Class action litigation broadening

By Resolve Editor Kate Tilley

A Federal Court judge has agreed to a settlement in one of several class actions brought against manufacturers of pelvic mesh, despite saying the amount was “at the lower end” of the range.

Justice Michael Lee also proposed appointing a referee to conduct a tender process for an administrator for the settlement scheme, rather than allowing the plaintiffs’ law firm to administer the scheme.

A $105 million settlement was reached in Fowkes v Boston Scientific Corporation in July 2022 and received Federal Court approval in March 2023.

It followed earlier settlements totalling $300 million against pelvic mesh manufacturers Johnson & Johnson Medical and Ethicon. All the cases were run by Shine Lawyers. Many Australian women had surgery to have the mesh implanted to treat stress urinary incontinence or pelvic organ prolapse.

In Boston, Justice Lee said the settlement sum was reasonable, “albeit at the lower end of that range”, considering the prospects of success and the amount likely be received if liability were established.

Negligence alleged

Debra Fowkes was the representative applicant for open class group members against the overseas manufacturer Boston Scientific Corporation and its Australian supplier, Boston Scientific Pty Ltd.

The case alleged negligence in the implants’ evaluation and supply, that the implants were defective products, and there were insufficient warnings about the risk of complications.

After a “very extensive process of identifying women likely to be group members”, 2,404 women registered.

Justice Lee said the court was required to “be alive to the interests of group members and take steps to ensure matters are conducted in a way which best facilitates the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible”.

Initially the settlement approval application was on an all or nothing basis – the settlement deed and proposed settlement scheme were to be taken together.

Bifurcated process

However, in late February 2023, the parties consented to Justice Lee’s proposal the approval process be bifurcated.

“My rationale was to give certainty to group members as to whether the proceeding would settle or not. However, as became clear [during] argument, significant questions attended the settlement scheme and proposed orders for the distribution of funds.”

Justice Lee said the initial deed required group members:
(a) to acknowledge that Boston maintains they would have been successful in the class action
(b) not, without Boston’s approval, to make any adverse, critical or disparaging statements to anyone about the implants, and
(c) if they did make such a statement, to return any amount paid to them under the settlement and be barred from recovering any sum against Boston.

He said (c) was effectively a gag and there were “very real questions” on the legality of a representative applicant agreeing to a regime that would have “imposed such obligations on strangers to the deed”.

Justice Lee said the parties “sensibly and perhaps seeing the way the wind was blowing” agreed to vary the deed by removing those provisions.

Red flags emerged

Group members were notified of the proposed settlement via a court-approved settlement notice, but Justice Lee received many objections.

“With the benefit of hindsight, I should have adhered to my preliminary view and appointed a contradictor … although ‘red flags’ with the settlement only emerged or crystallised in my mind during the hearing, where it is evident there is likely to be significant opposition to a settlement and group members wish to be heard, the conduct of the hearing” can be assisted considerably by appointing a contradictor.

But Justice Lee also said cost considerations loomed large and “it is important the court keeps close control over the process to ensure a contradictor does not go off on frolics or incur unnecessary costs or cause delay (as has sometimes happened)”.

He said the women’s written and oral objections were forceful. “It was impossible not to be moved by some of the heart-rending stories of despair and physical and emotional pain received. By sharing their stories, the women brought to the foreground the intimate and human element to this settlement approval application.”

Shine had emailed the group about the settlement before a court-approved notice was distributed, saying it was “a privilege to help you pursue your rights and to ensure each woman obtains the best possible outcome”.

Justice Lee said he would have “peremptorily rejected” a notice that suggested a settlement would reflect a “best possible outcome”, because any settlement was a “significant compromise”.

Complex information

He said notices in most large-scale consumer or mass tort class actions go to people with “different levels of financial and legal sophistication”. Group members’ ability to understand and evaluate complex information varied greatly and many would not understand the counterfactuals or recognise potential conflicts of interest.

“To tell people the solicitors are ensuring the ‘best possible outcome’ (by seeking approval of the settlement) is simply wrong. It is precisely the sort of comment that would reassure a group member … that the solicitors are acting to maximise any recovery by the group member.”

Justice Lee said he was confident the communication was not deliberately misleading, but showed the court needed to exercise close control and supervision over communications.

Shine’s email failed to provide details about the nature of the compromise, the extent of past and future costs, or any rough estimates of amounts payable to group members.

Justice Lee said just because women did not send emails or attend court was “an unsafe basis” on which to conclude they supported the settlement.

There was significant opposition from many group members about the settlement’s adequacy, but the amended deed was “considerably fairer” than the original.

Unrecoverable compensation

Justice Lee said it was impossible to say what group members might recover if the matter continued to be litigated. Some wanted compensation unrecoverable through any court process.

For example, the court’s ability to compensate for lost or diminished income of businesses they owned before implant surgery was limited. Lost or damaged relationships, while tragic, were not “a species of loss recognised by the law”.

Justice Lee said developing damages bands was “a rational approach to ensure the settlement sum reflects the contours of the group membership”.

A class action was a joint enterprise focused on a commercial outcome. “Put more bluntly: it is all about money.” But the Boston case was “about much more than money”.

“This is about personal injury and, where complications have manifested, a particular type and intimate form of personal injury.”

Justice Lee said a recurring theme among objectors was that their complaints of suffering complications were initially met by scepticism and disbelief, which meant physical suffering was exacerbated by frustration and anger.

No liability acknowledged

Many claimants felt “fobbed off” by people who did not appreciate the extent of their pain. “To be believed by others is a basic human desire.”

While the gag had been removed, preventing group members from getting public acknowledgment of “what they allege is the cause of their suffering, and holding the company they consider responsible to account, is no small thing”.

Justice Lee said it was “superficial” to note that Boston “will not acknowledge liability and no settlement can be struck which does not reflect this line in the sand.

“Some cases have an emotional dimension which makes striking any settlement absent a recognition of wrongdoing more difficult than others.”

Settlement not supported

While most group members were silent, none expressly supported the settlement.

The oral and written objections had three prevailing themes:

concerns the settlement was on a “no admissions” basis
the settlement sum’s inadequacy, and
uncertainty about the amounts group members would receive.

Justice Lee said he believed the second and third factors were resolved by his orders that intended to maximise the net amount available to group members and ensure the most effective method of distributing funds to them.

More than $7 million was to be paid to Shine and law firm AJB Stevens, which initially had filed a competing class action against Boston in the NSW Supreme Court.

Shine’s anticipated cost for administering the settlement was more than $16 million.

Fowkes v Boston Scientific Corporation [2023] FCA 230 judgement 16/3/23

Shine’s settlement overview.

A Lexis Nexis analysis on use of referees in complex class actions.