On The Case

State AGs pose big obstacle for novel opioids negotiating class proposal

(Reuters) - Bold innovations often require a bit of tinkering. So it shouldn’t be much of a surprise that the incredibly creative idea of certifying a class of all of the 24,500 local governments in the country to negotiate a global settlement with opioid defendants is going to take a little more time to design.

But after reading two letters in which more than two dozen state attorneys general outline their problems with the idea of cities and counties from across the country banding together to negotiate an opioids deal, I’m not sure that mere tinkering is all that’s required – especially if the goal of the lawyers who proposed the innovative negotiation class is to push opioid defendants into a global settlement.

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You’ve probably heard about the proposal by plaintiffs’ lawyers representing more than 1,800 city and county governments suing pharmaceutical companies, drug wholesalers and drugstore chains for sparking an epidemic of drug abuse. U.S. District Judge Dan Polster of Cleveland, who is overseeing the nationwide opioids MDL, has been pushing for a global settlement since practically the day he was assigned the case. Defendants have balked. For one thing, they deny that they illegally marketed or sold opioid products, which are tightly regulated by the federal government, and contend that illegal heroin and fentanyl, and not their prescription pharmaceuticals, are to blame for the rash of drug overdoses. For another, defendants are worried about the practical obstacles to global peace. Sure, nearly 2,000 cities and counties are in the MDL, but they’re only a fraction of the local governments in the country. Any settlement with plaintiffs in the consolidated litigation would just attract more claims.

Lead plaintiffs' lawyers in the MDL came up with a solution, presented in a June 17 filing before Judge Polster. They asked the judge to certify a class of all of the cities, counties and other local governments in the country – but only for the purpose of negotiating global settlements with defendants in the opioids litigation. All of the local governments would have a say in whether to accept settlement proposals, based on factors including their population and incidence of opioid abuse. In a blog post explaining the novel idea, co-lead counsel Joseph Rice of Motley Rice argued that the negotiating class would maximize the collective leverage of city and county governments – but would also give defendants an opportunity to settle claims en masse, shutting down their exposure to opioid claims.

Judge Polster held a hearing Tuesday on the motion to certify the negotiating class. As my colleague Nate Raymond reported, the judge himself seemed open to the idea, noting, “We need a novel solution to a novel problem.”

Plaintiffs’ lawyers nevertheless asked the judge to delay consideration of their proposal so they can rework pieces of it. Plaintiffs executive committee member Paul Geller of Robbins Geller Rudman & Dowd told Judge Polster that he and the other lawyers leading the case believe they can make some adjustments to address concerns raised by some of the defendants and by state AGs.

Can they? And even if MDL plaintiffs manage to get a negotiation class certified, will defendants actually come to the table?

The state AGs seem to me – and to law professor Adam Zimmerman of Loyola Law School in Los Angeles, whom I consulted on this question – to be a real problem for plaintiffs in the MDL. Remember, almost every state has filed a suit attempting to hold at least one opioid defendant liable for spurring drug abuse. No state AG’s case is currently being litigated in the federal court MDL before Judge Polster. So while cities and counties pursue their claims in federal court, the states that contain those cities and counties are chasing overlapping claims in their home courts. To offer one concrete example: the county government of Broward, Florida, is a plaintiff in the multidistrict litigation in Cleveland (and, in fact, is proposed to serve as a class representative in talks with opioid defendants if the judge certifies a negotiating class); Florida’s state AG, Ashley Moody, is meanwhile litigating a separate suit against many of the same defendants in state court in Pasco County.

Who gets to decide how much opioid defendants must pay to settle these overlapping claims by state and local government officials – and how that money is allocated within the state? The proposed MDL negotiating class offers allocation formulas and a suggestion for a board to resolve disputes between state and local governments about distributing recoveries. But Moody and 23 other state AGs, along with the AGs of Guam and Washington, D.C., argued in a June 24 letter to Judge Polster that these proposals threaten state sovereignty over their litigation in state court.

The AGs also contend that the proposed negotiating class creates federalism problems: By proposing a formula to allocate settlement funds among cities and counties across the country, the negotiating class would interfere with states’ rights to decide how to work with local governments within their borders. Instead of encouraging a global resolution of the opioid crisis, these AGs said, the negotiating class would impede it by driving a wedge between local governments in the MDL and state AGs litigating outside of it.

In a separate letter, 26 state AGs and the AG of Washington, D.C., argued that the proposed negotiation class may not even be certifiable under the federal rules governing class actions because of differences among state consumer laws and statutes dictating the relationship between state and local governments. (There’s considerable overlap between the state AGs who signed the two letters, but several states signed only one or the other, not both.) The second AGs’ letter also argues that the proposed negotiation class would interfere with states’ sovereign rights by attempting “to impose obligations on the Attorneys General in how they interact with the political subdivisions within their respective states.”

It’s important to keep in mind, as Loyola professor Zimmerman pointed out to me, that many states, including high-profile opioid litigants like Massachusetts and New York, signed neither letter. It’s also worth remembering that local governments (and the private lawyers they hired) were pushing litigation against opioid defendants before most state AGs decided to sue.

But the AGs who have signaled opposition to the negotiation class “are a really significant group that has to be reckoned with,” said Zimmerman. For defendants, the whole point of working with a class in the MDL would be to achieve a global resolution of claims, Zimmerman said, but that’s impossible if the state AGs won’t participate.

Obviously, the AGs can’t be bound to a settlement negotiated in a federal court that does not have jurisdiction over their claims. The question, however, is whether they work alongside or against the local governments litigating in federal court. It may turn out, Zimmerman said, participation in the MDL class will depend on whether state laws allow cities and counties to litigate independently. Local governments in states that do not grant them independent rights may have to opt out of the class.

“It may be that defendants can’t achieve global peace – but they can achieve some peace,” he said.

Co-lead MDL counsel Rice told me there’s no doubt that some defendants won’t settle with the MDL plaintiffs unless state AGs also settle. Others, he said, want to cut out the local governments in the MDL and reach deals with state AGs that attempt to resolve claims by MDL plaintiffs as well. One of the AGs’ letters to Polster hints obliquely at an AG-centered deal in a reference to AGs meeting with Judge Polster on June 19 “concerning their ongoing efforts to negotiate prompt settlements of pending litigation.”

The negotiation class is a shrewd play by plaintiffs’ lawyers to magnify their leverage and prevent the AGs and defendants from attempting to freeze them out of a role in global settlement negotiations. Judge Polster appears to be willing to give it a try. But its ultimate effectiveness will depend on persuading the AGs to buy in.