SANTA FE, N.M. (Legal Newsline) - New Mexico Attorney General Raul Torrez quickly touted his state’s settlement of opioid claims against Walmart, CVS, Johnson & Johnson and other companies last year with a press release, but so far he's not talking about this year's $500 million settlement with Walgreens.
Perhaps that’s because more than $150 million of the money is going to private outside attorneys, an amount that exceeds what New Mexico spent on narcotics treatment programs in 2020 and equal to $1,500 per state-estimated addict.
Using more conservative estimates from the federal Substance Abuse and Mental Health Services Administration, New Mexico is paying its lawyers at Baron & Budd, Levin Papantonio and Robles Rael Anaya the equivalent of almost $3,000 per person with opioid use disorder. The state spent a total of $148 million on addiction-treatment plans in 2020.
The contingency fee of 33% is more than double a 15% cap set by U.S. District Judge Dan Aaron Polster, who is overseeing federal multidistrict litigation against the opioid industry. In a recent order affirming $1.6 billion in fees for private lawyers who represented states and municipalities in lawsuits against CVS, Walgreens and Walmart, the judge reiterated his opinion that fees above 15% are “presumptively unreasonable.”
“When attorneys’ contingent fee contracts yield unreasonable or excessive amounts, the outsized payments to lawyers can undermine public faith in the judicial system,” Judge Polster wrote in a 2021 order laying out fee limits in the opioid MDL. “The proposed settlement amount is so large that customary contingent fee percentages would disproportionately over-compensate attorneys and reflect poorly on the legal profession.”
State and local negotiators set aside about $2 billion, or 8%, of the $26 billion national settlement of opioid claims against Amerisource Bergen, Cardinal, McKesson and Johnson & Johnson in 2021 for private attorneys. Individual law firms could also avail themselves of “backstop” agreements with their government clients, waiving their contingency fees in exchange for up to 15% of a recovery. Judge Polster predicted most of the fees would be in the 6-10% range, however.
A $13 billion national settlement with CVS, Walgreens and Walmart earlier this year included contingency fees of more than $1.6 billion, or about 12%. At 33%, the fee New Mexico is paying its lawyers is more in line with a $100,000 auto-crash settlement. A 2006 study of fees in mega-settlements over $100 million found fees ranged from 4-18%.
New Mexico isn’t the only state with an AG willing to pay outside lawyers more than the national average. Nevada AG Aaron Ford recently announced a $285 million settlement with Walgreens that could yield his old law firm, now called Eglet Adams, more than $60 million according to a contingency-fee contract that caps fees at 21.5%.
As a legislator back in 2018, Ford helped push through a law that eliminated the state’s $50 million cap on outside counsel. After he was elected AG, he signed the contract with his old law firm to represent the state in opioid litigation. Then known as Eglet Prince, the firm contributed $17,000 to Adams’ successful campaign for AG, according to Followthemoney.org.
Ford's office said the fees in the Walgreens settlement are "consistent with the sliding scale outlined in the state's contract," while noting Ford recused himself from the hiring process that led to his old firm winning the state contract.
Florida AG Ashley Moody also sidestepped her state’s $50 million cap on contingency fees for outside counsel by describing the more than $120 million that will be paid to Washington, D.C.-based Kellogg Hanson as coming from opioid defendants instead of out of the state’s share of the money.
The New Mexico AG’s office didn’t respond to repeated requests for comment by email and phone.
No one knows the precise number of people who are in need of treatment for opioid-related disorders in New Mexico. The state Medicaid program had 21,000 people in treatment for opioid abuse in 2018, up from less than 2,000 in 2007, and the state has a total of more than 40,000 people in treatment. And the federal National Survey on Drug Use and Health estimated New Mexico’s total population of opioid abusers at 56,000 in 2021.
The state’s expert in the lawsuit against Walgreens and other pharmacies, safety economist Ted R. Miller, said more than 100,000 people in New Mexico needed treatment, based on reported numbers of overdose deaths and the NSDUH’s estimated ratio of 1.3 people with undiagnosed opioid use disorder to each one treated for the condition. The state had another 37,000 users of illegal heroin and fentanyl, he estimated.
Miller said New Mexico needed a $28 billion abatement plan including $15 billion to build 16,000 housing units for the homeless and addiction treatment. His abatement plan anticipated placing 60,000 people in long-term addiction treatment plans, up from less than 20,000. The state spent $148 million on such plans in 2020.
The NSDUH estimated Florida had about 500,000 people misusing opioids in 2021, including 55,000 heroin users. Taking the higher number, Florida is paying its private lawyers about $240 per addict.