As published on Legal Newsline:

COLUMBUS, Ohio, Oct. 17, 2019 (Legal Newsline) – Ohio Attorney General Dave Yost has warned his fellow AGs that a reported $50 billion settlement of opioid claims will fall apart unless the states demand tight controls on fees to private lawyers and make sure the rest of the money is directed toward programs designed to address the opioid crisis, instead of state general funds.

In his letter, Yost says the settlement is in danger of descending into the divisiveness that has marked the bankruptcy of Purdue Pharma, where half the states and some 2,000 municipal plaintiff support a proposed $12 billion settlement and half the states object, saying it doesn’t extract enough money from the founding Sackler family.

Yost also says any settlement must include a court order dictating how the money will be spent and an agreement to limit attorneys fees. Ohio has a $50 million limit on fees for private lawyers but that cap doesn’t apply to cities and counties, many of which signed contracts with contingency fees as high as 30%. With a $1 billion settlement, Ohio’s lawyers would get $50 million, he wrote, while lawyers for cities and counties could get $330 million.

“That extra $275 million should go to fight the epidemic, not to line the lawyers’ pockets,” Yost wrote. “Any settlement must include terms to address this gross inequity.”

Yost wrote the letter to the AGs of North Carolina, Pennsylvania, Tennessee and Texas, who are leading negotiations over a global settlement with opioid manufacturers and distributors. Talks have heated up in advance of a bellwether trial scheduled to begin Monday that could establish the industry’s liability and potential damages for thousands of pending opioid cases in federal and state court. The plaintiffs in the bellwether trial are Cuyahoga and Summit counties in Ohio.

The industry is widely reported to be working on a settlement that parties may discuss as soon as Friday in the court of U.S. District Judge Dan Polster in Ohio. From the beginning, the multidistrict litigation involving thousands of cities and counties has been troubled by a major problem: Federal courts have no jurisdiction over the states in this matter, and the defendants won’t settle without releases from state claims.

The reported agreement involves states and municipalities, but lacks important details, Yost said. Any agreement must take into account the fact Ohio was one of the only states to sue distributors, who are likely to supply the bulk of the settlement money, he said.

“Any agreement that treats non-litigating states the same as those who have sat on the sidelines watching while others carried the battle is unfair and inappropriate,” he wrote.

He also cited the “lack of consultation with other attorneys general,” which increases the risk of a standoff among the states – like in the Purdue bankruptcy.

“It is obvious that such an outcome would not produce a workable settlement in an environment that does not include a bankruptcy judge to adopt a plan by order over the objections of some creditors,” he wrote.

Yost has been a vocal opponent of the role of municipal plaintiffs and the proceedings in federal court. He asked the Sixth Circuit Court of Appeals to halt the bellwether trials, a motion the appeals court denied. He also led a group of 37 state AGs who opposed an untried “negotiation class” to settle the litigation, under which every city or county in the U.S. would be involved unless they opt out in the next few weeks. Judge Polster approved the class in September.

It is not known if the distribution mechanism laid out in that proposal will be used to distribute global settlement proceeds beyond the 2,500 or so municipal plaintiffs that have filed suit so far. Absent such a structure, tens of thousands more municipalities would have an incentive to sue to obtain their share of the money.

Ohio has hired a fleet of private attorneys from some of the most prominent class-action firms in the U.S. including Hagens Berman, Baron & Budd and former Mississippi AG Mike Moore. Lawyers suing the distribution industry are operating under a separate contract. They include Keating, Muething & Klekamp, Fields PLLC and Gilbert LLP.

Yost suggested a settlement must include a consent decree prohibiting the money from being deposited in state general funds. It is not clear how that would square with laws like the one Oklahoma legislators passed after the state AG negotiated settlements with Purdue and Teva steering more than $350 million to the Oklahoma State University, Oklahoma AG Mike Hunter’s alma mater. Oklahoma passed a law after those settlements requiring all future funds to be deposited in the state treasury.

Categories: Opioid crisis