Deadline Hits for Local Governments to Opt Out of Opioid Class (1)

Nov. 22, 2019, 10:20 AMUpdated: Nov. 22, 2019, 9:01 PM

The deadline has arrived for thousands of U.S. cities and counties involved in a massive lawsuit against the opioid supply chain to decide whether to opt out of the negotiating class established to streamline the litigation.

Preliminary numbers reveal very few are choosing to go their own way—good news for the plaintiffs’ leadership team, which needs buy-in from three-quarters of local governments in order to work.

The multidistrict litigation has seen “very minimal” opt-outs, with fewer than 400 as of Friday afternoon, said Jayne Conroy, a partner with Simmons Hanly Conroy and co-lead of the negotiation class. While more than 2,800 communities around the country have been included in the multidistrict litigation, the deadline also applied to each of the nearly 34,000 towns and cities nationwide that are eligible to participate in the class, she said.

Novel Approach

The negotiation class is a novel arrangement that federal Judge Dan Polster approved in September. It unites the negotiating power of the many local governments and would allow defendants to resolve the bulk of liability rather than reaching settlements and litigating each case individually. The multidistrict litigation is being heard in the U.S. District Court for the Northern District of Ohio.

The process will allow the local governments to divvy up settlement dollars based on a predetermined formula.

That’s unusual because the settlement class members must make their decision on whether to opt out of the class before knowing the size of the settlement with any defendants, which include opioid distributors McKesson, AmerisourceBergen, and Cardinal Health.

Of the total pot, 75% would be divided among the settlement class counties and cities based on a formula that reflects public health expenses those communities have and will incur in responding to the opioid addiction crisis; 15% would go toward special needs of hard-hit communities; and 10% would be set aside for attorneys’ fees.

Why Opt-Outs Matter

The catch: If a supermajority of at least 75% of plaintiffs don’t buy into the class, it won’t have the power to proceed with any settlement offer that is made.

Lawyers leading the litigation are closely counting any opt-out filings coming by the Nov. 22 deadline and feel confident at this point that the three-quarters goal is well within sight.

“We’re pleased but not surprised,” Conroy said. “Although this is a new idea, this negotiation class, it’s really a tremendous opportunity for counties and cities across the United States to have a unified voice.”

The class is the fastest way to get money to local governments that are reeling from the opioid crisis, she said.

It’s also the best method for the defendants, which include some of the nation’s biggest companies, to get a near-global resolution of their liability.

“It’s difficult for individual cities and counties, they can’t really negotiate with the defendants unless they have an upcoming trial,” Conroy said. “This is a really effective vehicle that could bring closure to the defendants because they could receive a release from all the cities and counties.”

Hunter Shkolnik, an attorney on the executive committee for the multidistrict litigation, said that some counties and cities that had initially opted out have since changed their mind and withdrawn their paperwork.

“There’s strength in numbers,” said Shkolnik, a founding partner with the Napoli Shkolnik law firm in New York. “The fact that large numbers of cities and counties did not walk away from this and they support it makes me feel very comfortable that counties and cities want to band together.”

Challenges Ahead

Notably, officials in Harris County, Texas—which includes Houston and is third-most populous county in the nation—revealed their plans last week to opt-out of the negotiation class.

Harris County Attorney Vince Ryan said he anticipated many more municipalities would follow their lead.

In addition, the issue of whether the negotiation class is permitted under legal rules will be taken up by the U.S. Court of Appeals for Sixth Circuit.

Six Ohio cities and a group of pharmaceutical distributors and pharmacies sought interlocutory review of Polster’s ruling under Federal Rule of Civil Procedure 23(f). The rule allows parties to seek immediate appeal of class certification decisions, but the appeals courts rarely grant the petitions.

The case is In Re National Prescription Opioid Litigation, N.D. Ohio, No. 17-md-2804, 11/22/19.

(Updates third graph with new numbers late Friday.)

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Randy Kubetin at rkubetin@bloomberglaw.com

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