NEW YORK (Legal Newsline) - New York Attorney General Letitia James announced a $1.1 billion settlement of litigation against the three biggest opioid distributors that provides a likely model for a reported $26 billion national settlement and also includes a $70 million payday for private lawyers who represented cities and counties and will now urge their clients to sign off on the deal.
The agreement with Amerisource Bergen, Cardinal Health and McKesson ends a trial in state court involving Suffolk and Nassau counties that would have provided a key test of plaintiff theories that drug distributors caused a “public nuisance” by failing to block suspicious opioid orders from pharmacies. Johnson & Johnson settled out of the case last month by agreeing to pay $268 million, including at least $28 million to lawyers at Napoli Shkolnik and Simmons Hanly Conroy.
In this latest agreement, the two law firms negotiated themselves another $50 million in fees and expenses for representing Suffolk and Nassau counties, plus a significant chunk of an additional $27.9 million in fees associated with other municipal clients who agree to join the settlement. Napoli Shkolnik and Simmons Hanly Conroy also will be wired $20 million each for “additional costs and expenses” incurred by the two counties.
The settlement includes strong incentives for the state and private lawyers to convince all other potential plaintiffs to agree to its terms. The distributors have agreed to pay out $1.1 billion over 18 years, but they can withhold as much as 40% if a significant number of cities, counties, school districts and other municipal entities refuse to settle and release the companies from liability.
The same terms will likely appear in the $26 billion global settlement negotiated by state AGs, which has long hinged upon obtaining releases from the thousands of cities and counties that private lawyers recruited to sue the opioid industry but now represent a stumbling block to settlement. The New York agreement requires the distributors to make “incentive payments” representing 45% of the total or $400 million if the state obtains releases from its internal subdivisions within two years.
The incentive payments shrink to 5% based on how many municipal entities refuse to sign off. Another contemplated solution would be for New York legislators to pass a law barring political subdivisions from pursuing their claims.
The New York settlement also reveals the rich payout for private lawyers, many of whom are also prolific contributors to the public officials and political parties responsible for hiring them.
Napoli Shkolnik and its partners have contributed more than $100,000 to New York politicians in recent years, including $5,000 to the campaign of Suffolk County executive Steven Bellone in June 2018, equal to the firm’s contribution to New York Gov. Andrew Cuomo the year before. Most of the firm’s money flows through Lawpac of New York, which distributes contributions to state and local campaigns.
Simmons Hanley Conroy is a much more prolific contributor according to Followthemoney.org, spending $1 million since 2017 on a profusion of races, primarily in Illinois.
In addition to money, the New York settlement includes elaborate provisions dictating how they funds will be spent and how distributors will do business in the future. Distributor payments are supposed to flow to a “New York Qualified Settlement Fund” which will turn most of the money over to the New York State Office of Addiction Services to be spent on specified services related to opioid addiction. Individual municipalities will receive about 11% of the money, half in the form of unrestricted grants and half to be spent on opioid-related services.
Nassau and Suffolk counties, perhaps as a reward for their participation in the trial, will receive 6.7% and 8.6% of the money on top of other payments, while New York City gets 20%. The state has earmarked $30 million for itself for “costs and expenses.”
While the agreement is structured as a legal settlement of lawsuits filed in court, negotiators included a clause reflecting the economic reality that the costs will be mostly passed through to consumers in the form of a tax. Should New York pass a new “opioid tax” during the 18-year payout period, the distributors will receive a dollar-for-dollar offset against their settlement obligations.