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Texas County’s Opt-Out From Opioid Settlement Could ‘Snowball’ (1)

Nov. 18, 2019, 6:22 PMUpdated: Nov. 18, 2019, 7:19 PM

Officials in Harris County, Texas, will opt out of the federal opioid litigation’s negotiating class—sending a major blow to the novel system designed to streamline the sprawling case brought by 2,800 local governments nationwide.

Harris County contains Houston and is the third-most populous county in the nation, with nearly 4.7 million residents. Based on its size, along with being home to a massive public hospital district, the region will be better off going it alone, Harris County Attorney Vince Ryan told Bloomberg Law.

“We want to make sure that we can maximize the part of the recovery we get,” he said. “We’re big enough that if we don’t agree with the settlement terms, we could litigate this independently.”

The problem, Ryan said, is that Harris County wasn’t named as one of the class representatives, and therefore it would be denied active involvement in formal settlement negotiations with opioid wholesalers and distributors. At the same time, the county would be bound to any settlement approved through the negotiation class.

If other communities follow suit, it would be a significant shift that could undermine efforts by Judge Dan Polster, who is overseeing the opioid cases in the U.S. District Court for the Northern District of Ohio, to use broad negotiations to resolve the complex litigation more swiftly, said Richard Ausness, a professor at the University of Kentucky College of Law.

“You could have a snowball effect,” he said. “The whole thing collapses if you don’t get 75% of the class opting in.”

Ausness is referring to the three-quarters supermajority participation by cities, counties, and Native American tribes that is required for the negotiation class to proceed with any settlement offer that is made. He added that defendants will have “little incentive to negotiate with the class if a lot of potential plaintiffs opt out of the class.”

Polster approved the novel negotiation class on Sept. 11. The concept was designed to allow more than 34,000 local governments across the U.S. to enter into a universal settlement with some of the largest companies in the nation, including Cardinal Health.

It’s a good option for defendants because it offers them a more complete resolution of their liability in the massive litigation, Ausness said.

Opt-Out Unwise?

Attorneys leading negotiations in the multidistrict litigation said it was unwise for Harris County and others to opt out.

“Communities that opt out are extremely short-sighted and are either failing to understand or ignoring the fact that any community can remain in the class while at the same time proceeding to trial or settlement in their individual cases, leaving open the option to choose the benefits of an individual settlement or alternatively of a class-wide settlement for years to come,” Paul J. Hanly Jr., co-lead counsel representing municipalities in the case, said in a statement.

It’s unclear how much money Harris County would get out of any settlement through the negotiation class, and, given its size, the community is dealing with huge, expensive damages as a result of the opioid crisis, Ryan said. He added that he expects “a significant amount will” join the county in opting out by the end of the week.

“Quite frankly, becoming part of the class limits some of our options,” he said.

However, David Noll, a professor at Rutgers Law School, said Harris County may be needlessly worried because attorneys who are selected to represent a whole class of plaintiffs have a fiduciary responsibility to act in the interest of that entire class—even if that means overruling their direct clients.

“A lot depends on what happens next,” Noll said.

“If Harris County triggers a wave of opt-outs, then the practical value of the negotiation class is weakened because MDL (multidistrict litigation) leadership can no longer claim to be negotiating on behalf of all local governments in the U.S.,” he added.

Pegi Block, assistant Harris County attorney, said officials are in the process of filling out the required paperwork and submitting it by the opt-out deadline of Nov. 22.

The negotiation class would allow the plaintiff local governments to work as a class and divvy up settlement dollars based on a pre-determined formula. That’s unusual because the settlement class members must make their decision on whether to opt out before knowing the size of the settlement with any defendant.

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.

(Updates to add comment from David Noll in the 14th paragraph.)

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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