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Referee recommends sanction for Arnold & Porter in N.Y. opioid case

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Arnold & Porter offices in Washington, D.C. REUTERS/Andrew Kelly

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A court-appointed referee recommended that Arnold & Porter Kaye Scholer be sanctioned for failing to disclose evidence in a timely manner to the state of New York and two counties, which had accused its client Endo International Plc of fueling the U.S. opioid epidemic.

Joseph Maltese, a now-retired judge in the state's Appellate Division, Second Department, said that the law firm knew or should have known of the existence of the documents and their relevance to how Endo marketed its painkillers.

Those records included sale representatives' call notes and were turned over in the middle of a trial that began in June in New York and Nassau and Suffolk counties' case against Endo and other drugmakers alleging they had deceptively marketed opioids and downplayed their addictive risks.

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Maltese said those records were produced late despite the fact that Endo was already facing accusations it withheld the same type of records in a similar case in Tennessee, prompting a judge to later find the company liable by default as a sanction.

He recommended Suffolk County Supreme Court Justice Jerry Garguilo award the plaintiffs reasonable attorneys fees and issue monetary sanctions against Arnold & Porter.

Arnold & Porter in a statement said: "While we do not agree with all of the statements made in this report, we are gratified that the referee rejected the vast majority of plaintiffs' unfounded allegations and attacks on the integrity of our firm."

Following the production of the documents at trial, the state and the counties had sought sanctions against Endo and Arnold & Porter and asked Garguilo to enter a default judgment of liability against the drugmaker.

Facing that threat, Endo instead settled the case for $50 million on Sept. 9, after already settling the Tennessee case for $35 million. But the New York plaintiffs continued pushing for sanctions against Arnold & Porter.

Garguilo had referred the matter to Maltese to assess. In a 20-page report, Maltese said Arnold & Porter was "deficient in timely disclosing the documents," prejudicing the parties.

"This decision brings a world of hurt upon Arnold & Porter," said Hunter Shkolnik, a lawyer for Nassau County at Napoli Shkolnik. "The bad conduct here doesn't fly in New York courts and they are now looking at millions of dollars in sanctions."

Arnold & Porter, which had turned to Charles Martin of Steptoe & Johnson to fight sanctions threat, has denied wilfully withholding the documents and said their late production was a mistake.

While Maltese did recommend sanctions, he declined to endorse the plaintiffs' bid to bar the firm from representing Endo; refer one of its partners, Pamela Yates, for discipline in California, where she is based; or sanction another law firm representing Endo, Redgrave.

Endo did not respond to a request for comment. New York Attorney General Letitia James' office had no immediate comment.

More than 3,000 lawsuits have been filed by state and local governments accusing opioid manufacturers of falsely marketing opioid drugs as safe, and distributors and pharmacies of ignoring red flags that they were being used illegally.

The nation's three largest drug distributors - McKesson Corp, AmerisourceBergen and Cardinal Health - recently proposed paying up to $26 billion to resolve the opioid cases against them.

Endo was not part of that settlement, nor were two other drugmakers AbbVie Inc and Teva Pharmaceutical Industries Ltd, who remain on trial in New York.

The case is In Re Opioid Litigation, Suffolk Supreme Court, No. 400000/2017.

For Suffolk: Jayne Conroy of Simmons Hanly Conroy

For Nassau: Hunter Shkolnik of Napoli Shkolnik

For New York: John Oleske of the New York Attorney General's office

For Arnold & Porter: Charles Martin of Steptoe & Johnson

For Endo: James Herschlein of Arnold & Porter Kaye Scholer; Hank Bullock of Mayer Brown; Jonathan Redgrave of Redgrave

For Teva: Nancy Patterson of Morgan, Lewis & Bockius

For Allergan: Mike Brock of Kirkland & Ellis

Read more:

Drugmaker Endo settles opioid claims by New York, counties for $50 mln

Special master to consider default against Endo in opioid trial

Endo now faces contempt as well as default in N.Y. opioid trial

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Our Standards: The Thomson Reuters Trust Principles.

Nate Raymond reports on the federal judiciary and litigation. He can be reached at nate.raymond@thomsonreuters.com.

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