NASHVILLE, Tenn. (Legal Newsline) - A public fight between the Tennessee attorney general and counties that have filed separate lawsuits against the opioid industry could be the first of many similar conflicts as state AGs try to assert control over mushrooming litigation over the addiction crisis.
Tennessee AG Herbert Slatery is seeking to intervene in lawsuits filed by local prosecutors in 14 judicial districts representing 47 counties, saying their lawsuits “impede my ability to prosecute all of the opioid litigation implicating the State's interests.” Slatery, a Republican, also objects to the counties’ use of private lawyers working under contingency-fee contracts, saying the counties had no authority to hire them.
“Our consistent position has been that all recoveries go to the state and affected areas, not to outside attorneys,” Slatery said in a news release last week.
The fight illustrates a big potential stumbling block in the drive to negotiate a nationwide settlement of lawsuits against opioid manufacturers, distributors and pharmacies. Hundreds of lawsuits by cities and counties have been consolidated in a federal court in Ohio, where U.S. District Judge Dan Aaron Polster has told the parties he wants to hammer out a settlement that includes significant changes in how the companies do business.
But there are hundreds more lawsuits pending in state courts beyond the reach of Polster’s multidistrict litigation, and a bipartisan coalition of 41 state AGs is also investigating the industry in possible preparation for their own lawsuits. More than a dozen states have already filed suit - including Ohio, Washington, Missouri and Kentucky. Industry negotiators are unlikely to agree to partial settlements that require them to pay out hundreds of millions or billions of dollars yet leave them vulnerable to continuing lawsuits that could bankrupt them many times over.
That’s where the state AGs may have some power to bring order to what has become a chaotic tangle of litigation. The law varies from state to state but in most states, cities and counties are considered political subdivisions under the ultimate control of the state and its attorney general.
After state AGs negotiated the 1998 tobacco settlement, for example, Wayne County in Michigan tried to sue the industry to recover its own smoking-related expenses. But a federal court rejected the suit in 2002, citing an opinion from the Michigan Supreme Court that the state AG had already released the industry from all such claims – even those potentially raised by municipalities -- and the county couldn’t revive them.
Wayne County sued after the settlement had been signed, of course, while the cities and counties suing opioid manufacturers filed their suits first. And the law is unsettled in many states as to whether and when a state AG can squelch litigation by cities and counties. San Francisco mounted a high-profile, and ultimately successful, battle to overturn the state’s ban on same-sex marriages in which it was opposed by California’s attorney general.
It would have been absurd if the California attorney general could step in and settle San Francisco’s lawsuit, said Kathleen Morris, an associate professor at Golden Gate University and former deputy city attorney in San Francisco who is researching a paper on the legal interactions between cities and states.
“I’m not aware of a situation where an AG can walk into a room where a city is already litigating a case and say `I’m your lawyer,’” Morris said.
Cities and counties, in addition to being political subdivisions, are corporate entities with the authority to sue and be sued, she added.
“They have their own economic interests as corporations,” she said. “They’ve lost money, and they want it back.”
Some states also have enshrined “home rule” autonomy for cities and counties in their state constitutions. It requires courts to give even more deference to their legal activities. But state AGs can argue with the opioid litigation that it is a national problem requiring comprehensive solutions, including restrictions on how drugs are distributed and money to pay for treatment centers and other medical services. Doing so on a piecemeal, county-by-county basis would thwart those efforts, some argue.
Tennessee is “in the best position both to represent the interests of the state and to obtain the best possible monetary recovery for key governmental stakeholders,” Slatery wrote in a March 15 letter to the local district attorneys. “These cases impede my ability to prosecute all of the opioid litigation implicating the State's interests.”
The Tennessee counties say they’re suing under state statutes that give them specific powers to seek compensation for their own expenses, including the Drug Dealer Protection Act, which allows local hospital districts and other entities to recover the costs associated with drug abuse from anyone who “knowingly participates in the illegal drug market.”
It’s still a matter of proof whether companies like Purdue Pharma and Cardinal Health fit that description, given each pill they sold was authorized by a doctor’s prescription, but the statute appears to give the counties a powerful independent source of standing to sue.
The Tennessee AG wants to squelch local litigation so he can give the industry a full release in exchange for funds he can retain at the state level, said J. Gerard Stranch of Branchstetter Stranch & Jennings, who represents the counties. Tennessee participated in a 2007 settlement with Purdue that yielded the state less than $1 million - $400,000 of which was applied to state attorneys’ fees.
“I would want us gone, we’re going to be the expensive ones,” Stranch said. “If you want to talk settlement to us, we'd love to find creative solutions that don’t bankrupt the company, but there has to be real change and we have to be at the table."
While no similar battles have flared into public view, they likely will. A state representative in South Carolina, which has sued the industry, commissioned an opinion from its attorney general on whether cities and counties had independent standing to file their own suits.
His conclusion? It depends. In South Carolina, AG Alan Wilson said, a municipality “must allege infringement of its own proprietary interests or statutory rights,” but that it is entirely possible they can when it comes to opioid-related damages.
Given this legal landscape, it’s not surprising that plaintiffs attorneys are feverishly compiling all the evidence they can get their hands on of opioid-related hospital charges, drug-treatment program costs and even jail expenses at the local level to bolster the cases of their municipal clients. In the end, this may partly be a case of fighting the last war, in this case against tobacco, in which states obtained multibillion-dollar payments from cigarette manufacturers but little of that flowed down to cities and counties.
Many local officials viewed the 1998 tobacco settlement as a disappointment because most of the money flowed directly into state treasuries. Of course, the same thing would have happened if the states had simply taxed cigarettes – and they would have avoided the estimated $14 billion in fees to private attorneys that will flow out of the master settlement agreement over its 25-year life. One reason so many cities and counties are suing is their lawyers are telling them this is a way to keep their hands on any money they win.
States still have another powerful trump card they can play against their cities and towns, however: Legislation. While a state AG may not have the power to commandeer litigation by political subdivisions, the state legislature can.
Ohio did just that in 2007 to end then-burgeoning litigation against the lead paint industry, passing a law that amended the state’s consumer protection statute to make it harder to win nuisance suits over legal products. Congress did the same thing on a national level when it passed the Product of Lawful Commerce in Arms Act in 2005, prohibiting lawsuits against gun manufacturers over criminal acts involving their products.