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Saturday, April 4, 2020

Attorney: Private lawyers hired by local governments are the 'single greatest threat to attorneys general'

Attorneys & Judges

By Karen Kidd | Dec 11, 2019

Reedsmith

CHICAGO (Legal Newsline) – City, county and tribal governments' strategy of hiring private lawyers in opioid and other litigation is causing a "misalignment of the values" between those entities and the traditional primacy of state attorneys general, a government litigation expert says.

The strategy of governmental subdivisions hiring their own attorneys in litigation already pursued by state attorneys general on behalf of entire states - including those governmental subdivisions - was born out of tobacco and banking settlements, Paul W. Connell, a partner in ReedSmith's Chicago and Washington, D.C. offices, told Legal Newsline.

"The spawn of litigation brought by plaintiffs law firms representing counties, cities and tribes in the opioid litigation is really the single greatest threat to attorneys general that we have seen in this country," Connell said. "By alleging the same causes of action and the same claims that are being brought by attorneys general on behalf of entire states, we're now seeing something close to 35,000 lawsuits all across the country in different state and federal courts."


Paul W. Connell, partner at ReedSmith | Photo courtesy of ReedSmith

The strategy adopted by governmental subdivisions within states has dramatically complicated resolution of the nation's opioid crisis and the litigation itself "to an incalculable degree," Connell said. It's a battle waged by Ohio Attorney General Dave Yost, who wanted to halt the bellwether trials of two counties in the state because he felt they had usurped his authority as the state's chief legal officer.

Yost said the cities’ and counties’ lawsuits threaten “Ohio’s sovereign interest in vindicating its citizens’ rights – all of its citizens’ rights – against the various defendants who fueled the opioid epidemic in Ohio.”

“The scheduled bellwether trial undermines all this because it lets political subdivisions act as representatives of the people’s interests—and thereby appropriate remedies that belong to the State,” Yost said.

Connell noted that these issues have pitted AGs against their local units of government.

"Even more importantly, for general counsels at corporations who are trying to advise their CEOs and boards of directors, it has made it impossible for them to opine - with certainty - that if there is going to be a settlement, whether everything actually will be settled or will this just mean more and more litigation, over and over again," he said.

Connell is a trial lawyer and strategic adviser specializing in government, high-stakes litigation, investigations, controversies and regulatory matters.  

ReedSmith represents companies active in the opioid litigation but Connell is walled off from those cases due to his prior employment as a deputy attorney general in Wisconsin.

Diluting the primacy of state attorneys general and complicating litigation over the nation's opioid crisis are part of the unintended consequences of counties, cities and tribes hiring plaintiffs attorneys to represent them. The intent was to make sure those political subdivisions got their fare of any settlement because they didn't in big-money litigation in the past, Connell said.

"The starting point for discussion about the spawn of litigation by localities and the degradation of the authority of the attorneys general back really goes back to the tobacco settlements of the 1990s, where there was billions of dollars over time as paid by the big tobacco manufactures to the states," Connell said. "Very little of that money actually made it down to local units of government."

In 1998, attorneys general for 46 states and the District of Columbia reached a Master Settlement Agreement in which four major tobacco companies in the U.S. agreed to, among other things, pay the states billions to cover smoking-related health care costs.

Very little of that money trickled down to cities, counties and tribes. Instead, states have used the money as part of their general treasury to fill budget holes and support various programs.

Cities, counties and tribal governments were skunked again when banks and the mortgage servicing industry paid out billions in settlements following litigation file by state attorneys general over the near banking collapse that set off the Great Recession.

"All that money did not make it down to cities, counties and affected homeowners," Connell said. "So when the heroin crisis and the opioid crises started and the states' attorneys general started their investigation and to bring some lawsuits, it was very clear that cities, counties and tribes didn't want to be left out in the cold again."

Those governmental subdivisions hired their own attorneys from the private sector, who in turn filed lawsuits with allegations against opioid producers essentially identical to allegations in litigation being pursued by state attorneys general.

"That was done because the localities were the ones who actually bore the direct impact of the opioid crisis, from higher expenses for paramedics, for fire, for police, for basic services, impacts on local jails and court systems," Connell said. "All those entities bore the cost of what's been going on, on the ground so to speak. Because of that, they want to make sure when the time came for settlement dollars, from drug manufacturers and other responsible parties, that they actually got their share this time."

The strategy received little pushback from state attorneys general.

"The state attorneys general, right off the bat when it came to the opioid problem, they didn't assert their authority to speak for the whole state when it came to litigation," he said. "They ceded some territory to plaintiff's lawyers, who now filled the void."

Which has led to what Connell referred to as "the misalignment of the values."

"What I mean by that is state attorneys general are elected," he said. "They're elected and they swear an oath to the constitution. Plaintiffs lawyers who represent a client, whether that's a city, village or a tribe, take no such oath. And so you have somebody who's supposed to be representing the state as a whole in litigation, to do the right thing on behalf of all the citizens, that value is pitted against a plaintiff's lawyer whose job it is to do the best they can for their one client. But that one client might just be one county in the state."

The strategy also is upsetting the traditional method by which states would join in major litigation, Connell said.

"It used to be the case that state attorneys general would work with other state attorneys general, work across state lines, and big national problems would be resolved by the 50 state attorneys general as a whole," he said. "Now you have the state attorneys general trying to work together while layered on top of that, all these plaintiffs lawyers are representing subdivisions of state government, meaning cities, localities, tribes. It is making it impossible for any sort of deal to be struck."

It isn't only opioid litigation that governmental subdivisions and their plaintiff's attorneys are pursuing. Some of the same governmental subdivisions are also entering litigation over alleged generic drug price fixing that state attorneys general in 49 states already have joined.

Last month, 14 counties in New York sued the same defendants already being pursued in litigation by state attorneys general over generic drug price-fixing allegations. Local school districts have also begun to file vaping lawsuits. 

"So what we are seeing is like a cancer, the local lawsuits are metastasizing where every state attorney general used to have primary authority and primacy over the litigation position that the states should take," Connell said.

The strategy is causing uncertainty for businesses in the U.S., including those not being sued for anything.

"It's a big question for general counsel at companies that are subject to regulatory scrutiny by state attorneys general," Connell said. "CEOs should be very concerned about what they see here. 

"Because if every piece of litigation is going to end up like the opioid litigation, where you have tens of thousands of lawsuits being led by not just state AGs but by plaintiffs lawyers across the country, it is going to become more and more difficult for the business community to have any regulatory certainty that they need and that they seek."

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