Actual liability doesn’t matter as the lawyers get rich as usual.

By The Editorial Board, Wall Street Journal

This being America, the lawsuit capital of the world, it was probably inevitable that businesses would eventually settle the crush of opioid suits as a ransom to put the issue behind them. On Wednesday state Attorneys General trumpeted a rich opioid settlement with drug distributors and Johnson & Johnson, and there will surely be more.

Thousands of lawsuits have been filed around the country that seek to hold drug manufacturers, distributors and retailers liable for the opioid epidemic. Politicians and plaintiff attorneys claim the companies hooked hundreds of thousands of Americans on opioids with deceptive marketing and negligent dispensing practices to boost their bottom line.

The main problem with this argument is that opioids such as oxycodone require a doctor’s prescription. Thousands of doctors would have to have been complicit in the conspiracy. Ditto the Drug Enforcement Administration, which is supposed to monitor and control opioid shipments by distributors to pharmacies.

Opioid prescriptions have been declining since 2012, and the vast majority of overdose deaths are now from fentanyl sold on the street, often laced with other drugs. The Centers for Disease Control and Prevention reported last week that opioid deaths increased by nearly 40% last year to 69,710 in 2020, though only 13,637 were from prescription painkillers.

But actual legal liability doesn’t count for much when the U.S. mass tort industry gets rolling. Businesses settle because they know they risk getting slammed with enormous jury verdicts if they go to trial.

So three distributors— AmerisourceBergen Corp. , Cardinal Health and McKesson —and drug maker J&J agreed to pay states and municipalities $26 billion to drop their suits. About $2.5 billion will go to pay legal costs including the plaintiff attorneys the AGs hired to help bring the suits. They can upgrade their luxury yachts.

AGs are hoping the settlement will prod manufacturers such as Teva and Endo and retailers including Walmart, Walgreens and CVS to settle lawsuits so they can wave around the payouts when they campaign for re-election or for Governor.

Businesses can’t print cash, so where do politicians think the money for these payoffs will come from? The answer is customers in higher prices and workers in lower wages. Insurers might cover some of the tab, but businesses are having to pay more for insurance as litigation risk grows, especially in the pharmaceutical industry. Insurers have coined a term for the ballooning costs from class-action lawsuits, expansive theories of liability, and mammoth jury awards: Social inflation.

The opioid settlement is another example in a growing list of lawsuits that redistribute income from the larger society to rich plaintiff attorneys, who then help politicians with their campaign contributions, who then rehire the lawyers to help with more mass tort claims. Alas, it’s the American way.

By Daniel Fisher

OKLAHOMA CITY (Legal Newsline) – Johnson & Johnson urged the Oklahoma Supreme Court to reverse a landmark $465 million verdict in the state’s opioid lawsuit, saying no company will be safe from public nuisance claims if the ruling stands.

The decision last year by Cleveland County Judge Thad Balkman held J&J liable for the state’s entire opioid crisis, even though the company’s products represented less than 1% of the Oklahoma opioid market and the state never presented promised evidence that J&J’s marketing deceived physicians into prescribing painkillers inappropriately.

If allowed to stand, the verdict would allow government lawyers to sue virtually any company selling a legal product that is capable of causing harm, including alcohol, automobiles and food, J&J said.

“An avalanche of similar lawsuits making end-runs around traditional tort rules would become viable in Oklahoma,” the company said in a 50-page brief filed late last week. “No commercial activity – no matter how many decades distant, and no matter how uncontroversial at the time – would be safe from Oklahoma’s new public-nuisance regime.”

Johnson & Johnson has the support of a number of organizations including the U.S. Chamber of Commerce, the American Enterprise Institute and the National Association of Manufacturers.

Oklahoma was the first state to go to trial against the opioid industry in a wave of public-nuisance litigation against companies that manufactured and sold prescription narcotics. The state’s Republican Attorney General Mike Hunter hired private lawyers – including major contributors to his political campaign – who stand to earn tens of millions in fees if the verdict is upheld, on top of the $59 million they already got for negotiating $355 million in earlier settlements with Purdue Pharma and Teva. Judge Balkman originally ordered J&J to pay $572 million but reduced the verdict to $465 million after admitting he’d made a $100 million math error.

In its filing with the Oklahoma Supreme Court, J&J asserted multiple legal arguments for overturning the decision, including the judge’s refusal to allow a jury trial to resolve the central fact questions in the case. Oklahoma law also gives defendants the right to jury trial in cases involving money damages, J&J says, but Judge Balkman decided the state’s multibillion-dollar demand was for “abatement” of the opioid crisis.

Private plaintiffs can seek money damages under Oklahoma’s nuisance law, the company said, but not the government. The government can seek injunctive relief, such as a court order prohibiting some activity, but there was no activity for J&J to cease here because it stopped marketing opioids in the state years before, J&J said.

The judge also erred by rejecting more than a century of precedent holding Oklahoma’s public nuisance statute governs the improper use of property, not how products are marketed, J&J said. The judge held J&J liable under the state’s public-nuisance statute for conducting “false, misleading and dangerous marketing campaigns,” that involved property because sales representatives worked out of their homes, traveled on state roads and visited doctors’ offices.

The state Supreme Court rejected an earlier attempt to cite nuisance law against illegal liquor advertising, however, holding in a 1909 decision that it would be “tantamount to holding that every crime was a nuisance.” The Oklahoma Supreme Court has cited that decision repeatedly since, and the legislature has reenacted the nuisance law without changing it to add the interpretation the state AG pressed against J&J, the company says.

“This radical reimagination of Oklahoma law cannot stand,” J&J said.

The judge’s interpretation also leaves public nuisance law “hopelessly vague” and potentially unconstitutional because companies would have no way of knowing in advance whether it could be applied against them for otherwise legal activities, J&J said.

Finally, J&J said the state failed to present any evidence it caused doctors to prescribe opioids improperly, leaving the case devoid of the central requirement in any lawsuit: causation. The state’s private lawyers relied on experts like Dr. Andrew Kolodny, who said the company’s marketing materials and contributions to outside pain groups stimulated excessive opioid prescriptions. But despite early promises, Oklahoma didn’t put any doctors on the stand to describe how the company’s marketing misled them into overprescribing.

“No court would allow an individual patient to recover damages with vague testimony that a pharmaceutical company’s `influence’ affected prescribing trends,” the company said.

Oklahoma has vowed to appeal Judge Balkman’s decision as well, seeking more than the one-year “abatement” the judge approved. In the meantime, the states are working on a global settlement that might make AG Hunter’s victory in this case moot.

By Daniel Fisher

CLEVELAND (Legal Newsline) – The judge overseeing federal multidistrict litigation against the opioid industry has given plaintiff lawyers three weeks to provide more information to justify their request to steer 7% of any global settlement toward a “common benefit fund” for lead attorneys, which could amount to more than $3 billion based on reported settlement amounts.

The order follows recommendations of William B. Rubenstein, a Harvard Law School professor and expert on class actions, who submitted a report suggesting caution on approving any fees given the complexity of the opioid litigation and strong opposition from state attorneys general and others.

Earlier this year, AGs from 37 states urged U.S. District Judge Dan Aaron Polster, who is overseeing the federal MDL, to reject the fee request because it might endanger their own negotiations and siphon away money that should be used to address the opioid epidemic.

Rubenstein took those complaints seriously, saying in his 10-page report that the opioid MDL is unlike most multidistrict litigation, in which a committee of plaintiff lawyers negotiate a settlement that concludes all litigation at once. In those cases, the lawyers who did most of the work are entitled to take a slice of the fees and expenses as compensation, while individual plaintiffs pay the rest to their own lawyers under existing contingency fee agreements.

Here, state AGs are playing a lead role in negotiating any settlement entirely outside the MDL. Judge Polster has no jurisdiction over those cases and the AGs argue there is no power to tax them for the efforts of private attorneys. After more than two years of intense litigation in federal court, it is far from clear the private lawyers representing thousands of cities and counties can deliver a settlement that provides the global peace opioid defendants will require in exchange for their money.

“What is unique here is that it is entirely unclear at this point if an aggregate settlement is feasible, what structure it might take, which defendants will settle, what role this forum will play in it, and whether the settlement will require a `common benefit fee’ approach,” Rubenstein wrote.

Private lawyers say they have spent more than $100 million and 1.2 million hours on the opioid litigation so far. Given much of that money has likely been supplied by hedge funds and other outside funders, law firms and the entities funding them are both anxious to start seeing a return on that investment. While some states are represented by those same private lawyers, other states are handling the litigation in-house and might be more interested in injunctive relief that doesn’t yield fees, such as consent agreements to change how the opioid industry does business.

In his report submitted June 3, Rubenstein noted that the firms on the Plaintiffs Executive Committee haven’t supplied any documentation to show how much time and money they’ve spent so far. “The record would be stronger if their legal arguments were substantiated with proper supporting affidavits or documents,” he wrote.

The 7% request for fees and costs is high based on research Rubenstein cited in his report. His study of 35 fee assessments found a median of 6%, but that doesn’t fully reflect the fact common-benefit fees tend to fall with the size of the settlement. Plaintiff lawyers should provide more information on how the fee should be adjusted for the size of a settlement as well as the additional fees lead lawyers and others will earn under their contingency fee agreements. Most lawyers representing cities and counties have negotiated contracts paying them 20-30% of any money recovered.

The professor offered several more recommendations, all of which Judge Polster adopted in his order. They include briefing on the following questions:

-How likely is it a global settlement will include specific funds to pay private attorneys’ fees, so no common benefit fund order is needed. Can the court wait to find out?;

-How likely is it plaintiffs and defendants in a round of bellwether cases scheduled for trial later this year will agree on a common benefit contribution? If it’s unlikely, explain the obstacles and how they might be resolved; and

-How likely is it the lead plaintiff lawyers can negotiate an agreement with state court litigants operating outside the reach of the MDL judge? If they can’t reach agreement, identify the obstacles and explain whether Judge Polster can order a lien on state-court proceeds anyway.

Judge Polster gave the lawyers 21 days to supply additional briefs answering Rubenstein’s questions.

By David Yates

SAN ANTONIO – Bexar County, which hopes to reap $1 billion in damages from its opioid lawsuit, would rather take its chances in court than receive around $7 million from a statewide settlement.

On May 28, Attorney General Ken Paxton announced a coordinated bipartisan agreement with county leaders from around the state regarding the way Texas will direct future settlement money to people most impacted from the opioid epidemic.

Texas is one of the lead states currently negotiating financial settlements with the nation’s largest companies in the opioid supply chain.

The state is expected to receive around $1.5 billion through the national settlement.

On June 2, the Bexar County Commissioners Court declined to endorse Paxton’s proposed settlement.

Bexar County is a possible target for a bellwether trial.

The county is represented in part by San Antonio lawyers Mikal Watts and Martin Phipps.

By Amanda Bronstad

Texas Attorney General Ken Paxton announced a deal Thursday that would help distribute up to $1.5 billion to the state and its cities and counties from a potential nationwide opioid settlement.

The May 13 agreement, which also involved six law firms representing Texas and its cities and counties in their separate opioid lawsuits, attempts to resolve some of the key sticking points in bringing a myriad assortment of governments into the negotiations over a nationwide opioid settlement, estimated to be at least $19.2 billion.

Although a nationwide settlement is not a done deal, “we are very close,” said Mikal Watts, of Watts Guerra, whose firm represented more than a dozen counties in the Texas agreement.

“This is an important precondition for that to be able to happen,” he said. “Today’s announcement is a precursor to an agreement between the attorneys general, the state court litigants and the federal MDL, all of which must agree before the defendants will pay tens of billions of dollars that they are prepared to pay.”

Thursday’s agreement, which said it was “in preparation for settlement with opioid defendants,” comes as attorneys general from more than 20 states, and the plaintiffs’ executive committee for 2,600 cities, counties and other governments in the multidistrict litigation in federal court in Ohio, are attempting to hammer out a global deal. The negotiations have focused on the distributor defendants, AmerisourceBergen Corp., McKesson Corp. and Cardinal Health Inc., and manufacturer Johnson & Johnson.

“The opioids crisis is an ongoing epidemic that impacts countless families throughout Texas and our nation,” said Paxton on Thursday. “Families around Texas—from large urban areas to small farming and ranching communities—will benefit from this collaborative effort between my office and local leaders across our state. This agreement provides Texans in all 254 counties with desperately needed funding for education, prevention and treatment in our fight against opioid abuse.”

Under the Texas deal, 15% of a potential nationwide settlement’s share going to Texas would go to the legislature, with 15% directly to the counties and cities. A newly formed Texas Opioid Council, using the metrics of Christopher Ruhm, professor of public policy and economics at the University of Virginia, would distribute 70% of the funds.

Law firms representing Texas cities and counties agreed to accept contingency fees of less than 9.4%, a sharp reduction from the 35% promised under many of their outside counsel contracts. They plan to seek their fees from the MDL’s common benefit fund first, followed by funds that go to their clients and the state abatement fund.

“The idea is Texas lawyers have done a ton of work, so we intend to go try to get compensated for the work from the national common benefit fund,” Watts said.

Texas was among several states that opposed a proposed 7% holdback paid by the defendants in any possible nationwide deal that would contribute a common benefit fund for the plaintiffs’ executive committee in the MDL. They called the MDL leadership “non-transparent and uncooperative” and said such a holdback would violate a Texas statute, passed last year, requiring the attorney general to approve all contingency fees.

The agreement included San Antonio’s Watts Guerra, which, along with The Gallagher Law Firm and Fibich Leebron Copeland Briggs, represented 13 counties, including Bexar County. Don Downey PC also joined them in representing Harris County, while The Lanier Law Firm represented the city of Houston and five other counties.

Simon Greenstone Panatier represented 44 counties and, with The Lanier Law Firm, represented three others including Dallas County.

“In the aftermath of the Big Tobacco settlement there was a general sense among the individual cities and counties that the funds were not allocated equitably—that not enough money got to the right places. This agreement will help prevent that from happening with respect to opioid-related settlement monies,” said Jeffrey Simon, of Simon Greenstone. “Having an allocation plan in place allows us to now focus squarely on the common goal of holding opioid manufacturers and distributors accountable for their misconduct in creating and fueling this scourge that has cost so many lives and too much taxpayer money throughout Texas.”

Thursday’s agreement also attempted to resolve disputes among the various counties, many of which are political opposites, and involved the participation of several local judges.

“In making this agreement with the state, we set aside all political differences of opinion to do what’s best for the citizens of Dallas County, and we are proud to share this important news,” said Dallas County Judge Clay Jenkins.

By John Breslin

CLEVELAND (Legal Newsline) – Drug companies, state attorneys general and some local government entities are vigorously opposing an attempt by certain lawyers to secure a significant percentage of a probable multibillion-dollar global settlement stemming from nationwide opioid litigation.

Johnson and Johnson, along with other defendants, including distributor McKesson Corp and drugmaker Teva Pharmaceutical Industries, this week asked a federal court in Ohio to deny the request for a “common benefit” levy of 7% on a global settlement that would be steered to plaintiffs lawyers.

The Plaintiffs’ Executive Committee (PEC) in charge of litigation in a federal court in Ohio is asking for the levy on all proceeds from the settlement, which could amount to $3.3 billion of the $48 billion widely cited as a possible total amount.

Attorneys general and local government entities that have opted out of the “negotiation class” being represented by the PEC in multi district litigation (MDL) also oppose the proposed fee. The MDL is before U.S. District Court of the Northern District of Ohio and its presiding Judge Dan Aaron Polster.

Johnson & Johnson, other drug companies and distributors face thousands of claims from states, counties, and local municipalities. The defendants are accused of helping to start and drive an opioid crisis that has caused an estimated 400,000 deaths since the turn of the century.

In a memorandum opposing the motion, the defendants described the proposed order as “a transparent effort by a handful of lawyers to grab settlement funds that are not before this Court.” The demand is “staggering” and would give more money to the attorneys than any city or county, and many states, the defendants said.

They further argued, “The proposal does not allocate fees among plaintiffs, as a common benefit fund is meant to do, but instead seeks to impose an impermissible obligation on Defendants.

“Indeed, the PEC’s proposal would divert billions of settlement dollars that should be used to address the opioid crisis.”

Approval of the PEC’s proposal would only complicate settlement talks, the defendants argue, as it would create additional issues.

“There are hundreds of opioid-related cases pending in state courts, including many of those brought by State Attorneys General,” the defendants wrote. “In overseeing those cases, state courts may be called upon to enter judgment regarding fees.

“Moreover, the global settlement structure that has been the subject of negotiations would be embodied in a consent judgment in the courts of each settling State, regardless of whether that State has brought suit.  Entry of the Proposed Order would interfere with those state-court judgments in violation of basic principles of comity and federalism.”

Many local government entities are part of the MDL, but large numbers have opted out of the “negotiation class” being represented by the PEC. The proposed order states the levy is due from all entities “who have relied upon, used, accepted, or have had access to MDL generated work product.”

Those that opted out are generally cities and counties that tried to pursue the claims in state, were removed to federal jurisdiction by the defendants, then wrapped up in the Ohio MDL. Others, like in New York, want to hold their own state-court trials to recover more than what would have been available from being a part of the negotiation class.

“Here we have political subdivisions vigorously resisting federal jurisdiction over their pure state law claims, opting out of the Negotiation Class, relying on previous orders assuring of non-interference, and endeavoring to constructively address the havoc defendants have wrought in their respective communities,” the opt-outs stated in the memo opposing the motion for the levy.

“The Motion conveniently ignores all of the foregoing – behaving as if the PEC work represents the universe of what is driving resolution forward,” it added.

“The motion contemplates a 7% assessment against political subdivisions over whom this Honorable Court has no jurisdiction whatsoever.”

Attorneys general and other MDL plaintiffs are also resisting the 7% fee.

By Karen Kidd

CHICAGO (Legal Newsline) – City, county and tribal governments’ strategy of hiring private lawyers in opioid and other litigation is causing a “misalignment of the values” between those entities and the traditional primacy of state attorneys general, a government litigation expert says.

The strategy of governmental subdivisions hiring their own attorneys in litigation already pursued by state attorneys general on behalf of entire states – including those governmental subdivisions – was born out of tobacco and banking settlements, Paul W. Connell, a partner in ReedSmith’s Chicago and Washington, D.C. offices, told Legal Newsline.

“The spawn of litigation brought by plaintiffs law firms representing counties, cities and tribes in the opioid litigation is really the single greatest threat to attorneys general that we have seen in this country,” Connell said. “By alleging the same causes of action and the same claims that are being brought by attorneys general on behalf of entire states, we’re now seeing something close to 35,000 lawsuits all across the country in different state and federal courts.”

The strategy adopted by governmental subdivisions within states has dramatically complicated resolution of the nation’s opioid crisis and the litigation itself “to an incalculable degree,” Connell said. It’s a battle waged by Ohio Attorney General Dave Yost, who wanted to halt the bellwether trials of two counties in the state because he felt they had usurped his authority as the state’s chief legal officer.

Yost said the cities’ and counties’ lawsuits threaten “Ohio’s sovereign interest in vindicating its citizens’ rights – all of its citizens’ rights – against the various defendants who fueled the opioid epidemic in Ohio.”

“The scheduled bellwether trial undermines all this because it lets political subdivisions act as representatives of the people’s interests—and thereby appropriate remedies that belong to the State,” Yost said.

Connell noted that these issues have pitted AGs against their local units of government.

“Even more importantly, for general counsels at corporations who are trying to advise their CEOs and boards of directors, it has made it impossible for them to opine – with certainty – that if there is going to be a settlement, whether everything actually will be settled or will this just mean more and more litigation, over and over again,” he said.

Connell is a trial lawyer and strategic adviser specializing in government, high-stakes litigation, investigations, controversies and regulatory matters.

ReedSmith represents companies active in the opioid litigation but Connell is walled off from those cases due to his prior employment as a deputy attorney general in Wisconsin.

Diluting the primacy of state attorneys general and complicating litigation over the nation’s opioid crisis are part of the unintended consequences of counties, cities and tribes hiring plaintiffs attorneys to represent them. The intent was to make sure those political subdivisions got their fare of any settlement because they didn’t in big-money litigation in the past, Connell said.

“The starting point for discussion about the spawn of litigation by localities and the degradation of the authority of the attorneys general back really goes back to the tobacco settlements of the 1990s, where there was billions of dollars over time as paid by the big tobacco manufactures to the states,” Connell said. “Very little of that money actually made it down to local units of government.”

In 1998, attorneys general for 46 states and the District of Columbia reached a Master Settlement Agreement in which four major tobacco companies in the U.S. agreed to, among other things, pay the states billions to cover smoking-related health care costs.

Very little of that money trickled down to cities, counties and tribes. Instead, states have used the money as part of their general treasury to fill budget holes and support various programs.

Cities, counties and tribal governments were skunked again when banks and the mortgage servicing industry paid out billions in settlements following litigation file by state attorneys general over the near banking collapse that set off the Great Recession.

“All that money did not make it down to cities, counties and affected homeowners,” Connell said. “So when the heroin crisis and the opioid crises started and the states’ attorneys general started their investigation and to bring some lawsuits, it was very clear that cities, counties and tribes didn’t want to be left out in the cold again.”

Those governmental subdivisions hired their own attorneys from the private sector, who in turn filed lawsuits with allegations against opioid producers essentially identical to allegations in litigation being pursued by state attorneys general.

“That was done because the localities were the ones who actually bore the direct impact of the opioid crisis, from higher expenses for paramedics, for fire, for police, for basic services, impacts on local jails and court systems,” Connell said. “All those entities bore the cost of what’s been going on, on the ground so to speak. Because of that, they want to make sure when the time came for settlement dollars, from drug manufacturers and other responsible parties, that they actually got their share this time.”

The strategy received little pushback from state attorneys general.

“The state attorneys general, right off the bat when it came to the opioid problem, they didn’t assert their authority to speak for the whole state when it came to litigation,” he said. “They ceded some territory to plaintiff’s lawyers, who now filled the void.”

Which has led to what Connell referred to as “the misalignment of the values.”

“What I mean by that is state attorneys general are elected,” he said. “They’re elected and they swear an oath to the constitution. Plaintiffs lawyers who represent a client, whether that’s a city, village or a tribe, take no such oath. And so you have somebody who’s supposed to be representing the state as a whole in litigation, to do the right thing on behalf of all the citizens, that value is pitted against a plaintiff’s lawyer whose job it is to do the best they can for their one client. But that one client might just be one county in the state.”

The strategy also is upsetting the traditional method by which states would join in major litigation, Connell said.

“It used to be the case that state attorneys general would work with other state attorneys general, work across state lines, and big national problems would be resolved by the 50 state attorneys general as a whole,” he said. “Now you have the state attorneys general trying to work together while layered on top of that, all these plaintiffs lawyers are representing subdivisions of state government, meaning cities, localities, tribes. It is making it impossible for any sort of deal to be struck.”

It isn’t only opioid litigation that governmental subdivisions and their plaintiff’s attorneys are pursuing. Some of the same governmental subdivisions are also entering litigation over alleged generic drug price fixing that state attorneys general in 49 states already have joined.

Last month, 14 counties in New York sued the same defendants already being pursued in litigation by state attorneys general over generic drug price-fixing allegations. Local school districts have also begun to file vaping lawsuits.

“So what we are seeing is like a cancer, the local lawsuits are metastasizing where every state attorney general used to have primary authority and primacy over the litigation position that the states should take,” Connell said.

The strategy is causing uncertainty for businesses in the U.S., including those not being sued for anything.

“It’s a big question for general counsel at companies that are subject to regulatory scrutiny by state attorneys general,” Connell said. “CEOs should be very concerned about what they see here.

“Because if every piece of litigation is going to end up like the opioid litigation, where you have tens of thousands of lawsuits being led by not just state AGs but by plaintiffs lawyers across the country, it is going to become more and more difficult for the business community to have any regulatory certainty that they need and that they seek.”

By Daniel Fisher

CLEVELAND (Legal Newsline) – More than 500 cities and counties opted out of the unprecedented “negotiation class” proposed by plaintiff lawyers to settle sprawling opioid litigation, leaving 98% of the 34,458 U.S. cities and counties technically still in the class.

The opt-outs could make it difficult for defendant companies to use the mechanism to negotiate a global settlement, however. They reportedly include Harris County, Texas, home to more than 4.6 million residents; a number of counties in West Virginia with potentially substantial claims against the industry; and populous counties in New York that are scheduled to begin trial on their claims in state court at the end of January.

The defections, while small as a percentage of the overall proposed class, could represent tens of billions of dollars in potential liability that defendants must factor into their calculations while deciding whether to negotiate with lawyers representing the remaining class.

The deadline for opting out of the class was Nov. 22. Plaintiff lawyers released details of the response in a filing Monday with U.S. District Judge Dan Polster in Ohio, who is overseeing multidistrict opioid litigation in federal court. Some 2,300 cities and counties have lawsuits pending in federal court, while nearly every state and hundreds of municipalities have similar cases in state courts around the country.

More than half the states objected to the “negotiation class” proposal, saying it would interfere with their own efforts to negotiate a global settlement with the opioid industry including new controls on how the drugs are distributed and prescribed. The U.S. Court of Appeals for the Sixth Circuit has agreed to hear a challenge to the mechanism, which has never been used before and conflicts with existing class action law requiring class members to receive a second opportunity to opt out after they are notified of settlement terms.

Under the plan approved by Judge Polster, municipalities had to decide by Nov. 22 whether to remain in the class, before any money was on the table.

The plaintiff lawyers who support the negotiation class are working under contingent-fee contracts that give them a strong financial incentive to seek money damages, since they typically can’t earn fees for non-cash injunctive relief. They stand to earn as much as 25% of any settlement they negotiate, under proposed terms that would steer the majority of fees to the leaders of the plaintiffs’ team under “common benefit” rules typically imposed in MDLs to ensure all plaintiffs pay their share of collective legal expenses.

In the court filing, the lawyers don’t identify which cities and counties opted out. They say class notices were mailed out to every city and county in the country and the website they set up to inform class members received some 15,000 hits, or less than half the proposed class. They described the class notice program as “a success” that “has provided more than adequate notice.”

“The response to the Class Notice program shows that class members of all sizes (from small towns to major metropolitan areas) throughout the country received and thoughtfully considered” the notices, which were mailed and emailed.

Critics of the proposal say the opt-out mechanism ensures high participation since many towns and cities either failed to understand the stakes or couldn’t be bothered to respond since there is no money at stake right now. Multiple U.S. Supreme Court decisions have established protections for class members, most importantly the opportunity to opt out of a settlement if the financial terms are inadequate.

Under this proposal, any settlement must be approved by 75% of class members who cast a vote, with the vote measured several different ways. Class members can also file legal objections to an agreement, but after Nov. 22, if the plan is upheld by the Sixth Circuit, they have lost the right to reject a settlement and sue on their own.

In a separate filing this week filed in advance of a hearing today, plaintiffs and lawyers for pharmacy defendants said they were far apart on procedures for a bellwether trial scheduled for next year over claims by Cuyahoga and Summit counties in Ohio. The counties settled their claims against drug manufacturers and distributors on the eve of trial this year for $330 million, more than $80 million of which flowed to their lawyers at Napoli Shkrolnik and other firms.

Pharmacy defendants say they can’t defend themselves without information about specific prescriptions the plaintiffs claim they shouldn’t have filled. They want to depose witnesses from the Drug Enforcement Administration, the Ohio Board of Medicine, hospitals, doctors and even patients to gather evidence on whether prescriptions were appropriate.

Plaintiff lawyers say none of that is necessary as they will present only “aggregate proof” at trial. They say they can prove the pharmacies are responsible for causing the crisis of widespread opioid abuse, including the use of illegal heroin and fentanyl, with testimony from experts who say an excess number of pills were distributed in the two counties compared to what they believe is normal prescribing behavior.

In testimony prepared for the earlier trials against distributors and manufacturers, one expert opined that more than half of the pills distributed in the Ohio counties represented “suspicious orders” that should have been blocked.

By David Yates

HOUSTON – Harris County Attorney Vince Ryan has won Commissioners Court approval to opt out of a group that includes all cities and counties in the U.S. that have been impacted by the opioid crisis.

The group is a first-of-its-kind “negotiating class,” established to promote settlements in cases brought by 2,800 local governments nationwide against opioid manufacturers, distributors and sellers.

Ryan believes that the county’s being a part of the negotiation class is not in the best interests of the residents of Harris County.

In December 2017, Ryan filed suit against drug manufacturers and distributors, doctors and a pharmacist for their roles in promoting the opioid epidemic that has cost Harris County residents their health and even their lives and cost taxpayers millions to pay for health care and law enforcement.

In September, U.S. District Court Judge Dan Polster of Cleveland, Ohio, who is overseeing the opioid cases, established a plan to allow more than 34,000 local governments across the U.S. to enter into a universal settlement with some of the largest companies in the nation, including Cardinal Health.

Court-appointed lawyers would attempt to reach settlements with defendants on behalf of all local cities and counties in the nation. The plan required settlement class members to decide whether to opt out by Nov. 22 before any settlement had been negotiated.

After Nov. 22, local cities and counties that had not opted out would be bound by the settlement even if they disagreed with its terms. Settlements would be divided among the settlement class counties and cities based on a pre-determined formula.

“Harris County should not be bound by a settlement negotiated by others,” said Ryan. “The damages suffered by Harris County and its residents were incurred in Harris County. We believe that our judge, our county, our juries in Harris County have the right to decide the fate of this lawsuit and should be the ones to do so.”

Ryan says that although Harris County is the third-largest county in the country, it was not included among the 49 counties designated as “class representatives,” and neither were its attorneys chosen to negotiate with the defendants.

Despite this, Harris County would be bound by any settlement approved by a super majority of the parties if it had remained as part of the group.

“Participating as a class member in the negotiated class settlement efforts would preempt the discretion and authority of local elected officials,” Ryan said. “I fully expect the case to be tried in Harris County.”

By Legal Newsline

A proposed “negotiation class” to settle all opioid litigation by U.S. cities and counties could be in deep trouble, as the U.S. Court of Appeals for the Sixth Circuit considers an appeal of the order creating the controversial class and lawyers in two states with big claims urge their clients to opt out before a Nov. 22 deadline.

Private attorneys representing counties in West Virginia and New York are advising their clients to steer clear of the negotiating class and press their claims in state court instead. West Virginia is considered Ground Zero for the opioid crisis, with the nation’s highest overdose death rate per capita. A New York judge, meanwhile, has set an aggressive Jan. 20 trial date for lawsuits by the state and two counties, exposing the opioid industry to tens of billions of dollars in potential liability and inspiring other municipal plaintiffs in New York to bypass national negotiations in favor of consolidated state-court litigation in Suffolk County.

“We believe the firm trial date will drive a quicker resolution at higher values,” said Paul Napoli, of counsel to Napoli Shkolnik, which represents Nassau County and other municipalities around the state as well as numerous plaintiffs in national multidistrict litigation concentrated in federal court in Ohio.

With a bellwether trial on the question of industry liability scheduled to begin in less than three months, Napoli said in an e-mailed comment, “the New York governmental entities are in a unique position to retain the ability to vote on any settlement proposed and not be bound by any national agreement required by participation the Negotiation Class.”

In West Virginia, lawyers who managed to get their cases remanded from the federal MDL back to state court say the allocation formula laid out in the negotiation class doesn’t pay enough. Harrison County, for example, stands to gain $130,000 per $1 billion in settlement – before legal fees and before it splits the proceeds with cities within the county.

“It’s just wholly inadequate,” said Sam Madia, outside counsel for Harrison and several other West Virginia counties. “We think when we get the defendants and put their feet to the fire with a West Virginia trial, they will sit down and negotiate for significant money.”

Clayton Fitzsimmons, whose firm represents 13 counties in West Virginia, also said “we feel it’s in our clients’ best interest to opt out of the national negotiation class.”

The defections undermine the premise behind the controversial negotiation class, which is to give defendant companies a single group with which to negotiate a global settlement. Deep-pocketed companies like Johnson & Johnson, McKesson and Walmart argue they face the least liability based on their market share and conventional theories of tort law, yet are being asked to pay the most.

Many of the lawyers at the top of the plaintiffs’ executive committee in the federal opioid MDL, such as Joe Rice of Motley Rice and the Simmons Law Firm, came to prominence as asbestos lawyers. They proposed the negotiation class to solve a problem largely of their own making. Instead of recruiting state attorneys general as clients, as they did with tobacco litigation in the 1990s, private lawyers fanned out around the country recruiting thousands of cities and counties to sue the opioid industry.

They said this was to prevent what happened with tobacco, where most of the $260 billion, multiyear settlement has flowed straight into state treasuries – after $14 billion in fees to private lawyers – instead of being deployed to treat smoking-related health problems. But having recruited more than 2,000 municipal plaintiffs, the lawyers still had the problem of assuring opioid defendants they wouldn’t be sued by the remaining 28,000 or so U.S. cities and counties that haven’t joined the litigation so far.

Wary of the experience with asbestos litigation, where mass settlements simply inspired plaintiff lawyers to file more claims against an ever-broader collection of companies, opioid defendants are unlikely to enter into serious talks with the negotiation class if they think they will face huge and unpredictable liability in state courts around the country.

The proposed solution was the negotiation class, which would include every city and county unless they opt out. The unprecedented class was approved by U.S. District Judge Dan Polster in September over the objections of many state AGs and distributor defendants, who say it violates federal law and constitutional protections laid out in multiple U.S. Supreme Court decisions. Under existing class action law, for example, class members have the right to opt out of a settlement if they disagree with its financial terms.

Under the negotiation class approved by Judge Polster, all 30,000 cities and counties must decide on the front end whether to remain in the class, before there is any money on the table. Judge Polster has said it is unlikely he would allow a second opt-out period after a settlement is negotiated, in clear conflict with Supreme Court precedent.

“In the normal course you’d sit down with the client and say `here’s how much money’s on the table, here’s how much you get.’ There’s no money here,” said Madia. “We didn’t like anything about it, we didn’t think it was fair, and that’s why our unwavering position is to stay out.”

The two attorneys at the head of the negotiation committee, Jayne Conroy and Chris Seeger, declined comment. The Sixth Circuit has agreed to hear an appeal of the legal objections to the judge’s order, saying in a Nov. 8 order that the questions presented are “novel and important” and could have implications for future class actions.

In a hearing last week, even Judge Polster expressed something close to despair over bringing the litigation to a close. With state AGs, who aren’t subject to his jurisdiction; cities and counties that may or may not be included in the federal MDL; Indian tribes; labor unions; and other plaintiffs in pitched legal battle against distributors, manufacturers and pharmacies, the litigation he once hoped to end last year has no end in sight.

“This model isn’t sustainable,” Judge Polster told lawyers for the plaintiffs and defendants during a Nov. 7 status conference. “If I want to use a biblical model, I’d have to be Methuselah and live thousands of years, and do this one year at a time – that being facetious.”