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Judge Delays Hip Case Settlement

August 17, 2001

CLEVELAND (AP) _ A federal judge delayed action Friday on a request for preliminary approval of a $700 million settlement to resolve a class action lawsuit for faulty hip replacements.

U.S. District Judge Kathleen O’Malley said there were still too many unresolved questions about the 1,200 lawsuits, and set a hearing for Aug. 28.

She said it was still unclear whether the plaintiffs could opt out of the settlement and file their own lawsuits. She also questioned what would become of any money left over after the claims are paid.

The faulty Inter-Op hip implants were made by Austin, Texas-based Sulzer Orthopedics Inc., a U.S. subsidiary of Swiss medical technology company Sulzer Medica.

Sulzer Orthopedics recalled the implants in December after discovering that lubricant residue on the artificial joints could prevent the implant from bonding properly with the bone, causing it to loosen.

Under the proposed settlement, Sulzer Medica would pay for surgeries to replace the recalled joints and provide compensatory payments. Patients who require more than one surgery would receive $97,500 worth of cash and equity as compensation, while those requiring one surgery would receive $57,500 in cash and equity. Those who did not require surgery would get $2,750.

Executives expect the number of revision surgeries for hips and knees to reach 4,000. About 17,500 patients received Sulzer Medica hip implants overall, primarily in the United States.

Stanley Chesley, an attorney representing several plaintiffs, praised the settlement. Under the deal, Sulzer Medica would offer victims 4 million shares of stock totaling one-third of its value.

The settlement also would enable the company to avoid a possible bankruptcy filing, Chesley said.

Still, other attorneys were happy at the delay.

``This is a victory for the victims of Sulzer’s misconduct,″ said Andrews Pereira, a Houston attorney representing a group of plaintiffs. ``The court wisely put on hold this absurd deal.″

In trading on the New York Stock Exchange Friday, U.S. shares of the company fell 74 cents, or 9 percent, at $7.04.

Richard Scruggs, an attorney representing Sulzer Medica, told the judge he would hold off on a request for an order freezing lawsuits that are pending against the company in state courts.

He also said attorneys were trying to determine whether the proposed settlement complies with Swiss law regarding corporate claims.

O’Malley was selected to handle the case by a panel of judges because the lawsuits have been filed all across the country.

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