CLEVELAND (Legal Newsline) - More than 500 cities and counties opted out of the unprecedented “negotiation class” proposed by plaintiff lawyers to settle sprawling opioid litigation, leaving 98% of the 34,458 U.S. cities and counties technically still in the class.
The opt-outs could make it difficult for defendant companies to use the mechanism to negotiate a global settlement, however. They reportedly include Harris County, Texas, home to more than 4.6 million residents; a number of counties in West Virginia with potentially substantial claims against the industry; and populous counties in New York that are scheduled to begin trial on their claims in state court at the end of January.
The defections, while small as a percentage of the overall proposed class, could represent tens of billions of dollars in potential liability that defendants must factor into their calculations while deciding whether to negotiate with lawyers representing the remaining class.
The deadline for opting out of the class was Nov. 22. Plaintiff lawyers released details of the response in a filing Monday with U.S. District Judge Dan Polster in Ohio, who is overseeing multidistrict opioid litigation in federal court. Some 2,300 cities and counties have lawsuits pending in federal court, while nearly every state and hundreds of municipalities have similar cases in state courts around the country.
More than half the states objected to the “negotiation class” proposal, saying it would interfere with their own efforts to negotiate a global settlement with the opioid industry including new controls on how the drugs are distributed and prescribed. The U.S. Court of Appeals for the Sixth Circuit has agreed to hear a challenge to the mechanism, which has never been used before and conflicts with existing class action law requiring class members to receive a second opportunity to opt out after they are notified of settlement terms.
Under the plan approved by Judge Polster, municipalities had to decide by Nov. 22 whether to remain in the class, before any money was on the table.
The plaintiff lawyers who support the negotiation class are working under contingent-fee contracts that give them a strong financial incentive to seek money damages, since they typically can’t earn fees for non-cash injunctive relief. They stand to earn as much as 25% of any settlement they negotiate, under proposed terms that would steer the majority of fees to the leaders of the plaintiffs’ team under “common benefit” rules typically imposed in MDLs to ensure all plaintiffs pay their share of collective legal expenses.
In the court filing, the lawyers don’t identify which cities and counties opted out. They say class notices were mailed out to every city and county in the country and the website they set up to inform class members received some 15,000 hits, or less than half the proposed class. They described the class notice program as “a success” that “has provided more than adequate notice.”
“The response to the Class Notice program shows that class members of all sizes (from small towns to major metropolitan areas) throughout the country received and thoughtfully considered” the notices, which were mailed and emailed.
Critics of the proposal say the opt-out mechanism ensures high participation since many towns and cities either failed to understand the stakes or couldn’t be bothered to respond since there is no money at stake right now. Multiple U.S. Supreme Court decisions have established protections for class members, most importantly the opportunity to opt out of a settlement if the financial terms are inadequate.
Under this proposal, any settlement must be approved by 75% of class members who cast a vote, with the vote measured several different ways. Class members can also file legal objections to an agreement, but after Nov. 22, if the plan is upheld by the Sixth Circuit, they have lost the right to reject a settlement and sue on their own.
In a separate filing this week filed in advance of a hearing today, plaintiffs and lawyers for pharmacy defendants said they were far apart on procedures for a bellwether trial scheduled for next year over claims by Cuyahoga and Summit counties in Ohio. The counties settled their claims against drug manufacturers and distributors on the eve of trial this year for $330 million, more than $80 million of which flowed to their lawyers at Napoli Shkrolnik and other firms.
Pharmacy defendants say they can’t defend themselves without information about specific prescriptions the plaintiffs claim they shouldn’t have filled. They want to depose witnesses from the Drug Enforcement Administration, the Ohio Board of Medicine, hospitals, doctors and even patients to gather evidence on whether prescriptions were appropriate.
Plaintiff lawyers say none of that is necessary as they will present only “aggregate proof” at trial. They say they can prove the pharmacies are responsible for causing the crisis of widespread opioid abuse, including the use of illegal heroin and fentanyl, with testimony from experts who say an excess number of pills were distributed in the two counties compared to what they believe is normal prescribing behavior.
In testimony prepared for the earlier trials against distributors and manufacturers, one expert opined that more than half of the pills distributed in the Ohio counties represented “suspicious orders” that should have been blocked.