GSK (LON: GSK) (NYSE: GSK) has risen 5% in London this morning on the announcement that they've settled a suit concerning Zantac. This puzzles us: “GSK plc (LSE/NYSE: GSK) today confirmed it has reached a confidential settlement with James Goetz, and the case he filed in California state court, set to begin trial on July 24, 2023, will be dismissed. The settlement reflects the Company's desire to avoid distraction related to protracted litigation in this case. GSK does not admit any liability in this settlement and will continue to vigorously defend itself based on the facts and the science in all other Zantac cases.”
We do get a part of it. American law usually insists that each party pay its own legal costs. Therefore it's entirely possible to end up it being cheaper to settle a case than go to trial and win. If the demand for a payoff is low enough that can be cheaper than the lawyer's bills. Indeed, it's fairly standard in insurance lawyering that most cases under a certain number are just paid off. But with some percentage - say, 5% - pursued to the bitter end no matter what the cost. On the basis that if there's substantial uncertainty about gaining a small pay off or years of painful battles in the court then people will be dissuaded from trying it on.
Well, OK.
GSK share price from London Stock Exchange
On the other hand there is that larger problem. GlaxoSmithKline (as was), Pfizer and then even Haleon if the cases burn through those first two face a mass of litigation concerning Zantac. It's possible to think there might be something to it, possible to assume - as the companies insist - that this is just American lawyers. But there really is a bolus of cases moving through the legal system.
It is possible, as GSK here implies, to say that it's better to settle the small cases so as to preserve the ammunition and effort for the large ones. But it's also possible to think that paying off some cases - however small - merely emboldens further cases and even the lawyers in the extant ones. True, we're not the management of a megacorp nor are we legally trained. But the idea that GSK should rise 5% on the news of the payoff of what must be a fairly small case does confuse us.
