American Lawyer: NY Lawyers Litigation 'Mass Tort Debacle' (MORE, CLICK HERE)

9/11 Lawyer Made Name in Lawsuit on Diet Pills
The New York Times by Anthony DePalma - March 30, 2008

In the years since the 9/11 attack, more than 9,000 ground zero workers have sued New York City, saying it failed to protect them from the toxic dust at the site that they say made them sick.

Nearly all of them are represented by two lead lawyers. One, David E. Worby, is well known to most of them because he often appears on television and in newspaper articles as a spokesman for their cause. But few of the workers recognize the other lawyer, Paul J. Napoli, or know much about him.

Mr. Napoli made his name and fortune in one of the biggest class-action lawsuits of the last decade, the case involving the diet drug combination known as fen-phen. He won thousands of fen-phen users compensation for heart damage, but he has also been criticized for his conduct of that litigation. A federal judge overseeing some of those cases in 2002 dismissed scores of his fen-phen claims, saying the heart scans he submitted were medically unreasonable. And former clients, business associates and an ex-employee have accused him of misrepresentation and ethical breaches.

Most of those claims against Mr. Napoli have been dropped. But in late January, a New York State appellate court cleared the way for a trial on a suit brought by former clients and a law firm once associated with Mr. Napoli charging that he manipulated the distribution of fen-phen settlement money for 5,600 clients. The suit contends that the settlement — reportedly $1 billion — was managed in a way that favored some clients over others and thereby increased the lawyers’ fees for Mr. Napoli’s Manhattan firm. No trial date has been set.

“There’s no federal order or state order that says I ever did anything wrong,” said Mr. Napoli, who is known in New York’s legal circles as a self-assured young lawyer with a penchant for taking on tough cases that other lawyers pass up. “We tried to do the right thing.” There are no claims of misconduct in the ground zero cases.

But the appellate court ruling on the fen-phen suit, which might otherwise have gone unnoticed, takes on added significance because Mr. Napoli is involved in the ground zero cases, which could also move toward a settlement. Last fall, Mr. Napoli and Mr. Worby asked their ground zero clients for authority to negotiate a broad settlement with the city.

Lester Brickman, a professor of legal ethics at the Benjamin N. Cardozo Law School at Yeshiva University who has studied Mr. Napoli’s role in the fen-phen litigation, said he was disturbed that the Napoli firm was now representing ground zero workers. “I am deeply concerned,” he said, “given the allegations that the firm flouted its ethical obligations.”

Ground zero clients said there has been no reason to believe that Mr. Napoli and Mr. Worby, who was not involved in the fen-phen cases, have been less than aggressive in protecting their interests. Most have no knowledge of the fen-phen controversy, but some clients, when informed about the case, were wary. Joseph Lutrario, a retired New York City police officer from Long Island who was buried under the trade center rubble and believes he was sickened by the dust, said in an interview, “Why wasn’t I notified of their prior history?”

In interviews at his office on lower Broadway overlooking ground zero, Mr. Napoli, 40, said he has not discussed that history with the 9/11 clients because the two legal actions were wholly unconnected. He also said that when all the confidential fen-phen settlement documents were unsealed at a trial, they would prove that he had handled that litigation properly and had protected all the people he represented.

Invited to the Case

Mr. Napoli was brought into the ground zero cases in 2004 by Mr. Worby, a successful personal injury lawyer from White Plains. Mr. Worby sued the city in 2003 on behalf of his son’s hockey coach, a New York City police detective who had been told that he had leukemia, which doctors feared might have been caused by exposure to toxic dust from the five months he spent at ground zero.

As word of the suit spread and hundreds of workers poured into his office seeking legal representation, Mr. Worby realized that he needed help. He turned to Mr. Napoli, who was known for his success in the fen-phen litigation and his sophisticated computer system that could handle thousands of cases.

While Mr. Napoli handles day-to-day logistics of the case, Mr. Worby oversees issues of medical causation that could come up in a trial. Although they had not worked together before, Mr. Worby said he had “100 percent confidence” in Mr. Napoli and his firm.

“I’ve looked into every aspect of what they did in the fen-phen case,” he said, “and I don’t think they did a darn thing wrong.”

When Mr. Napoli became a major participant in the fen-phen litigation in 1997, he was just five years out of St. John’s University Law School. After graduation, he joined a small Long Island law firm but quickly moved on to win medical malpractice cases in his own personal injury practice. In a relatively short time, his work in class-action lawsuits like fen-phen proved so profitable that he was able to give St. John’s $500,000 and have an auditorium there named after him when he was just 37.

He first read about fen-phen in a 1997 Mayo Clinic report on five obese women who underwent heart valve surgery after taking the prescription drugs to lose weight. Immediately after the federal Food and Drug Administration called for the drugs to be withdrawn from the market on Sept. 15, 1997, Mr. Napoli and a partner, Marc Jay Bern, took out a newspaper ad soliciting fen-phen users. In time, the partners would draw in 5,600 clients who would sue the drug maker, American Home Products.

Challenging a Settlement

The American Lawyer magazine has called the fen-phen litigation a “mass tort debacle.” Forbes magazine portrayed it as a “$22 billion gold rush.” Hundreds of lawyers around the country cashed in.

The Napoli-Bern firm, with a few dozen lawyers, was among the biggest winners in the fen-phen sweepstakes. In 2001, it negotiated a settlement with American Home Products, now Wyeth, the pharmaceutical giant headquartered in Madison, N.J. The details of the settlement were sealed by the courts, but The New York Law Journal and other publications estimated that it was worth $1 billion and that it provided legal fees of roughly $350 million.

Now there is a chance that those fees and the awards paid to clients could have to be renegotiated because the courts, in a rare move, have decided to re-examine Mr. Napoli’s seven-year-old fen-phen settlement. On Jan. 31, the New York State Appellate Division, First Department, upheld a decision by Justice Charles E. Ramos of State Supreme Court in Manhattan ordering a trial on “allegations of misrepresentations and manipulation” related to the way Mr. Napoli and his firm dealt with their fen-phen clients.

That suit was filed by a New York law firm — now known as Parker Waichman Alonso — that had referred several hundred fen-phen clients to Mr. Napoli in 2001. Around 400 of those clients are also plaintiffs in the suit.

The suit maintains that Mr. Napoli and his associates violated ethics rules by misrepresenting to clients how their awards had been determined. It says they led clients to believe he had negotiated individual awards for them from the drug company when in fact his firm had negotiated a single lump sum and then divided up the money on its own. Court documents show that in letters to his fen-phen clients, Mr. Napoli said awards being offered were “based on the final offer made by A.H.P. to settle your case.”

The Parker firm, which received $5.3 million in fees, contends that clients it referred to the Napoli firm received smaller awards than clients whom the Napoli firm recruited on its own, causing a larger portion of the lawyers’ fees to go to the Napoli firm. Mr. Napoli declined to discuss details of the case because of the litigation. But he said that the individual awards were the result of negotiations with the manufacturer, and that a legal ethicist had reviewed the settlement approach.

“This case was never about anything being done wrong,” Mr. Napoli said. “It’s a lawyers’ fight, and they’re trying to put our clients in the middle.” Arnold E. DiJoseph III, who represents the Parker firm, disagreed. “This is about the clients, not about fees — clients who got money taken out of their pockets,” he said.

If a trial shows that there was misrepresentation in the handling of the settlement, some or all of the legal fees could be forfeited. The compensations paid to clients could also be re-examined. Another aspect of Mr. Napoli’s record that has raised the concerns of Professor Brickman and other legal experts was his firm’s use of diagnostic tests in additional fen-phen claims that were litigated after the 2001 settlement.

In those cases, a federal judge accused the firm and its associates of running a medical mill that churned out questionable echocardiograms to show that clients had suffered damage to their heart valves. The judge, Harvey J. Bartle III of Federal District Court in Philadelphia, dismissed 78 cases, finding they were based on “medically unreasonable” screenings and allowed the manufacturer to audit every test the Napoli team submitted.

Mr. Napoli challenged the judge’s findings, and court documents indicate that all of the claims that had been dismissed were eventually paid, although the amounts are confidential. “The judges were wrong and we were right,” Mr. Napoli said. “We did not stop. That’s what the ground zero people should know.”

Concessions on the Dust

It may be a long time before the claims of the ground zero workers are resolved. The city administration has conceded that exposure to the dust has led to respiratory problems, and it has provided millions for treatment while also lobbying the federal government for medical assistance. At the same time, the city has argued that it is immune to lawsuits for actions taken in response to an enemy attack.

Last week, the United States Court of Appeals for the Second Circuit upheld an earlier decision by Federal District Court in Manhattan, which allowed the suits to go forward, with immunity to be determined on a case-by-case basis depending on the facts of individual cases.

Judge Alvin K. Hellerstein of the Federal District Court, who is overseeing the cases, has made it clear that he wants them settled. He has raised the possibility of using $1 billion that Congress provided to insure New York City against liability claims as a victims’ compensation fund for injured workers, but that may require Congressional approval.

If the money is made available for a settlement, individual compensation awards are likely to be based on a complex evaluation of factors like severity of illness and intensity of exposure to the hazardous dust.

Unlike fen-phen claims, which were based largely on echocardiograms done by doctors paid by the lawyers, ground zero clients have been examined by their own doctors or the Mount Sinai World Trade Center Medical Monitoring and Treatment Program.

Mr. Napoli said his firm had already spent more than $10 million on the litigation, including hiring 50 nurses to evaluate the workers’ medical records. Of course, if he and Mr. Worby succeed in obtaining settlements for the workers, they could make hundreds of millions in lawyers’ fees.

Mr. Napoli said his legal team had done everything to ensure fairness, including engaging an independent expert to oversee a settlement. “I’ve got a job to do and I’m going to do it,” he said. “These ground zero guys are going to be protected.”