FRANKFORT, Ky. (Legal Newsline) - A federal judge has decided not to put the brakes on either Kentucky Attorney General Jack Conway's lawsuit against Merck & Co. or Merck's lawsuit against Conway.
A pair of recent rulings U.S. District Judge Danny Reeves will keep both lawsuits moving along. Conway sued Merck in 2009 over the anti-inflammatory drug Vioxx, and Merck countered by suing Conway in August over his decision to employ private lawyers on a contingency fee.
Reeves denied Merck's motion for a preliminary injunction against Conway's employment agreement on Wednesday, then denied Conway's motion to dismiss Merck's lawsuit on Tuesday.
"A 'preliminary injunction is reserved for only the most egregious case, and should not be extended to cases which are doubtful or do not come within well-established principles of law,'" Reeves wrote, citing a 1972 case.
"The law concerning the constitutionality of contingency fee arrangements in quasi-criminal civil cases is far from settled, and Merck has failed to carry its burden of proving that a preliminary injunction would be appropriate in this case."
In September 2009, Conway filed a lawsuit against Merck over alleged violations of the state's Consumer Protection Act.
The drugmaker was charged with violating the law by marketing their anti-inflammatory drug Vioxx without revealing all the facts.
The suit, Commonwealth ex rel. Conway v. Merck & Co. Inc., alleged that in May 1999 Merck began an aggressive and deceptive promotional campaign of the drug directed at both consumers and health care professionals, without mentioning warnings of increased risk of cardiovascular events listed as a side effect.
Conway alleged that Merck was aware of the dangers through internal studies that were not disclosed to the FDA or the public.
The lawsuit also accused Merck of engaging in an elaborate scheme to create or publish scholarly articles under fake or ghost authors in order to drum up support for Vioxx.
In 2004, Merck admitted that Vioxx caused serious side effects and pulled the product from the market.
A year after filing his case, Conway hired Garmer & Prather, a plaintiffs firm in Lexington, Ky.
Merck alleges that, in entering into such a contract with private lawyers, Conway has granted them a stake in the outcome of the lawsuit.
The company also alleges that Conway's outside counsel has since assumed the lead role in the prosecution of the suit and has "made or influenced myriad decisions about the prosecution, large and small."
"The contingency-fee arrangement between the defendant and contingency-fee counsel has injected personal financial interest into the prosecution of Commonwealth of Kentucky ex rel. Conway v. Merck & Co., Inc.," Merck's lawyers wrote.
"Indeed, as any lawyer knows, under a contingency-fee arrangement an attorney effectively bets everything on attainment of victory in litigation."
The contingency fee agreement, the company argues, creates a "powerful incentive" for the outside counsel to focus "single-mindedly" on maximizing the amount of civil penalties recovered on behalf of Kentucky from Merck.
Conway said Merck lacks standing and that the case is not ripe for adjudication. Reeves wrote that Merck pleaded enough sufficient facts to deny Conway's argument and send the case to discovery.
"The AG contends that his use of outside counsel is constitutional because the contract 'expressly preserve(s) the Attorney General's right to control the litigation,'" Reeves wrote.
"He maintains that '(t)he case law is clear: state attorneys general can properly engage outside counsel pursuant to contingency fee arrangements so long as the respective attorneys general retain complete control over the litigation.' This is, indeed, the general rule.
"However, there is an exception to this rule: If there is evidence that private counsel 'have ever engaged in any conduct that invaded the sphere of control' reserved to the AG's office, then the door is opened to a conclusion that the contingency fee arrangement violated the defendant's rights."
Similar efforts by companies have failed in other states.
In California, paint companies failed to disqualify outside counsel representing seven counties and four cities.
In Rhode Island, paint companies failed to disqualify outside counsel representing the State in its ultimately unsuccessful litigation over lead paint.
And in Pennsylvania, Janssen Pharmaceutica failed to disqualify outside counsel representing former Gov. Ed Rendell.
Most companies point to a 1985 decision from California.
The case involved the City of Corona hiring a private attorney to bring public nuisance cases against alleged violators of a city ordinance. The attorney was paid more for successful than actions than unsuccessful ones.
The decision said a government office could not have a financial stake in the outcome of the charges.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.