Latest Wave Of State Opioid Lawsuits Shows Diverging Strategies And Lawyer Pay Scales
By: Daniel Fisher
The latest wave of state lawsuits over the opioid crisis illustrates sharp differences emerging in how governments litigate these cases, both in whom they choose to sue and whether private lawyers stand to get a piece of the action.
Five of the six states announcing lawsuits earlier this month focused on a single defendant, OxyContin manufacturer Purdue Pharma. They also decided to prosecute the cases with their own attorneys, rather than farming the work out to private lawyers working on contingency.
The sixth state, Florida, added Endo Pharmaceuticals, Johnson & Johnson and the three biggest opioid distributors to its case and hired four outside law firms. But they’re working under a contract that pays them no more than $50 million, far less than the open-ended terms that private lawyers have obtained from most government clients in opioid litigation.
The differing approaches and fee schedules illustrate the complex nature of these cases, many of which are concentrated in federal court in Ohio but are also scattered in state courthouses around the country. Some states are focusing on opioid manufacturers because they believe it will be relatively easy to prove their cases under state deceptive trade practices laws.
Others are taking a shotgun approach to the industry, suing everyone involved along the chain of production and distribution, from manufacturers to retail pharmacies and prescribing physicians.
The involvement of private attorneys working under different contract terms adds yet another layer of complexity and potential conflicts. Where state attorneys general might press for injunctive relief, under which courts enforce new standards of behavior on the industry, private attorneys only get paid if they win monetary damages.
That difference in emphasis is already spilling out into the open as states fight with municipal plaintiffs over litigation strategy as well as who will reap the spoils if they win or, as is more likely, negotiate a multibillion-dollar settlement. Tennessee’s AG briefly sought to take control of lawsuits by a number of cities and counties, and the Arkansas AG sought to prevent a local district attorney from suing on behalf of the entire state, a dispute that is still unresolved.
The latest states to go it alone without private lawyers are Nevada, North Carolina, North Dakota, Tennessee and Texas. All but North Carolina have Republican AGs, and all named Purdue as sole defendant. Most of these states participated in a $19 million settlement with Purdue in 2007 that included a consent agreement with strict requirements to report suspicious transactions and cease deceptive and off-label marketing practices. The existence of that agreement makes it easier for the states to accuse Purdue of failing to live up to its own commitments.
Florida took the wider approach by suing multiple manufacturers as well as distributors including Amerisource Bergen, Cardinal Health and McKesson. Florida AG Pam Bondi, a Republican, also chose to hire outside attorneys though she was required under state law to use a bidding process with a $50 million cap on total fees. If the state gets into a dispute with its lawyers over fees, an arbitrator will decide with a cap of $50 million or 3.4% of any award.
The fee structure contrasts sharply with the standard contract most private lawyers have negotiated with municipal clients, giving them 25-30% of any award.
Florida was the first of several states to pass fee caps and transparency rules in the wake of the 1998 tobacco settlement, in which politically connected lawyers working under no-bid contracts earned $14 billion in fees. Ohio, another state plaintiff, has a $50 million cap, as do West Virginia and Arkansas. Other states have sliding-scale rates, typically 10% of the first $10 million and lower percentages after that with no limit.
Several law firms with a leading role in the opioid litigation reportedly refused to bid for the Florida work because of its cap, including Morgan and Morgan, which sits on the plaintiffs’ steering committee in the Ohio multidistrict litigation.
While the latest batch of states may add additional defendants later, their strategy appears to more focused than the ones adopted by cities, counties, hospital districts and other plaintiffs represented by private lawyers. Those entities appear to be refining their legal theory to claims the entire industry engaged in a conspiracy to market and distribute addictive drugs with the knowledge they could cause widespread harm.
In a hearing over discovery procedures in Ohio earlier this month, for example, lawyers for the plaintiffs and defendants jousted over whether witnesses could be shown confidential documents from other companies. Plaintiffs want to do this to generate evidence of industry cooperation and conspiracy, while defendants say it is unfair to expose their proprietary information to witnesses from competing companies unless there is some reason to believe they saw the document before or participated in the meeting it references.
State plaintiffs, unlike cities and towns, are not required to participate in the federal MDL process and Judge Dan Aaron Polster, who is overseeing the proceedings in Ohio, has no authority over them. They are betting they can achieve better results with focused lawsuits in state court, where many states already have won large settlements from other drug manufacturers with deceptive marketing claims.
This difference in strategy was exposed last month in Arkansas when Republican AG Leslie Rutledge filed an emergency petition with the Arkansas Supreme Court to prevent Scott Ellington, a district attorney, from suing a number of opioid defendants in the name of an association of county governments as well as the state.
In that filing, Rutledge accused Ellington of associating “with private, out-of-state attorneys” who stood to earn fees exceeding the state’s $50 million cap, money “that would otherwise go to the State to address the opioid epidemic.”
The Arkansas Supreme Court denied the petition and Ellington’s suit is still pending. Rutledge subsequently sued Purdue, Endo Pharmaceuticals and Johnson & Johnson herself, hiring former Mississippi AG Mike Moore and Seattle lawyers Hagens Berman, in seeming contradiction with her earlier criticism of similar litigation against the oil industry.
Rutledge declined comment, but the state’s lawsuit, like those in other states or the Arkansas counties, concentrates on alleged violations of state consumer protection laws by the manufacturers. Adding distributors, pharmacies and physicians could complicate such a case by presenting jurors with additional parties who allegedly contributed to the opioid crisis.