SAN FRANCISCO (Legal Newsline) - Lawyers who met in a federal courtroom in Cleveland yesterday to discuss a settlement of opioid litigation face the difficult task of crafting a deal that will not only pay their clients -- mostly towns and cities -- but include states and even the federal government while spreading the cash evenly across the country.
That reality was expressed repeatedly at a conference last week in San Francisco, where plaintiff lawyers discussed the strategies they are pursuing against opioid manufacturers and distributors as well as the complexity of the unprecedented litigation wave they have launched. Most of the attendees were private lawyers who have signed contingency-fee contracts with municipal clients, under which they stand to collect a percentage of whatever their clients earn from the litigation.
“Obviously there’s no resolution here unless it’s for the entire country,” said Jayne Conroy, a partner with Simmons Conroy, one of the plaintiff law firms leading the multi-district litigation. “You can’t have rehab programs in some areas and not others.”
Conroy
With plaintiffs ranging from small towns to cities as large as New York and Chicago, plus hospitals and union healthcare plans, the MDL consolidated in a federal court in Ohio represents a multibillion-dollar threat to the opioid industry.
But plaintiff lawyers have their own challenges: A number of states have filed lawsuits in state court, potentially competing for the same dollars as the clients of private attorneys. And last week the federal government announced its interest in the litigation, saying it may intervene to recover billions of dollars in Medicare and Medicaid expenditures associated with opiate addiction.
Lawyers for both sides were scheduled to meet for a new round of settlement talks in the courtroom of U.S. District Judge Dan Aaron Polster in Cleveland March 6. But the sheer complexity of the litigation raises questions about how the parties will craft an agreement that ends the threat of further lawsuits against the industry while distributing cash to all the varied entities who have sued.
Some lawyers participating HarrisMartin’s Opioid Litigation Conference in San Francisco on Friday admitted it will be politically difficult to negotiate terms that reward towns and counties that sued and leave others with nothing. Attendees spoke of using the litigation proceeds to fund addiction-treatment programs as well as helping governments recoup a huge variety of opiate-related costs, from unreimbursed hospital care to special high schools for the children of addicts.
California State Sen. Joe Dunn, himself a former mass-tort plaintiff lawyer, said the litigation will be inherently political, as government officials view their lawsuits as a way to supplement strained budgets and provide addiction treatment to patients who are often the children of white, middle-class constituents.
“Middle-class families will lead them to focus to abatement,” he said, with demands for local treatment centers and related services like educational assistance for the children of addicts. The opioid crisis is “something different happening in this country, regardless of who you represent.”
Judge Polster made it clear at a January hearing that he wants the parties to hammer out a global settlement which would, in his words, “do something meaningful to abate this crisis and do it in 2018.” To do that, however, plaintiff lawyers have to offer the defendant companies what they need: Closure. And that will be difficult given the parallel litigation in state courts, some of it pursued by state attorneys general who don’t share the same financial incentives as plaintiff lawyers representing towns and cities under contingency-fee contracts.
Private lawyers are funding the litigation themselves, and they have an incentive to reach a settlement that includes enough money for them to recoup their costs and make a profit. The states may be more interested in injunctive relief, such as reforms in the way drugs are distributed and more robust systems for preventing diversion. Millions of addicts started their habits with pills they obtained from someone else with a prescription, or in street purchases.
Lawyers at the HarrisMartin conference laid out the legal theories that they plan to deploy against opioid manufacturers, distributors and retailers as well as providing advice on how to obtain detailed damages estimates from plaintiff entities. The legal strategies fall into roughly three categories:
Nuisance
While the law in this area is still unsettled, plaintiff lawyers won a landmark victory in California this year when the state Supreme Court refused to hear an appeal of a $600 million judgment several cities obtained against paint and pigment manufacturers for removal of lead paint. The theory, which has been upheld by several other courts, is that paint manufacturers created a “public nuisance” by selling lead paint despite the knowledge lead is poisonous.
The cities overcame arguments the paint was legal when it was sold – in fact, it was specified for use in many government buildings – and lead’s toxicity was common knowledge by citing advertising touting the paint as safe. Opioid plaintiffs make a similar argument that manufacturers and distributors created a public nuisance by lulling prescribing physicians into believing drugs like OxyContin were safe and non-addictive. Defendant companies will argue opioids were distributed through tightly regulated channels and prescribed by physicians.
Fraud and false advertising
Lawyers will try to use broad state consumer protection and antifraud statutes where they can, based on marketing materials that touted the supposedly abuse-resistant qualities of delayed-release pills like OxyContin and the use of highly paid “detailers” who allegedly misled prescribing physicians. Statutory penalties can run to thousands of dollars per violation under state law, yielding tens of billions of dollars in potential verdicts.
Racketeering
Plaintiff lawyers are engaged in heated negotiations with the Trump administration over the Drug Enforcement Administration’s Automation of Reports and Consolidated Orders System, or ARCOS, which tracks every single opioid pill from production line to retail pharmacy. They hope to use this database to build cases under the Racketeer Influenced and Corrupt Practices Act alleging distributors including McKesson, Cardinal Health and Amerisource Bergan knowingly shipped millions of pills to outlets where there was an unreasonable risk of diversion to addicts.
“We think this is one of the best RICO cases we’ve ever seen,” said David McMullen, a partner with the Barrett Law Firm who is trying to form a nationwide class action of hospitals. With treble damages, RICO could be one of the most potent weapons in the plaintiffs’ arsenal.
Lawyers also discussed how to assemble estimates of damages directly related to opioid abuse, a key element of any lawsuit. McMullen told attendees hospitals are ideal plaintiffs because their records include codes for every procedure that directly reference opioids and addiction.
Other lawyers urged the audience to start pushing their government clients to compile all the costs that might be associated with opioid abuse, which reaches into practically every nook and cranny of local government. Sheriff’s departments, for example, have reported higher jail costs as they have incarcerated more addicts for everything from theft to driving while impaired (include the costs of blood tests for intoxication, lawyers were told).
Local governments are also spending more on schools, foster care and other social services because of opioid addiction, and hospitals lose an estimated $35 billion a year on uncompensated care of addicts. One problem yet to be worked out is how state and local governments will document costs that are often shared between them to avoid double-counting, assuming any resolution of the litigation includes such detailed accounting.
This detailed accounting will help plaintiffs get around another challenge in public nuisance lawsuits, which is proving the entity that is suing suffered specific damages that are different than the public at large. They can’t sue over generalized harms like drug addiction and increased harm, but they can potentially convince judges to continue lawsuits seeking to recover specific expenses associated with drug abuse and addiction.
One study showed the median delivery of a healthy baby costs $3,500 and involves 2.5 days in the hospital, while the median baby born with neonatal abstinence syndrome due to drug use by its mother costs $66,000.