at this year’s summit was dedicated to what organizers described as the “active volcano” of “trial lawyer advertising” that has been used to aggregate plaintiffs and “affect jury pools” in big product liability cases, including a number of high-stakes actions against manufacturers of pelvic mesh devices and producers of drugs like the anticoagulent Xarelto.

In a 67-page white paper released in conjunction with the summit, the Chamber said there is “mounting evidence” that “misleading information and exaggerated claims made in lawsuit ads prevent people from seeking treatment or lead them to stop taking a prescribed medication without consulting a doctor.” The FDA has said that 60 doctors reported their patients had “viewed an advertisement and then discontinued” use of an anticoagulant, and that two of those patients died while 28 others suffered serious medical events.

“If it feels like these ads are on all the time, you’re not imagining things—they are,” said Rustin Silverstein, founder of a data analysis firm that forecasts litigation risk for Fortune 500 companies. Drawing on analyses he has performed for clients, Silverstein said “one of these ads is running somewhere in America every minute,” particularly “if you are watching late night or daytime TV.”

Law firms that buy those ads are motivated by the potential for tremendous returns on their investments. Last month, a Philadelphia jury awarded $57.1 million to a single plaintiff who purchased a pelvic mesh device made by Johnson & Johnson. Six months earlier, another pelvic mesh plaintiff won $20 million from Johnson & Johnson, which is still facing more than 42,000 mesh-related product liability suits, according to a website that aggregates mass tort verdicts and settlements.

“This is a large and growing share of all legal advertising, dwarfing the hardy perennial asbestos and mesothelioma ads and other types of product ads you see on TV,” Silverstein said. “This is a booming business for the plaintiffs’ bar, and seemingly everybody wants to get a piece of it.”

At the Chamber’s summit, pharmaceutical executives and defense lawyers discussed a plan to blunt the effectiveness of plaintiffs’ lawyer ad campaigns—which, speakers said, are more potent ever because they are allegedly financed by private equity firms and a new breed of “lead generators” that exist solely to generate claims. (A public relations specialist who works for the Chamber said in an email to Bloomberg Law that one of the most prolific lead generators, The Relion Group, is backed by The Carlyle Group).

One part of that plan, detailed in the Chamber’s white paper, is to convince the FTC to “prohibit” certain “fearmongering” ads used to solicit plaintiffs for mass tort claims against drugmakers and device manufacturers. The paper said the FTC should find that producers of those ads “engage in an unfair or deceptive practice when an ad does not include needed disclosures,” including a disclaimer warning viewers not to stop taking a drug without consulting a doctor.

‘Not Going to Happen’

Some experts said the push for FTC regulation of lawyer ads was quixotic. “If they think that the FTC is going to put additional restraints on commercial speech—or restraints to limit factually accurate information—that’s not going to happen,” said Lynda A. Shely, a former ethics counsel at the Arizona bar who advises law firms on professional responsibility issues.

“My understanding is that these advertisers don’t run ads [about a drug] until there has been a legitimate medical study concluding that there have been bad side effects or significant reported cases of bad side effects,” Shely told Bloomberg Law. “I guess what they’d like to do is ban advertising alerting consumers to quantifiable, bad side effects. I don’t think they’re going to be able to do that—or I certainly hope not—under the First Amendment.”

The American Association of Justice, which promotes the interests of plaintiffs’ lawyers, also dismissed the proposal in a written statement.

“Consumers face an ever-growing, multi-billion dollar barrage of pharmaceutical advertising, which the Chamber’s report fails to mention,” the AAJ statement said. “If a consumer is harmed or killed by a prescription drug or a device, it’s important that patients or their families know there are legal options to hold negligent pharmaceutical companies accountable.”

The AAJ also noted that regulation of lawyer advertising traditionally falls under the authority of state bar associations, all of which have adopted ethics rules that only forbid false or misleading advertisements. “If the relevant standards are met, attorneys have a First Amendment right to advertise their legal services just like other professionals,” the AAJ said.

ABA’s ‘Insulting’ Response

The push for FTC regulation could be described as “Plan B,” because critics of lawsuit ads, including Rep. Bob Goodlatte, the Republican chairman of the House Judiciary Committee, have already tried—unsuccessfully—to enlist the support of the American Bar Association in eliminating those ads.

In March, Goodlatte sent the ABA and every state bar association to adopt self-imposed limits on drug ads. Those ads, Goodlatte said, should include disclaimers warning patients not to stop taking medications without consulting their doctors.

The ABA’s response to that request was lukewarm. In a letter to Goodlatte, the ABA’s then-president said there were First Amendment concerns with the proposal, and that state ethics rules already prohibited false and misleading advertisements.

At the Chamber’s summit, the reaction to the ABA response was biting.

“The response from the American Bar Association is very disheartening—and insulting,” said William E. Moschella of Brownstein Hyatt Farber Schreck LLP in Washington, D.C., who moderated the panel on drug lawsuit advertising. “They basically said patients were misunderstanding the ads. And I guess I would ask what is there to misunderstand about ‘1-800-BAD-DRUG’?”

Moschella said producers of the objectionable advertisements, eager to convince viewers to connect with plaintiffs’ lawyers, have used scaremongering tactics that have caused people to discontinue vital medication regimens.

“I think the profession has to come to grips with the impact [these ads] are having—not just on trials but on patients as well,” Moschella said. “This is something that I think all members of the legal profession should be concerned about. We pride ourselves on self-regulating, and this is an area where there’s been little activity—in fact, literally no activity—to regulate.”

File a Bar Complaint

Shely, the former Arizona bar ethics counsel, said critics of lawsuit advertising should do something else before “getting the FDA or the FTC involved": file bar complaints against the lawyers who sponsor purportedly objectionable ads.

“How about if people are concerned about lawyer advertising—in whatever state they’re in—they actually use the existing mechanism,” Shely said.

Nobody has ever done so, Shely said, drawing on the results of a survey of state bar authorities that she conducted before testifying at a congressional hearing on lawsuit ads.

“In all of my years advising law firms, and being involved in lawyer regulation across the country, I have literally never heard of anybody filing a bar complaint saying … this [ad] made my patient stop taking their medication,” Shely said.

‘The Mass Tort Litigation Underbelly’

One section of the Chamber’s glossy white paper was titled, “A Peek Into the Mass Tort Litigation Underbelly.” It focused on a new phenomenon: the emergence of “lead generation” law firms—or, as Moschella described them, “glorified claims-processing centers.”

“They are firms of a handful of lawyers who are representing thousands of people,” Moschella said. “But they don’t meet the clients, they don’t take notes, they don’t learn about them, they don’t assess liability. They are in the business of putting these ads on the air, getting the claims as they come in, and then passing them off to other firms that do the litigating—either for some kind of referral fee or a piece of the ultimate contingency arrangement.”

Moschella said the firms that actually litigate the cases “are happy with this arrangement, too, because they understand there is a stigma attached to a lot of lawyer advertising.”

“They don’t want to have their names on some of these ads—which are in poor taste, unsavory—they don’t want judges or jurors to think less of them, so they’re happy to let these other firms ... bear the brunt of whatever stigma comes with this advertising, and then reap the rewards of actually working with these clients,” Moschella said.

The business model of these purportedly new types of law firms was revealed in a 2015 lawsuit against AkinMears, a small Houston-based firm that spent $25 million on mass tort claims advertising in 2015, the most of any firm in the country that year.

The lawsuit was filed by AkinMears’s former “chief business development officer,” a former investment banker who claims he was hired to raise millions of dollars in funding so AkinMears could acquire thousands of pelvic mesh claims from another firm—and was then fired and denied what he was owed after he came through.

In his complaint, the plaintiff alleged that there “are essentially two ways for a plaintiffs’ firm to play in the swashbuckling world of mass torts. One is to acquire clients through advertising. The second is to acquire cases (or an interest in cases) directly from another law firm that has already retained the clients—in essence, buying the claims.”

Elizabeth Tippett, a University of Oregon law professor who has studied drug injury advertising, said her research has shown that many of the “top 10 advertisers” in the legal advertising market “are not law firms.”

Tippett said the fact that so many of these ads are produced by nonlawyers was problematic because states may find it difficult to police the conduct of entities that may not be run by lawyers, and thus not subject to the jurisdiction of bar authorities.

And Tippett also shares concerns about the substance of some of commercials, which often have “content that sort of masquerades as a public service announcement to prevent consumers from figuring out that it’s just a legal advertisement soliciting people for law firms.”

But Tippett said she’s not all that concerned about the concentration at the top of the market, or the division of labor that has emerged.

“I don’t think there’s anything inherently wrong with having a specialized market where some entities specialize in advertising and others specialize in litigating,” she said. “In fact, I think there are benefits to the fact that the advertising market is very concentrated among a few top advertisers. Because what that means is if you can improve the practices of the top advertisers, you’re going to improve the quality of the advertising overall for consumers, by just influencing a small number of top players.”

FTC’s Expertise

But Tippett told Bloomberg Law that she is also supportive of the idea to have the FTC regulate lawsuit ads.

“What I like about the FTC is that they have a lot of expertise in figuring out what kind of advertising content is misleading, and they know a lot about how to protect consumers,” she said. “So if they issued some guidelines on what they consider misleading practices in this context, I think that would be really helpful.”

“It just seems very doable to come up with some reasonable, common-sense, data-driven recommendations or guidelines or rules around this kind of advertising,” she said. “That seems doable to me, but I’m being overly optimistic.”

Tippett said that as a “baseline,” consumers “should be able to tell that an advertisement is sponsored by a lawyer or referral network.”

“If you can tell that it’s sponsored by a lawyer, consumers already have a good schema in their head for understanding why lawyers might profit—you don’t need to disclose so much in that scenario,” Tippett said. “But when it’s a referral network of some sort, you have to think about how can you disclose this in a way that will be understandable to a consumer about why this network is sponsoring an ad—so they can understand the motive of the advertiser.”

Tainting Jury Pools?

Silverstein told the attendees at the Chamber summit about his study on lawsuit ads that aired in St. Louis in the run up to a series of recent, high-stakes product liability trials that talcum powder users brought against Johnson & Johnson.

Silvertstein said he discerned “increasing efforts to use this advertising not just to run up as many claims or clients as possible, but seemingly as a strategic effort to influence trials.”

Silvertstein said that when mass tort trials are scheduled in particular venues, “the advertisers will storm in and inundate these areas with a lot of advertising, in the hopes that the public gets scared and ultimately members of the jury will come in with preconceived notions” about the product that is the subject of the litigation.

That was what Silverstein said he detected in St. Louis before the talcum powder trials—four of which ended with plaintiffs’ verdicts ranging from $55 million to $110 million. “During this time, St. Louis—which is the twenty-first largest media market in the country—saw more talcum powder ads than any other media market,” Silverstein said.

Silverstein said volume was not the only unusual thing about that advertising spree. "[T]hese ads were particularly aggressive and emotional,” he said. “It wasn’t ‘If you’re injured call our law firm.’ It was ‘the company knew about this, there’s a definitive link, and you should be mad.’” That raises questions, SIlverstein said, about “the intention of these advertisements: was it to get clients or was it to influence the jury?”

J. Lee Meihls, a trial consultant who advises companies in mass tort cases, was on hand at the Chamber summit to discuss the results of a jury survey she conducted after a talcum powder suit that resulted in an $72 million verdict against Johnson & Johnson. (The verdict was reversed on appeal Oct. 17).

Meihls polled jurors to determine their feelings about lawsuit ads, and she urged pharmaceutical representatives in the audience to take heed of what she found: “Jurors really aren’t put off by lawyer advertising.”

“This is something that we all need to hear and take seriously—that jurors really don’t have a big problem with lawyer advertising,” Meihls said.

To contact the reporter on this story: Samson Habte in Washington at shabte@bna.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bna.com

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