Founded in the 19th century, medical device maker Depuy was acquired by Johnson & Johnson in 1998 and forms a key part of its medical devices segment. Today, the company makes about $25 billion a year in sales from medical devices and earns $5.6 billion in pre-tax income. Those amounts are equal to 35% and 27% of Johnson & Johnson’s overall sales and segment operating incomes for 2016.
Lately, though, the orthopedics part of Depuy has been involved in a lengthy legal controversy over hip implants alleged to have been defectively designed, leading to bone erosion and other problems in those in whom it had been implanted. Late last year, a jury awarded six plaintiffs that had sued Johnson & Johnson more than $1 billion in punitive damages, although Dallas Federal Judge Edward Kinkeade slashed the jury award in half to about $500 million. Since about 10,000 lawsuits regarding the devices remain, the verdict in the decision holds consequences beyond just the payment of $500 million as it would likely have reverberations affecting the amount Johnson & Johnson could settle the remaining cases for, should they decide to pursue settlement. All of the lawsuits were consolidated and those heard in the trial were test cases that would help inform how to proceed. The devices in question have not been sold since 2013.
It was not a surprise to anyone that Johnson & Johnson decided to appeal the verdict. In a statement shortly after the jury’s decision the company’s lawyer said, “Today’s verdict provides no guidance on the merits of the overall Pinnacle litigation because the court’s rulings precluded a fair presentation to the jury.”
The appeal is being heard by the Fifth Circuit, which is now receiving accusations that Plaintiffs Attorney Mark Lanier engaged in misconduct in how he characterized his relationship with expert witnesses. During the trial, Lanier had told the jury that the expert witnesses in the trial were doing so without compensation. According to Johnson & Johnson attorneys, that is not true. They uncovered a $10,000 donation to one expert’s grade school and payments of $35,000 and $30,000 directly to expert witnesses themselves. Unlike witnesses testifying due to direct observation of events, it is not improper to provide compensation to expert witnesses for their time and expertise. They typically are done so at an hourly rate.
If an expert witness regularly gives testimony and is compensated, the Federal Rules of Civil Procedure require the disclosure of compensation in a report submitted to the court. Johnson & Johnson’s attorneys are arguing that the failure to disclose the compensation gave the plaintiffs an unfair advantage and are asking that the verdict be set aside. Not only was the jury given the impression that the experts were unpaid, but the lack of compensation also denied Johnson & Johnson the opportunity to review a report submitted to the court.
Lanier, a revered Plaintiffs’ attorney, denies Johnson & Johnson’s characterization by stating that no agreement existed between himself and the expert witnesses, who he said did not expect to be compensated. After receiving the large verdict and noting that their opinions played a role, Lanier had “a change of heart” and decided to compensate the experts.