Legal Newsline

Monday, February 17, 2020

Drug companies lose challenge to alliance between private lawyers and state officials

By David Hutton | Jul 14, 2017

General court 06

CONCORD, N.H. (Legal Newsline) – Private lawyers who could possibly make millions of dollars in attorneys fees can continue with their representation of the state of New Hampshire in an investigation into and a possible lawsuit against the pharmaceutical industry.

According to a June 30 ruling by the New Hampshire Supreme Court, the companies' challenge to the agreement between the private firm Cohen Milstein and the state Attorney General's Office has been deemed both premature and incorrect.

The court decided the companies - Actavis Pharma, Endo Pharmaceuticals, Janssen Pharmaceuticals, Purdue Pharma and Teva Pharmaceuticals - do not yet have standing to challenge the contingency fee agreement because there has been no settlement or final decision in the case yet.

It also ruled against the companies' assertion that the contingency fee agreement violates the Ethics Code.

"Under the plain terms of the agreement between the OAG and Cohen Milstein, the OAG retains direct authority over all aspects of the investigation," says the court's opinion, authored by Justice Linda Stewart Dalianis.

"When the investigation has been completed, the OAG 'will determine, in its sole discretion, whether to move forward to litigation.' Given these plain terms, we hold that the trial court did not err in concluding that 'Cohen Milstein... has no authority to make any key administration decisions and therefore lacks the ability to represent the State as a substitute for the OAG.'"

As part of an ongoing investigation into marketing practices by large pharmaceutical companies, the Office of the Attorney General in June 2015 retained the law firm of Cohen Milstein Sellers & Toll PLLC on a contingency fee basis “to represent [the OAG] in an investigation and litigation of potential claims regarding fraudulent marketing of opioid drugs,” the court opinion states.

In September 2015, former AG Joseph Foster and Cohen Milstein revised the retainer agreement, stating that Cohen Milstein is retained “to assist [the OAG] in an investigation and litigation of potential claims regarding fraudulent marketing of opioid drugs.” 

The OAG subpoenaed the companies, requesting they produce specified “information and documentary material because the Attorney General has reason to believe that [the defendants] have engaged in or have information about unfair trade practices and methods of competition.”

The companies had initially intended to comply, but eventually refused, citing their objection to the attorney general’s retention of Cohen Milstein to aid in the probe on a contingency basis.

According to a four-page retainer agreement obtained by Legal Newsline and signed by former Cohen Milstein partner Linda Singer -- a former District of Columbia Attorney General -- the firm stood to earn 27 percent of the net recovery, exclusive of the costs of litigation.

The companies said it was wrong for attorneys representing a state agency to have a financial interest in the outcome of any litigation.

“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.”

In 2016, the companies successfully argued that the OAG shouldn’t be permitted to retain Cohen Milstein to handle the paperwork, and a request by the companies to cancel the contract with Cohen Milstein was approved by a judge, who also denied the state’s motion to enforce the subpoenas.

The State appealed that decision to the New Hampshire Supreme Court, which reversed those decisions and sent the case back to the lower court.

The court concluded that the companies lack standing to challenge the contingency fee agreement under RSA 7:6 f, which provides in part that “any funds received by the attorney general on behalf of the state or its citizens as a result of any … action under [the CPA] . . . shall be deposited in a consumer protection escrow account.”

The companies do not have standing yet, the court wrote, because there has been no settlement or award.

Foster said the investigation was started after review of preliminary information indicated that drug companies may have “deceptively minimized” the risk of addiction from long-term use of narcotic painkillers and exaggerated their benefits for treating chronic pain.

Cohen Milstein is a politically active firm known for its class action lawsuits and, in recent years, has teamed with several public officials.

The firm has donated thousands to political campaigns, including more than $70,000 to state attorney general candidates from 2010-2015.

Foster resigned in March after a four-year term. The new attorney general is Gordon MacDonald.

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Organizations in this Story

New Hampshire Office of the Attorney GeneralNew Hampshire Supreme Court