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J&J Opioid Ruling Provides Clues to How Much Others Could Pay (1)

Aug. 26, 2019, 9:15 AMUpdated: Aug. 26, 2019, 8:37 PM

There are major differences between an opioid lawsuit against Johnson & Johnson in an Oklahoma state court and a much bigger, multi-district case on the same issue in the Northern District of Ohio—but lawyers watching both say the outcome of the first still offers insights into how the odds are stacked in the second.

Judge Thad Balkman Aug. 26 ruled that Johnson & Johnson must pay $572 million to Oklahoma for wrongfully marketing opioid drugs in the case in Oklahoma state’s District Court for Cleveland County. The Ohio jury trial is slated to begin Oct. 21.

The two cases are in different types of courtrooms (state vs. federal); have different defendants (one drugmaker vs. the entire supply chain); and focus on different aspects of law (Oklahoma’s unique public nuisance law vs. multiple legal theories, including racketeering).

Settlement Value

The biggest clue Oklahoma offers for the Ohio case comes down to the payout.

“No opioid manufacturer has gone to verdict in a case like this, and we have only seen a handful of manufacturer settlements,” said David Noll, a law professor at Rutgers University. “The district court’s judgment in Oklahoma provides important information about the general settlement value of opioid cases.”

Harry Nelson, founder of Los Angeles-based health-care firm Nelson Hardiman, agreed, saying a J&J win in Oklahoma would have been a “rebuke to the public nuisance theory that will drive other settlements down.”

But an order to pay any part of the $17.5 billion sought is bad news for the defendants in Ohio. “I think the other pharmaceutical companies will be running in fear in terms of opening up more funding” for a settlement, he said.

State Has Settlement Leverage

Oklahoma Attorney General Mike Hunter’s highly visible involvement in the J&J case illustrates the leveraging power of a single, large plaintiff in negotiating settlements.

By contrast, the multi-district case is being litigated by private plaintiffs’ law firms retained by cities and counties. Those firms won’t be able to negotiate settlements at a state level, which means they probably can’t count on deals like the ones Hunter was able to reach with drugmakers Purdue Pharma LP (for $270 million) and Teva Pharmaceutical Industries Ltd. (for $85 million).

Judge Dan Aaron Polster will preside over the Ohio case, which consolidated thousands of suits into one bellwether, or test, case. The outcome of the bellwether will determine whether the individual parties will negotiate some kind of settlement or continue fighting the patchwork of legal claims on behalf of cities, counties, and Native American tribes. Polster has urged all parties in the massive case to work toward individual settlements.

“Defendants would rather be negotiating with states, and this gives states settlement leverage that cities and counties don’t have,” Noll said.

In Oklahoma, the plaintiff is the state, while the next case is being brought by two counties in Ohio that serve as the lead plaintiffs representing some 2,000 similar suits that have been lumped together in the U.S. District Court for the Northern District of Ohio.

Jury or Judge?

The difference between state and federal court could also be relevant because “judges like to be a little more defendant-friendly in federal court,” said Richard Ausness, a professor of law at the University of Kentucky.

“Generally speaking, plaintiffs lawyers don’t feel as comfortable in federal court,” he added.

In addition, the Oklahoma case was a bench trial, argued before a judge instead of a jury. Juries also tend to be friendlier toward defendants on a complex issue like the opioid crisis, where many Americans still place blame squarely on the shoulders of the addicts themselves rather than the supply chain, Ausness said.

But Nelson said a jury trial could backfire for defendants in Ohio due to widespread outrage that has emerged as the opioid epidemic has touched the lives of American families.

“I think J&J was willing to roll the dice and go to trial because they knew they were going to get a judge who was much more factually driven and less emotional in making a decision,” he said. “There’s a huge risk that public anger and disgust is going to come through in a jury decision.”

J&J Has ‘Strongest’ Defense

Johnson & Johnson and its Janssen unit are the only defendants in the Oklahoma case, making it easy for them to point fingers at other drug companies. J&J argued that Purdue and illegal drug traffickers were to blame for the Oklahoma opioid crisis.

“If defendants use the ‘blame the other guy’ defense in the Ohio case, it will work to the advantage of counties, because defendants will essentially be making the counties’ case for them,” Noll said. “This is a major strategic problem for the defendants.”

In addition, the defendants in Ohio are from all corners of the drug industry—manufacturers, distributors, and pharmacy chains. Lawyers watching the case want to know if the plaintiffs’ attorneys will be able to divide and conquer.

“One strategy could be for all manufacturers and distributors to say, ‘We agree there’s a crisis, but we followed the law, and the crisis was caused by doctors over-prescribing and drug traffickers bringing in fentanyl from Mexico and China,’” Noll said.

That could be tough, however, given that J&J chose to fight in Oklahoma, while Purdue and Teva settled—making it harder for the companies to stay aligned, Nelson said.

“The internal documents coming out of companies like Purdue make it clear they were very aware of the risks and addictiveness of their products,” he said.

“The evidence in the case against Johnson & Johnson is much more focused on the harm caused than any intentions,” Nelson said. “Johnson & Johnson had one of the strongest defenses of any opioid manufacturer in terms of this being an unfortunate accident rather than a deliberate corporate policy.”

In other words, because J&J lost, that doesn’t bode well for the defendants in Ohio.

The Legal Theories

Oklahoma focused on public nuisance law, while the Ohio case involves a variety of alleged violations—of public nuisance, the Racketeer Influenced and Corrupt Organizations Act (dubbed RICO, often used to target mafia organizations), conspiracy, and negligence laws.

The difference matters because the more liability theories in play, the more likely one of them is to stick, Ausness said.

In addition, having more legal theories in the Ohio case means the jury will be free to award a broader array of damages. For example, under RICO, a prevailing plaintiff can recover treble damages, litigation costs, and attorney’s fees.

The case is Oklahoma v. Purdue Pharma, Okla. Dist. Ct., No. CJ-2017-816, complaint filed 6/30/17

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