In December 2000, the Swiss medical device maker Sulzer Medica AG voluntarily recalled its popular Sulzer hip replacement device. This device is made of titanium and coated with a porous surface through which the bone can grow. After changing its manufacturing process in 1999, Sulzer Medica discovered that the new technique left a residue of lubricant on the surface of the joint. This residue interfered with proper bone growth around the implant. Therefore, the hip replacement device was recalled.

As a result, Sulzer Medica has become the target of more than 1,000 lawsuits. With over 30,000 hip-replacement devices already implanted into patients, the company expects the number of lawsuits to further increase. In an effort to curtail future lawsuits, Sulzer Medica has reached a preliminary agreement to settle the cases for $780 million in cash and stock. This unique agreement attempts to force all potential plaintiffs into one class-action suit, even though an individual patient's claim could be worth far more than what Sulzer is offering under the settlement proposal.

This settlement would entitle all participants to a lien on the company's assets, meaning that the claims of the class action plaintiffs would be paid before any other court awarded damages. Sulzer will seek preliminary approval of the settlement today from United States District Judge Kathleen M. O'Malley in Cleveland. Sulzer also plans to ask the Judge to put a hold on all other pending cases against the company. Attorneys representing other plaintiffs are vehemently opposed to the settlement offer, believing that injured patients will not receive adequate compensation under the proposal. Sulzer's response: "If they (some of the victims) went to court they'd average five-hundred grand or more. Is it adequate? No. Is it fair? Yes."

The proposed settlement will award $97,500 plus medical expenses to those patients who have undergone two or more replacement surgeries. Patients who undergo one surgery will receive $57,500 plus medical costs, and those patients who do not need additional surgery would receive $2,750. Patients would receive payments in cash and Sulzer Medica stock.

To date, 2,353 patients have undergone revision surgery to replace their defective Sulzer hips. The company expects a total of 4,000 replacement surgeries. Some analysts worry that litigation will send Sulzer Medica into bankruptcy.