States Clash With Cities Over Potential Opioids Settlement Payouts

The New York Times | Jan Hoffman

Over the last 18 months, progress toward a settlement in the massive federal opioid litigation has stalled, even as the costs of the crisis continue to mount.

Now, an inventive plan to jump-start negotiations, recently put forth by lawyers for the nearly 2,000 cities and counties that have brought cases, is facing attacks from an unlikely source. Pushback that could torpedo it is coming less from the corporate defendants than from the localities’ uneasy allies: the states.

It is a struggle over power, politics and money. And in an arena filled with outsize egos, the fight is also very much about who will get to claim credit for resolving a public health crisis that has killed more than 200,000 people since 1999 and sunk many more into debilitating addiction.

A hearing on the proposal is scheduled for Tuesday in Cleveland before the federal judge who is overseeing the cases, Dan A. Polster.

The plan was devised to address a major sticking point: The defendants, including manufacturers that developed and made the drugs, Fortune 20 companies that distributed them and national pharmacy chains that sold them, want an end to the constant stream of lawsuits.

So lawyers for the plaintiffs suggested allowing all 34,000 towns, cities and counties in the country to vote on settlement offers. After an offer is approved, they will be bound by the outcome and can bring no further suits. All voting communities affected by the crisis would get a portion of the payout.

But a letter signed by a bipartisan coalition of 39 state attorneys general raises arguments that could topple the ambitious proposal and further slow talks.

Rather than myriad cities and counties, they contend, it is the states, through law enforcement and regulatory authority, that can efficiently wrest a high-impact national agreement. They maintain that this plan goes behind the backs of the states pursuing cases brought by their own attorneys general, who are elected or appointed. By contrast, local governments are using private lawyers, who work on contingency fees.

The states also fear that the plan would corral money for the cities and counties that they should control. And because this “negotiation class” is untested, they argue, it is likely to be appealed, delaying remedies for everyone.

“In my view, it’s the plaintiffs’ lawyers using local governments to hijack the sovereignty of the states and create ‘city states,’ ” said Dave Yost, the Ohio attorney general, who filed a letter critical of the plan. “But this is not the United City-States of America.”

The plaintiffs also intend their proposal to be a course correction to the Big Tobacco settlement, as well as a possible template for future resolutions in such public welfare areas as firearms, climate change and environmental pollution.

The 1998 Master Tobacco Settlement, which resulted in payouts of some $250 billion, was struck between five cigarette manufacturers and 46 states seeking reimbursement for their Medicaid programs for treating tobacco-related illnesses. But much of the money went to discretionary funds of state legislatures. Especially in the wake of the 2008 financial crisis, hefty amounts were redirected to balancing budgets and fixing potholes, rather than to local prevention and treatment programs.

Still bitter about those outcomes, communities whose coffers had been depleted by the opioid crisis decided to sign with private lawyers, circumventing the states.

Since 2013, when Chicago filed its opioid lawsuit, platoons of these private lawyers have taken more than 500 depositions, filed thousands of motions, read through more than 50 million pages of documents and analyzed raw code from the Drug Enforcement Administration about pill distribution. At Judge Polster’s direction, they have shared their trove with the states.

“None of the attorneys general complained while we were doing all that,” said Paul Geller, an attorney whose opioid clients include Los Angeles. “It kind of makes you wonder why seeking to organize for negotiation purposes all of a sudden crosses the line for them.”

Strictly speaking, the states, whose cases are in state court, have no say in the federal litigation. While all are suing some manufacturers, fewer are going after the deep-pocketed distributors, and fewer still have named pharmacy chains. With the exception of some states, including Oklahoma, Massachusetts and New York, opioid litigation by many attorneys general lags behind the federal cases.

But mindful that the conclusion of federal and state cases likely depends on each other, Judge Polster has regularly solicited input from the attorneys general.

So how do they really feel? The states bluntly say that the negotiation plan usurps a role that is properly theirs.

Under the legal doctrine called “parens patriae” — parent of the nation — states, in a wide swath of cases, often assume the role of vindicating the interests of vulnerable citizens.

“We have a vision of the state attorneys general as being preferable because they’re insulated from money,” said Adam Zimmerman, who teaches complex litigation at Loyola Law School, Los Angeles.

“But they’re not insulated from politics,” he added, noting that the position is often a steppingstone to higher political office.

Mr. Yost, the Ohio attorney general, and others argue that these cases should be resolved from the top down, not the bottom up. But each state’s relationship with local government, enshrined in its constitution and laws, varies. Funding sources for the diverse costs of the opioid crisis, whether local or state, also differ from state to state.

And so the states say they should disburse the money. The fly in that ointment is that many states preclude attorneys general from distributing settlement money, because their legislatures control such funds.

Rather than approving the plaintiffs’ plan, Mr. Yost said, Judge Polster could ascertain each state’s relationship with its municipalities. He could then encourage those with similar laws and interests to negotiate in groups. That process, Mr. Yost predicted, would be more streamlined than this proposal.

“If I were a defendant, I’d be very wary of dealing with the cities and counties, knowing that the state attorneys general were still gunning for me,” said Elizabeth C. Burch, a law professor at the University of Georgia who closely follows the litigation. “I’d be more inclined to do a global deal with them that pre-empts the city and county cases.”

Mr. Yost said that if the states oversaw negotiations, private lawyers would still get paid — any settlement would include a separate money bucket for them. “But I think that’s a one-gallon bucket for washing the car and they think it should be an oil tanker.”

There’s a love-hate relationship between the states and private lawyers, he said. While a government’s use of private lawyers dates to early English common law, the biggest boost to that practice came during the tobacco litigation itself, when state attorneys general, strapped for resources, turned to them.

Some of those very same lawyers are now in the opioid litigation, working for cities and counties — and, indeed, a handful of states.Mr. Geller’s opioid clients include Maryland’s Montgomery County in federal court and Maryland itself, in state court.

While that dual representation may prompt skepticism, Mr. Geller said that it served the interests of time and coordination, because so much material overlaps.

At the outset of the litigation, Judge Polster established two parallel tracks. One is to prepare for trial, the first of which is set for Oct. 21 in Cleveland.

The second is to pursue negotiation, to bring remedies as soon as possible. That track has sputtered along, mostly because the defendants have pointed fingers at each other, disputed liability and faulted the federal government’s role in overseeing the sale and distribution of drugs.

The concept for this negotiation group was developed by several law professors, who now have roles in the opioid litigation, and refined by the plaintiffs’ lawyers. (The group would not include other parties like tribes and third-party payers.)

It uses an allocation map that shows each municipality what share to expect from a settlement, calculated with federal data about pill distribution, opioid-related overdoses and deaths.

“All the political entities have gotten notice about this plan,” said Samuel Issacharoff, a law professor at New York University who worked on the proposal, referring to the cities and counties, “and it’s noteworthy that we’ve heard no substantial opposition to it.”

If Judge Polster does certify the proposal, it is unclear whether the states or even the defendants can appeal.

The manufacturers’ motion says that they “take no position on whether the court should grant plaintiffs’ motion,” a possible indication of their willingness to negotiate.

But the distributors are fighting hard. The plaintiffs responded by saying, essentially, that the plan is not about the distributors — it is only about how to organize the plaintiffs. If the distributors do not like the plan, the plaintiffs’ lawyers wrote, “fine. Don’t negotiate with it. Don’t settle with it.”

Nonetheless, added Mr. Geller, who represents Los Angeles, “it’s time to try to land the plane.”

Read the full story on The New York Times website here.

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