In the Opioid Litigation, It’s Now States v. Cities

August 6, 2019 – When tobacco companies agreed to pay states $206 billion two decades ago to settle litigation over the public-health costs of smoking, cities and counties eagerly awaited their share of the money. For the most part, it never came.

Now, in similar litigation seeking to hold the pharmaceutical industry accountable for the opioid crisis, local municipalities aren’t waiting around. Hundreds of cities, counties and Native American tribes have filed lawsuits directly, many suing before state attorneys general went to the courthouse to file their own actions.

The dueling tracks are coming to a head, with 38 state attorneys general opposing a novel proposal by plaintiffs’ lawyers to form the country’s 33,000 cities, towns and counties—even those who haven’t yet sued—into one negotiating bloc aimed at settling the opioid cases.

A standing-room-only crowd of 100 lawyers gathered in Cleveland on Tuesday to argue for and against the proposal before U.S. District Judge Dan Polster, who is overseeing the consolidation of some 2,000 opioid cases filed in federal court.

Virtually every state has filed its own opioid lawsuit in its respective state courts, which haven’t been sent to Judge Polster. Underlying some of the objections to the proposed negotiating body is the fear that any deal reached in the Cleveland cases could leave the states on the outside looking in.

Jonathan Blanton, a deputy attorney general in Ohio, argued in court the proposal risks undercutting states’ rights to settle their own cases. State legislatures and attorneys general, he said, are best situated to “ensure the money goes to where the harm really is.”

Judge Polster, who has actively pushed for settlement since the cases began, said companies will have to separately settle with states too, but that this offers one way of broadly settling the local cases. “There needs to be some vehicle to provide resolution to these cases,” he said, repeatedly asking objectors: “What are you proposing as an alternative?”

If the tool is officially approved by Judge Polster, companies could choose to use it settle with the cities and counties or continue fighting claims or pushing settlements on their own.

Any settlement would need the approval of 75% of participating local governments. An online calculator shows how money would be allocated nationwide in a theoretical $1 billion settlement, based on factors like population and overdose deaths. Los Angeles County, for instance, would get $12 million, while Boise, Idaho would get $11,355.

Settlement talks are likely to become more active as an October trial date looms in two test trials in Judge Polster’s court.

In a court filing, the opposing state attorneys general argued the proposed negotiating class intrudes on state sovereignty and interferes with states’ ability to vindicate the rights of their citizens.

“What we’re encouraging here is a cannibalization by the people who raced to the courthouse,” Ohio Attorney General Dave Yost said in an interview. Mr. Yost took office in January and inherited a lawsuit brought in 2017 against OxyContin-maker Purdue Pharma LP and others by his predecessor, now-Gov. Mike DeWine.

Local governments, meanwhile, say they are at the front lines of the epidemic and are better placed to put settlement money to use.

“We are the ones answering the 9/11 calls, dealing with overdoses in our library bathrooms, and seeing the impacts on families in our foster care system,” said Denver City Attorney Kristin Bronson. “The casualties have really been felt at the local level.”

Paul Geller, a Florida plaintiffs’ lawyer representing the cities and counties, said the attorneys general have been eager to get access to information that has come out of the Ohio litigation. “But apparently when it comes to self-organizing for purposes of negotiating, that somehow goes too far,” said Mr. Geller, who also represents the state of Maryland.

Many states have only sued Purdue Pharma. Cities and counties, meanwhile, have targeted a range of some two-dozen manufacturers, distributors and pharmacies.

Tensions over how to allocate money from opioid settlements have already emerged in Oklahoma, where two companies agreed to pay a total of $355 million ahead of what became the nation’s first opioid trial.

After Oklahoma Attorney General Mike Hunter reached a $270 million settlement with Purdue Pharma that allocated the majority of the funds to an addiction treatment center, state legislators passed a law requiring all future settlements to go directly to the state treasury. The Purdue deal also raised complaints from local Oklahoma governments, which were allocated $12.5 million of the funds.

Before a state-court judge would approve the second deal, an $85 million payment from Teva Pharmaceutical Industries, he received assurance that despite the new law, the state would still use the money to help abate the opioid crisis.

Meanwhile, on Tuesday, drugmaker Mallinckrodt said it would suspend plans to spin off its division that sells generic products, citing unfavorable market conditions and “increasing uncertainties created by the opioid litigation.” The drugmaker had already announced board members and executives to lead the new company, which would have retained the Mallinckrodt name.

The nation’s three biggest drug distributors, McKesson Corp., Cardinal Health and AmerisourceBergen, have been in settlement negotiations with state attorneys general, but the two sides are still far apart on numbers, people familiar with the matter said. The states want as much as $45 billion, while the companies don’t seem willing to go above $10 billion, the people said. These talks, which were earlier reported by Bloomberg, aren’t part of negotiations with plaintiffs representing cities and counties whose cases have been consolidated in federal court in Cleveland.

AmerisourceBergen said Tuesday it is vigorously defending itself in the pending lawsuits. McKesson said it regularly engages with other parties about a path toward a global resolution but has made no settlement offer. Cardinal didn’t immediately respond to a request for comment.

Judge Polster said during Tuesday’s hearing the cases in his courtroom stem from the legacy of the tobacco settlement, where by some estimates 90% of funds went toward general state uses instead of reducing smoking and treating lung cancer. He said he believes the city and county opioid lawsuits were filed “to ensure that doesn’t happen again.”The judge also underscored the complexity of the cases in front of him and again encouraged the parties to work toward settling. “If someone says, why is the federal judiciary trying to address a 20-year social epidemic?” he asked, “I might share that question.”

By Sara Randazzo, The Wall Street Journal
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