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Tuesday, July 23, 2019

Proposed opioid 'negotiation class' is unnecessary and likely to fail, former negotiator says

Lawsuits

By Daniel Fisher | Jul 1, 2019


Carl B. Stokes U.S. Courthouse

CLEVELAND (Legal Newsline) - A proposed opioid “negotiation class” that would include more than 24,000 U.S. cities and counties is a waste of judicial resources unlikely to achieve its stated goal of hammering out a global settlement, say critics, including a former Connecticut official who was directly involved in negotiations with the opioid industry. 

Plaintiff lawyers led by Motley Rice last month asked U.S. District Judge Dan Aaron Polster in Ohio to approve their unique proposal, which blends concepts from class action and bankruptcy law to create a single group of plaintiffs authorized to negotiate a settlement with opioid distributors and manufacturers. Some defendants immediately dismissed the idea as legally flawed and unworkable, while others question why lawyers representing cities and towns need a new procedure to conduct negotiations when the court has already appointed a plaintiffs’ negotiating committee for that purpose.

“This is the best idea after all this time?” asked Perry Zinn Rowthorn, a partner with Shipman & Goodwin and former deputy attorney general in Connecticut who served as a lead negotiator in talks with the opioid industry.  

“There is a tremendous investment in this model,” Rowthorn added. But, he continued, “I think you can tell from the responses in the docket that the companies don’t believe it is viable and aren’t likely to entrust resolutions to it.”

Texas Attorney General Ken Paxton joined AGs from California and 25 other states to ask Judge Polster to delay making any decisions on the proposal because it “could result in a grave miscarriage of justice and do significant harm to the ability of states to protect their own people.”

In a strongly worded brief filed June 24, opioid distributors AmerisourceBergen, Cardinal Health and McKesson Corp. said they “would be unlikely to participate in settlement discussions with this class as currently proposed.” The “negotiating class” doesn’t include states, Indian tribes, union pension funds, hospital districts and other plaintiffs that are essential for providing global peace, they said, and probably violates federal law. 

States have particularly good claims compared with cities and counties because they can enforce state consumer protection laws with potentially stiff statutory penalties, Rowthorn said. He doesn’t represent opioid defendants although his law firm includes Johnson & Johnson as a client.

“The cities and counties have a variety of legal hurdles,” including using aggressive theories of public nuisance law and proving causation, or that pharmaceutical marketing practices caused physicians to prescribe too many opiates, he said. 

While plaintiff lawyers say their proposal is allowed under Rule 23 of the Federal Rules of Civil Procedure governing class actions, distributors say there is no precedent for it. Rule 23 requires specific legal findings before a judge can approve a class, including that class litigation is superior to individual lawsuits and the proposed class members share roughly similar claims. 

Megacities like New York and Los Angeles have little in common with tiny rural towns, the distributors say, and some of the leading plaintiff lawyers represent both, as well as entire states.

“There are not only multiple conflicts of interest within this class, but also conflicts of interest between class members and the other clients of the lawyers proposed as class counsel,” the distributors say in their brief.

Motley Rice, for example, holds one of the top positions on the plaintiffs’ executive committee yet also represents states including Arkansas, New Hampshire, Rhode Island and South Carolina. Federal courts have no jurisdiction over state attorneys general suing the opioid industry. Depending on state law, cities and counties also may be considered political subdivisions subject to the authority of those state AGs. 

It is unclear how a lawyer representing both a state and a city within could avoid conflict as they fight over the finite proceeds of an opioid settlement. 

Motley Rice, whose name partner Joe Rice was a pioneer in engineering mass settlements in asbestos and with the tobacco industry, didn’t immediately respond to a request for comment. 

A proposed “supermajority” voting procedure borrowed from bankruptcy law is unlikely to protect the negotiation class from legal challenge, critics say. Under the proposal, 75% of cities and counties would have to vote to accept the proposal, with a single vote granted to each municipality plus additional votes according to population and the severity of the opioid crisis in their area. 

Under these rules, it is virtually certain a handful of the largest cities will dominate the voting, even though smaller municipalities would be included on the negotiating committee.

The proposal also assumes the plaintiffs’ negotiating committee will work out a settlement with the opioid industry and present it to Judge Polster for approval, as with an ordinary class action. But U.S. Supreme Court precedent dictates that class members must have the opportunity to “opt out” of class actions, either when they are formed for purposes of litigation or, in the narrow case of classes formed specifically to settle a case, when the settlement terms are presented. 

The negotiation class would be somewhere in the middle, with a complex formula for allocating settlement proceeds before any money is on the table.

"What this does is tell the cities and counties that you have one and only one opt-out opportunity,” Rowthorn said. “You have to exercise it before you know what the deal is --- no matter how good or bad that deal turns out to be for local governments."

To survive legal challenges, cities and counties would likely require a second opportunity to opt out of the class after they see how much money they will get. But defendants are unlikely to enter serious negotiations under that scenario, since any major city could blow it up by opting out. 

Thousands of smaller cities and towns, meanwhile, may not even bother reading the proposed disclosures or participate in the process.

“This means a deal of enormous consequence could be crammed down on most cities and counties without their approval or affirmative consent,” he said.

After a June 25 hearing on the negotiation class proposal, Judge Polster ordered a delay so state AGs could continue to pursue negotiations and other parties could present arguments to the court. He gave the plaintiff lawyers until July 9 to file an amended motion to certify the class and scheduled an Aug. 6 hearing to discuss the matter.

Plaintiff lawyers recruited cities, counties, pension funds and healthcare systems as clients by the thousands as part of a well-worn strategy of confronting defendants with such a huge mass of litigation they would have no option but to settle. But while that strategy has been hugely successful with other mass torts, it could be in trouble with opioids.

Rowthorn was among the initial group of state lawyers to discuss a settlement with opioid manufacturers back in 2017. By the end of that year, he said, the defendants had made it clear the cities and counties were a stumbling block to any deal. Unless the states figure out a way to fold all their political subdivisions into a single agreement, Rowthorn said, the opioid MDL is likely to devolve into a lengthy process of motion practice and trials.

“When this thing fails, the MDL is in real trouble from a settlement perspective,” he said. “Fortunately, AGs have the authority to structure deals outside of the MDL.”

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Organizations in this Story

AmerisourceBergen Cardinal Health Johnson & Johnson Mckesson Corporation

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