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The Tepezza hearing loss litigation, should your firm be involved?

  • Author:John Ray
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The Tepezza hearing loss litigation, should your firm be involved?

The Tepezza hearing loss litigation, should your firm be involved?

Ophthalmology Management - RX PERSPECTIVE Join us for our June Mass Tort Success Course and learn how to evaluate metrics (all of them) necessary to decide whether any given mass litigation is a good investment of your firms resources.

The emerging litigation involving the drug Tepezza, will likely be consolidated (MDL) within the next few months. The formation of an MDL generally causes firms to take note and consider becoming involved in the given mass litigation.

Given that lawyers are lawyers, you often review the legal merits of an emerging mass litigation (legal viability of the case (LVC)) however, spend little time evaluating the other metrics that you need to consider before deciding to invest your funds by accepting clients on a contingency basis.

The Teppezza litigation presents a case that passes the legal merits test (LVC) and the defendant is financially viability test (DFV) but may fail, for investment purposes on the Average Case Value (ACV) vs Potential Plaintiff Numerosity (PPN) test. You may spend more on acquiring clients than you receive in inflation adjusted fees. This is not to say that you will not recover your investment and even see a profit however; you must also consider whether the opportunity cost (you could put the money in other cases) merits the investment.

We will use Tepezza as a case study in our June Mass Tort Success Course. This is a real time case where we can study and demonstrate the importance of evaluating the ACV metric as compared to the PPN metric, which is crucial to firm investment decisions in mass torts.

On a personal note:

I spend a great deal of time teaching the business and fiancé of the mass tort practice and the running of a successful contingency fee law firm in general. While outsiders might view this as our pandering to greed, this is not the case. Contingency fee law firms invest their own money to get justice for people who could not otherwise afford counsel. If a contingency fee firm does not do the proper analysis before accepting cases or becoming involved in mass litigation, that firm will have no money to invest and will not be able to help those in need of counsel in the future. I make no apologies for our “money” focused course curriculum.

On another personal note:

If my coverage in this article is confusing, just take the mass tort success course like almost 1000 of your colleagues have done and this will all make sense, its difficult to cover in an article

 

Below are examples that will provide an outline for our coverage of Tepezza in June. After you learn to run the numbers on all of the metrics, you can make an informed decision about becoming involved in this litigation or any other mass litigation.

Our current take on the most important metric in Tepezza: 

Relatively low potential plaintiff numerosity (PPN) no more than 5000 potential plaintiffs meaning at best 2000 plaintiffs might contact an attorney.

Moderate Case Values We do not expect average case values (ACV) to exceed $200,00 with $125,000.00 to $150,000.00 being more probable.

If it takes 6 years for the case to settle and your clients claims to be paid (cash conversion) the inflation adjusted value of a $60,000.00 fee at 4% annual inflation is $47418. Remember you are spending pre inflation dollars to acquire clients today however, you the value of the $60,000.00 you receive 6 years will only have the spending power of   $47418 in today dollars.

After common benefit fees and co-counsel fees (depending on fee splits with settlement counsel) your inflation adjusted net could be around $30,000.00 on a $60,000.00 total fee.

Because relatively low potential plaintiff numerosity (PPN) generally causes the cost per client acquired (CPCA) to increase, you have to do the math correctly (considering all factors including inflation/time value of money) prior to making an informed decision to invest your firms’ funds by accepting clients on a contingent fee basis.

Why does relatively low PPN drive up CPCA? Running advertising spots cost the same without regard to the size of the target audience (Potential Plaintiff Numerosity (PPN)). If there are several hundred thousand potential plaintiffs, each spin of an ad will produce far more leads than if there are only two or three thousand potential plaintiffs.

 If it costs $5000.00 each time an ad spins and on average that ad spin only produces one lead, the lead cost $5000.00, if only 1 out of 4 leads result in a qualified, signed client, then the advertising or cost per client is $20,000.00.  Conversely, if each spin results in 10 calls, with the same fall out rate, the average cost of a signed qualified client is $2000.00.

If the low potential plaintiff numerosity in Tepezza results in an average cost per case acquired (ACPCA) of over $20,000.00 before other expenses, and your inflation adjusted, post common benefit fees (CBF), post co-counsel net fees, on an ACV of $150,000.00 is $30,000. This would seem on the face that this is a good investment, however, there are additional question that must be answered.

You must also consider opportunity cost. If the same $20,000.00 could be put into another mass litigation or simply plowed back into your current single event practice and return a net $40,000.00 then investing in Tepezza would not make sense.

 



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