Appeals court nixes 'negotiation class' created for opioid settlement
The move is a setback for thousands of cities and counties working to streamline a global settlement.
Reversing another key decision by the federal judge overseeing opioid lawsuits, an appeals court has struck the certification of a novel class of thousands of cities and counties that was designed to streamline a global settlement.
In a Thursday ruling, the U.S. Court of Appeals for the Sixth Circuit reversed U.S. District Judge Dan Polster’s 2019 approval of the nation’s first “negotiation class,” which the lead plaintiffs lawyers in the multidistrict litigation pitched as a method to obtain a global opioid settlement involving a myriad assortment of parties. The 2-1 opinion is another rebuke to Polster, whose “clear abuse of discretion” prompted the Sixth Circuit to reverse one of his pretrial rulings on April 15.
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“The primary problem here is that the negotiation class ordered by the district court simply is not authorized by the structure, framework, or language of Rule 23,” wrote Judge Eric Clay, for the majority on Thursday, referring to Federal Rule 23 of Civil Procedure, which governs class actions. “But even if not unauthorized, it is unlikely that the problems presented by the negotiation class, as conceived by the district court, can be overcome.”
In a lengthy dissent, Judge Karen Nelson Moore found the majority failed to account for the flexibility of judges to manage class actions and multidistrict litigation.
“The Federal Rules of Civil Procedure were not written and have never been interpreted to manacle district courts that innovate within the rules’ textual borders,” she wrote. “The district court has breathed life into a novel concept—a class certified for negotiation purposes—to aid in its Promethean duty to secure the just, speedy, and inexpensive resolution of this byzantine multidistrict litigation. We should be in the business of encouraging, not exterminating, such resourcefulness.”
The plaintiffs’ steering committee in the opioid MDL, represented by Samuel Isaacharoff, of New York University School of Law, who defended the “negotiation class,” emphasized in an emailed statement the “need for a national agreement with defendants so that they can deliver relief quicker to localities dealing with rising overdose rates compounded by the COVID-19 pandemic.”
“The negotiation class is a first-of-its-kind framework put forward by the plaintiffs as a voluntary option to resolve the federal opioid litigation and deliver much-needed resources to support the 33,000 cities, towns and counties of the class,” wrote co-lead counsel Paul Farrell, of Farrell Law; Paul Hanly, of Simmons Hanly Conroy; and Joe Rice of Motley Rice. “Defendants must deliver funding that will provide communities the resources they need for full abatement to move this case toward a complete resolution. Until then, we will pursue full transparency, accountability and restitution from the defendants in court as part of the upcoming trials in West Virginia and Ohio this fall.”
Trials are set for Oct. 19 in Charleston, West Virginia, between a West Virginia county and city against distributors AmerisourceBergen, Cardinal Health and McKesson, and Nov. 9 in Cleveland, Ohio, between two Ohio counties against pharmacies CVS, Rite Aid, Walgreens, HBC, and Discount Drug Mart.
Lawyers for those challenging the “negotiation class” — Sonya Winner, a San Francisco partner at Covington & Burling, who argued for McKesson and other distributors at a July 28 hearing, and Kevin Russell, of Bethesda, Maryland’s Goldstein & Russell, who argued for six Ohio cities — did not respond to requests for comment.
The unprecedented “negotiation” class is a master case designed to resolve all opioid lawsuits against drug companies and pharmacies. Polster certified the class as part of the MDL, but more than 33,000 governments could participate in the class, even if they have not filed opioid lawsuits. If they do not opt out, cities and counties would be part of the class.
Although no settlement exists, lawyers for the class used a hypothetical $1 billion settlement to calculate an estimated dollar figure for each government.
In a Dec. 2 report, lawyers said about 1.6% of counties and other governments had opted out, a turnout that one lead lawyer called a “landslide endorsement.”
Yet the idea has faced criticism—most notably, from the distributors and pharmacies that are defendants in the lawsuits. The defendants, and six Ohio cities, separately petitioned the Sixth Circuit to reverse certification of the class, and their appeals were combined.
The “negotiation” class, created by the late Francis McGovern, a professor at Duke University School of Law, and Harvard Law School’s William Rubenstein, is novel because it comes before any settlement but, also, is not for pursuing litigation. In most cases, judges certify class actions under those two circumstances, but lead plaintiffs lawyers in the opioid multidistrict litigation insisted that the proposal fits within the confines of Rule 23.
In Thursday’s ruling, the majority held that Rule 23 identified settlement and litigation classes, but not a negotiation class “or anything along those lines.”
“What plaintiffs fail to appreciate is that a new form of class action, wholly untethered from Rule 23, may not be employed by a court,” Clay wrote. “Ultimately, the speculative possibility that this negotiation class will settle a broad swath of the MDL does not bring it within the narrow textual confines of Rule 23 as a settlement class.”
Polster also “papered over the predominance inquiry” in Rule 23, because it is unclear whether various state law claims would be included in a class certified under federal claims such as the Racketeer Influenced and Corrupt Organizations Act.
“The fact that negotiation class members in the present case must choose whether to opt-out before knowing the settlement amount only heightens our concern,” Clay added.
But Moore, in her dissent, noted that class members could file objections to any proposed settlement.
She likened the “negotiation class” to the evolution of the settlement class, originally not envisioned under Rule 23. She also defended Polster’s Rule 23 review of the class, whose representatives include cities across the nation such as Atlanta, Chicago, Denver, Los Angeles and San Francisco.
She also found that the defendants lacked standing to appeal the “negotiation class,” which did not involve them, a position the majority rejected outright.
“The negotiation class is designed to fundamentally alter the nature of the MDL — to foster settlement through a novel means of class action that binds an unprecedented number of municipalities into a single bloc,” Clay wrote. “Defendants are pressured, or at least strongly incentivized, to negotiate with the class.”
A potential $48 billion global settlement fizzled last fall after lead counsel in the MDL, most of whom represent cities and counties, would not agree to the deal, hammered out by attorneys general in the states of North Carolina, Pennsylvania, Tennessee and Texas. The “negotiation” class excludes states, many of which opposed the idea and filed amicus briefs before the Sixth Circuit.
The concerns of the attorneys general about state sovereignty are overblown, Moore wrote in her dissent.
“These cities and counties seek damages for the direct harm that they allegedly sustained from defendants’ supposedly unlawful activities; their complaints detail the astronomical sums of money that these localities have spent on costs tied to the opioid crisis, including millions of dollars spent on opioid drugs, health care plans, and workers’ compensation,” she wrote. “It is perfectly within the prerogative of counties and cities to try to recoup these enormous expenditures.”
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