CINCINNATI (Legal Newsline) - A federal appeals court rejected a novel “negotiation class” that was designed to facilitate a multibillion-dollar settlement of opioid lawsuits, saying the concept wasn’t authorized under the rules governing class actions.
The decision represents another setback for U.S. District Judge Dan Polster, who has made settlement his primary goal since he was appointed to oversee federal multidistrict opioid litigation in December 2017. The “negotiation class” was designed by Francis McGovern, a special master appointed by Judge Polster, and was intended to provide a mechanism for opioid manufacturers and defendants to negotiate a settlement covering more than 30,000 cities and counties with potential claims relating to the opioid crisis.
The Sixth Circuit rejected that attempt, saying a single judge “facing the pressures of litigation” wasn’t authorized to depart so completely from the Federal Rules of Civil Procedure. The negotiation class was a proposed hybrid vehicle under Rule 23 governing class actions, combining elements of classes certified to pursue litigation at trial and those intended for settlement. Unlike either, class members were expected to approve or reject the agreement before any money was on the table.
“A new form of class action, wholly untethered from Rule 23, may not be employed by a court,” the Sixth Circuit ruled, in a decision penned by Judge Eric Clay, a Bill Clinton nominee. The opinion drew a lengthy dissent from Judge Karen Moore, also a Clinton nominee, who said the mechanism was needed to “preserve the class action ecosystem in which district court flexibility thrives.”
The Sixth Circuit previously reversed Judge Polster’s decision allowing opioid plaintiffs to add new claims to their complaints months after court deadline had expired. And in February, the appeals court nixed his order requiring the nation’s largest pharmacy chains to hand plaintiff lawyers more than a decade’s worth of sensitive prescription records for millions of consumers, saying they weren’t necessary to prepare for trials involving individual Ohio counties.
The negotiation class drew several hundred opt-outs and was opposed by attorneys general of 37 states who said it would interfere with their own efforts to negotiate a settlement of opioid lawsuits. The states aren’t subject to the jurisdiction of Judge Polster and are operating outside the federal multidistrict litigation he oversees.
It was supported by private plaintiff lawyers who recruited more than 1,300 cities, counties and other public entities to sue the opioid industry but have since encountered serious difficulties in forming a cohesive group to negotiate an agreement with the defendants. Without some certainty the litigation will end, opioid distributors and manufacturers have no incentive to negotiate. Plaintiff lawyers, meanwhile, have likely racked up tens of millions of dollars in expenses that they want to recover in fees.
In rejecting Judge Polster’s negotiation class, the Sixth Circuit also rejected arguments defendant companies had no standing to block it. Plaintiff lawyers argued the structure was entirely voluntary and both plaintiffs and defendants were free to use it or not as they saw fit. The mere establishment of a negotiation class would change the trajectory of the litigation, the court ruled.
“Although the district court was clear that no Defendant must negotiate with the class, its presence obviously affects the state of play,” the decision says. “The negotiation class is designed to fundamentally alter the nature of the MDL. Defendants are pressured, or at least strongly incentivized, to negotiate with the class.”
In her dissent, Judge Moore said the federal rules of civil procedure are intended to give judges flexibility to manage litigation so it is efficient and less expensive. Echoing plaintiff arguments, she said Rule 23 doesn’t explicitly prohibit a negotiation class, so Judge Polster should have been allowed to give it a try.
The majority disagreed, saying Judge Polster tried to sidestep fundamental questions including whether a class action was the superior way to resolve the litigation and how that would square with the growing conflict between state AGs and cities and counties, among other issues.
“The district court’s order creates confusion surrounding the scope of negotiations—a putative class member cannot be sure whether, and how, the negotiation class representatives, empowered by the court, will address their state law claims during settlement discussions,” the appeals court ruled.
Ultimately, Judge Polster failed to explain why plaintiffs and defendants couldn’t use existing structures to settle claims, either by seeking to certify a litigation class or negotiating a class settlement.
The federal rules of civil procedure represent the work of a Rules Advisory Committee operating under the oversight of the federal judiciary and subject to the approval of the Supreme Court, which Congress can override, the Sixth Circuit noted. This multilayered approach allows the various bodies to “assess the virtues and drawbacks of a proposed change as well as evaluate the possible implications of the proposed rule across the entire judicial system, rather than by individual judges facing the pressures of litigation.”
The Sixth Circuit’s ruling, unless successfully appealed, ends another attempt by Judge Polster to accelerate an end to the litigation concentrated in his court. The states, meanwhile, continue to work on a global settlement although how that would accommodate the demands of individual cities and counties – and their private lawyers – remains unknown.