CONCORD, N.H. (Legal Newsline) - A group of pharmaceutical companies have asked a New Hampshire state court judge to bar Attorney General Joseph Foster from using prominent plaintiffs law firm Cohen Milstein Sellers & Toll PLLC, saying the arrangement creates an “obvious problem.”
In November, five drug makers -- Actavis Pharma Inc., Endo Pharmaceuticals Inc., Janssen Pharmaceuticals Inc., Purdue Pharma LP and Teva Pharmaceuticals USA Inc. -- filed motions in Merrimack County Superior Court, asking Judge Diane Nicolosi to enter a preliminary and permanent injunction barring the retention and “continued involvement” of Cohen Milstein, and a protective order barring enforcement of subpoenas issued by Foster’s office.
The motions followed Foster’s announcement in September that his office launched an investigation into how several drug makers have marketed prescription opioids in the state.
Foster said he retained Cohen Milstein, noting it has “substantial experience in this area,” to assist in the investigation.
According to a four-page retainer agreement signed by Cohen Milstein partner Linda Singer -- a former District of Columbia Attorney General -- the firm stands to earn 27 percent of the net recovery, exclusive of the costs of litigation.
The pharmaceutical companies argue in their Nov. 30 motion for preliminary and permanent injunctive relief that Foster’s retention of the firm violates state statutes, common law, rules of professional conduct, as well as the companies’ due process rights under the state and U.S. constitutions.
Public policy strongly disfavors -- and judicial decisions and statutes prohibit -- prosecutors with a pecuniary interest from participating in investigations and litigation, they argue in the motion.
“If such an arrangement is permitted, the practice will obliterate the distinction between public enforcement actions and private lawsuits,” the drug makers wrote in a 39-page memorandum accompanying the motion.
“Cohen Milstein will make a substantial investment of costs, expenses, and time in this investigation. It is not working pro bono, or on a fixed non-refundable fee, or on an hourly basis, without regard to the outcome. The only way it recoups its investment and gets paid at all is if it achieves a monetary recovery. Cohen Milstein’s ‘private interest’ could not be more plain.”
The companies continued, “It is beyond serious question that the 27 percent contingent fee and the recoupment of the law firm’s investment gives Cohen Milstein a ‘private interest’ with the potential to influence its work on State business. No amount of ‘supervision’ can change that fact. The private interest exists, and once it does, ‘participation’ in the public matter must cease. As an ‘executive branch official,’ Cohen Milstein can no more have a private financial interest in the matter than any other attorney working on the matter for the OAG.”
According to the Sept. 25 retainer agreement, Foster’s office will appear as lead counsel in all pleadings and shall retain control over any litigation decisions and settlement of the State’s claims.
“OAG will maintain control of the investigation and will make all key decisions, including whether and how to proceed with litigation, which claims to advance and what relief to seek,” the agreement states.
“Cohen Milstein will provide regular reports to OAG on the investigation, including summaries of documents and interviews.”
In a recent email to Legal Newsline, which included a copy of the retainer agreement, Senior Assistant Attorney General James Boffetti said he is serving as the lead attorney on the case.
“This office remains completely in control of this investigation and is making all decisions regarding the case,” Boffetti wrote.
The drug makers contend that any notion that supervision or control might “cure” the conflict of interest “would lead to absurd results.”
They argue that it is “unavoidable” that the firm, in its work for other clients, will disclose or use confidential information acquired through their work in New Hampshire.
At least two lawsuits have been filed against the pharmaceutical companies -- one by the City of Chicago and another by the California counties of Orange and Santa Clara.
In 2014, the city sued the drug makers in an Illinois state court. The lawsuit, later removed to Chicago’s federal court, accuses the companies of overstating the benefits of their drugs in a way that increased addiction and the city’s prescription and health care-related costs.
In the California lawsuit, also filed in 2014, the counties argue that the pharmaceutical companies knew that opioids were ineffective, addictive and unsafe for long-term use but persuaded doctors to prescribe them in order to expand the market and boost their profits.
Cohen Milstein, a firm known for its class action lawsuits and that has been hired by a growing number of state attorneys general in recent years, including some of those to whom it donated, is helping to represent Chicago and the two California counties.
“It would be impossible for Cohen Milstein lawyers who are working on this matter to divide their minds and not use confidential information disclosed here in connection with litigating nearly identical claims in the Chicago and California cases,” the drug makers wrote.
The pharmaceutical companies cautioned the state court against allowing Foster to proceed with “self-interested contingent fee counsel.”
“Allowing the Attorney General to proceed with Cohen Milstein under the circumstances of this case would subject Plaintiffs to irreparable harm because it would be impossible to ‘unring the bell’ and determine whether any subsequent decision to seek civil or criminal penalties, or to proceed with the litigation stemming from the investigation, was tainted by the interests of Contingent Fee Counsel,” they wrote, noting that the state legislature provided a “clear path” for the attorney general to retain outside counsel.
“With the approval of the joint legislative fiscal committee and the governor and council, the Attorney General may employ counsel, attorneys, detectives, experts, accountants and other assistants in case of reasonable necessity, and may pay them reasonable compensation, on the warrant of the governor, out of any money in the treasury not otherwise appropriated,” the drug makers wrote.
They argue the attorney general has not secured “such approval” in this case.
“Indeed, by outsourcing this investigation to Cohen Milstein without complying with RSA 7:12, I, the Attorney General proposed a potentially vast expansion of the power and breadth of the Department of Justice without any corresponding authorization or oversight by the Legislature,” they wrote.
Simply put, the “dangers presented” by Cohen Milstein’s participation as a prosecutor in the investigation cannot be undone, the drug makers argue.
“In this case, if the State’s investigation is permitted to proceed with the involvement of Cohen Milstein -- even on a preliminary basis -- the conduct of both the investigation and any ensuing litigation will be called into question,” the companies wrote. “If Cohen Milstein’s involvement is later determined to be inappropriate, it may be impossible to determine at a later date whether that involvement influenced critical decisions in the investigation or subsequent litigation including, among others, decisions to seek civil or criminal penalties or, decisions to accept or reject settlements -- particularly those for other than monetary relief that might be in the best interests of New Hampshire residents, but not in the interest of Contingent Fee Counsel.”
In their motion for a protective order, the five drug makers note they have no problem in producing the requested documents -- but only if Cohen Milstein is removed from the investigation.
“On Aug. 3, 2015, the Office of the Attorney General (‘OAG’) issued administrative subpoenas (the ‘Subpoenas’) to Defendants in connection with a CPA (Consumer Protection Act) investigation by the State into the marketing of prescription opioids,” they explained in the 33-page memorandum accompanying their Nov. 30 motion. “Defendants informed the OAG that they are willing to produce documents to the OAG, but they object to Cohen Milstein’s involvement in this matter. Defendants requested that until the Cohen Milstein issue could be resolved, any documents produced not be shown to Cohen Milstein. The OAG refused that proposal. On Oct. 8, 2015, the State filed the Petition to Enforce.
“However, Defendants have not contested the AG’s power to issue the Subpoenas, nor have they objected to the production of appropriately responsive documents to the OAG. Instead, Defendants object to the involvement of contingent fee counsel.”
Again pointing to the contingency fee agreement, the drug makers argue that the arrangement between Foster’s office and the firm creates an “obvious problem.”
“Cohen Milstein has a huge financial stake in the outcome of the investigation,” they wrote. “The only way Cohen Milstein can recoup its investment and realize the tremendous upside of its financial arrangement with the Attorney General is if the firm ultimately recommends bringing an enforcement action, and that action results in a recovery against Defendants.
“It is inconceivable that Cohen Milstein would recommend any outcome other than bringing an enforcement action.”
Given the firm’s financial stake in the investigation, the State cannot “credibly” suggest that it could be impartial or would recommend any course other than litigation, the companies contend.
“Put simply, the outcome of any investigation in which Cohen Milstein is involved is preordained,” they wrote. “Any other result would place Cohen Milstein at odds with other clients on behalf of whom it has already sued these Defendants, and would require the firm to walk away from its substantial investment.”
The drug makers noted that no New Hampshire court has ever approved the attorney general’s delegation of the investigation and prosecution of criminal or civil enforcement claims against private citizens -- whether individual or corporate -- to private lawyers “who are incentivized only to collect money from those targets.”
“This Court should not be the first,” they argue.
The companies are still awaiting a ruling from Nicolosi on the motions.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.