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Wednesday, November 20, 2019

Opioid judge approves `negotiation class’ over objections of state AGs and defendants

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By Daniel Fisher | Sep 12, 2019

Judge Polster

In a move that appeared preordained after his comments at an August hearing, U.S. District Judge Dan Aaron Polster approved an unprecedented “negotiation class” of every city and county nationwide to try and reach a global settlement with opioid manufacturers and distributors.

The proposal was opposed by 37 state attorneys general and many of the defendants, who said it will hinder their own efforts to negotiate a settlement and may violate federal law and constitutional guarantees of due process. Even if settlement talks proceed under the plan, any agreement must be presented to state AGs for possible objections before the court can approve it and some cities and counties are also likely to file objections to both the procedure and any settlement reached.

Under the plan Judge Polster approved yesterday, the normal process in which class members decide whether to participate in a settlement only after it is negotiated would be inverted. With the “negotiation class,” more than 34,000 cities and counties will have to decide, possibly within the next 60 days, whether to participate before they know how much money is on the table. While Rule 23 of the Federal Rules of Civil Procedure and U.S. Supreme Court precedent suggest class members must have the opportunity to opt out of settlements they disagree with, Judge Polster said that isn’t a requirement and he will only consider a second opt-out period “if circumstances require.”

The plan would allocate 75% of any settlement to counties, leaving for later the question of how to share the money with the cities within them, and steer as much as 25% to private lawyers representing municipal plaintiffs. It could produce a multibillion-dollar payday for many of the same lawyers who shared in $14 billion in fees from the $260 billion tobacco settlement in 1997.

Critics of the proposal, led by Ohio Attorney General Dave Yost, say it interferes with state sovereignty by laying out a distribution scheme for opioid proceeds regardless of how state officials might want to allocate money for drug treatment and criminal enforcement. In another sign of the growing conflict over opioid litigation, Yost has also filed a mandamus petition with the Sixth Circuit Court of Appeals to halt or dismiss lawsuits by Cuyahoga and Summit counties scheduled to begin trial in Judge Polster’s Cleveland courtroom next month.

Judge Polster brushed aside the AGs’ objections, saying he was determined to proceed with the multidistrict litigation concentrated in his court and if the AGs wanted to intervene in lawsuits by political subdivisions within their states they should do so directly.

“To date they have made no effort in this Court to shut down their constituent entities’ cases,” the judge wrote. “Until they do so, this Court remains vested with more than 2,000 separate actions by cities and counties from throughout the United States. The Court cannot pretend these cases do not exist.”

From the beginning Judge Polster has seemed less interested in trials to determine the merits of the claims than presiding over a multibillion-dollar settlement. He reiterated that view in his Sept. 11 order, saying “settlement is important in any case.”

 “Here, a settlement is especially important as it would expedite relief to communities so they can better address this devastating national health crisis,” he wrote.

While some defendants have settled individual cases and OxyContin maker Purdue Pharma has reportedly offered $12 billion to settle with more than 20 states, most defendants have fought the claims against them even as Judge Polster has rejected virtually all of their arguments so far.

The glut of litigation in his court demanded “creative thinking,” wrote the judge, which led to the negotiation class idea devised by Special Master Francis McGovern and William Rubenstein, a professor at Harvard Law School. The goal is to present defendants with fixed class size and “a sense of the precise scope of the group with whom they are negotiating,” he wrote.

As expected, the judge appointed attorneys Jayne Conroy and Christopher Seeger to lead the negotiating class, removing other lawyers including Joseph Rice of Motley Rice who represents both states and cities. The judge said the negotiating class lawyers can still work with the other attorneys on the plaintiff steering committee, however. His one restriction is that lawyers on the negotiating committee cannot represent their clients in legal fights with their state governments over opioid money.

The judge’s approval raises many questions, including whether the tentative Purdue settlement – with a reported 27 states and the municipal plaintiffs in Polster’s court – will be expanded to the entire nationwide class. Also unknown is whether plaintiff lawyers will be able to convince the biggest cities and counties to join the class instead of pursuing lawsuits and settlements on their own.

Under the terms of the proposal, 75% of cities and counties by number must approve any settlement amount, guaranteeing the largest cities can’t force a settlement on smaller ones. But the voting mechanism also requires 75% supermajority approval of classes determined five other ways, including population and severity of their opioid-related needs. The supermajority requirement applies only to voting municipalities; cities and counties that don’t opt out at the beginning or vote on a proposed settlement will be left on the sidelines.

The negotiating class proposal includes a detailed allocation formula that is available on the class website. A hypothetical $10 billion settlement would give Los Angeles County $120 million, or $12.20 per capita, while hard-hit Boone County in West Virginia would get $3.1 million or $1,294 per capita. Thousands of cities and counties would get nothing, however, under a formula that keeps allocations of less than $500 in the general fund.

The judge also glossed over objections that distributing money strictly to counties sets up future fights with the cities within them. Some states, such as Connecticut, have only a vestigial county system meaning the largest cities within the counties may control any distribution.

“It is true that if a settlement is reached, each county and its constituent cities will need to work together – or, arguably, negotiate against one another – to divide the county-level allocation amongst themselves,” the judge said.

The proposal would steer 10% of any settlement fund toward legal fees for private lawyers, plus an undetermined amount of another 15% set aside for “special needs” including litigation expenses. Those are likely to include common-benefit fees that MDL lawyers typically charge for leading the litigation. The opioid MDL is dominated by lawyers who frequently lead such cases and reap common-benefit fees including Motley Rice, Lieff Cabraser, Simmons Hanly Conroy, Weitz & Luxenberg and Hagens Berman.

Judge Polster said he must any approve any fees under rules he announced early in the litigation requiring lawyers to keep accurate time records and capping expenses. It is not known how cities and counties with more contingency fee contracts granting their lawyers a larger share of proceeds will work if there is a settlement.

Also unknown is whether state attorneys general will block a settlement after it is reached. Under the 2005 Class Action Fairness Act state AGs have 60 days to examine federal class action settlements and decide whether to object to them. The rarely used process may take on heightened importance with opioids given the tension between states and municipalities over how to spend the money.

The judge approved the negotiation class to negotiate agreements to settle four legal issues, two involving claims the opioid industry violated the Racketeer Influenced and Corrupt Organizations act by convincing doctors to prescribe too many opioids, and two based on alleged failures to fulfill their obligations to halt drug theft and diversion under the Controlled Substances Act. The order appears to push public-nuisance claims aside, even though Oklahoma recently won a $572 million verdict against Johnson & Johnson on that basis.

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