As opioid litigation expands, Vermont towns weigh their options

Posted November 7th, 2019.

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By Mike Dougherty

Last month, a packet of paperwork arrived at the town office in Kirby. The U.S. District Court for the Northern District of Ohio needed to know: Did this Northeast Kingdom town of less than 500 people want to join a historic multi-district lawsuit against the companies accused of fueling the opioid crisis?

“We really didn’t have much of a chance to look it over,” Wanda Grant, Kirby’s town clerk, said last week. The packet included a form: If town officials signed it, they would opt out of the suit. If they did nothing, the town would become part of a negotiating class that stands to include tens of thousands of municipalities around the country. The town’s three-member selectboard would discuss the proposal at its next meeting.

Similar paperwork has landed at local governments around Vermont and the nation. Over the next two weeks, each of those municipalities will decide whether to join the broad-ranging lawsuit against several opioid manufacturers, distributors, and pharmacy chains.

Vermont Attorney General TJ Donovan is now recommending that Vermont towns and cities join the suit. In a letter to local leaders, first reported by VPR on Tuesday, Donovan says joining the litigation may be the simplest path for municipalities to get reimbursed for their efforts fighting the crisis.

“I think it’s important that the cities and towns that have been on the forefront of this crisis have a role to play if there’s a potential recovery, and to get some money back to the Vermont cities and towns,” Donovan said Wednesday.

The attorney general’s office has separately brought lawsuits against OxyContin manufacturer Purdue Pharma, members of the billionaire Sackler family who own Purdue, and two major opioid distributors. Donovan had previously opposed opening the national suit to a broad list of municipalities, signing onto a letter stating that the maneuver could interfere with the state’s settlement negotiations. But Donovan said that the court has now established a framework that resolves those concerns.

U.S. District Court Judge Dan Polster, who is based in Ohio, is overseeing the consolidated lawsuits of about 2,500 plaintiffs nationwide, broadly called the National Prescription Opiates Litigation.

Bennington and St. Albans are already named as plaintiffs in the national suit. Both towns previously retained private law firms to file separate, individual suits that brought them into the multi-district litigation, or MDL.

But Polster has ruled that a new class of plaintiffs are now eligible to join: Nearly every municipality in the country — about 34,000 local governments — will be automatically included in a potential settlement unless they opt out of the suit. Stanford Law professor Deborah Hensler wrote in a blog post that this is “a newfangled form of class action” — there is no precedent for a settlement class of this scope.

Donovan was one of 38 attorneys general who signed a July 23 letter opposing the move. The authors wrote that by giving local governments the power to negotiate a settlement that could affect parallel legal actions by states, the new structure would be an unconstitutional infringement of state sovereignty.

Donovan said Wednesday that this concern stemmed from the likelihood that all legal claims against the opioid companies — including his office’s cases, which are separate from the MDL — would eventually become part of a “global settlement” paid by the opioid companies.

The letter’s authors also said expanding the national suit would create procedural challenges that could delay a settlement. “Plaintiffs continue to propose an unprecedented process that, among other problems, would make ‘global peace’ more, not less, difficult to achieve,” they wrote.

But on Sept. 11, Polster ruled that the opt-out system, called a “negotiation class,” would proceed. Under the new structure, municipalities will be included in the suit unless they submit paperwork by Nov. 22 to opt out. The court has already determined, using data about the impacts of the opioid crisis, how a potential settlement would be allocated among the local governments included.

A settlement proposal would be subject to a vote by a panel of representatives. If 75% of the representatives vote in favor of a settlement, the plaintiffs will be locked in to those terms. No representatives from Vermont municipalities are included on the panel.

The federal court has left Vermont cities and towns with a decision to make: sign on to pursue a broad settlement that’s still short on details, or forgo a potential payout that could help offset the money they’ve spent fighting the crisis in their communities.

Stuart Hurd, the town manager of Bennington, said the town joined the national suit because it would give local leaders more leeway in deciding how to use potential settlement money.

Hurd said that while Donovan has indicated that he wants any awards from the state’s cases to help local communities fight the opioid crisis, the Legislature would ultimately control how much to allocate to municipalities and how much to direct to the state’s general fund. A settlement from an individual lawsuit, though, would go directly to the town.

“We get to determine how to use it,” Hurd said. “We get to determine how it best suits the needs of our community.”

Because Bennington pursued the suit before Polster’s move to expand the negotiating class, the town retained a private law firm, Sanford Heisler Sharp, that is also representing municipalities in Virginia and Texas in the MDL. The firm will receive 25% of any settlement the town is awarded.

Hurd believes the town could be poised for a larger overall settlement because it is suing a broader range of companies, including pharmacy benefit managers, that are not defendants in the MDL.

Hurd spoke last month at a meeting, organized with the Vermont League of Cities and Towns, where representatives from Sanford Heisler Sharp encouraged more local leaders to file individual suits. But because the new settlement model is now available to every town, city and county in the state, private law firms may play less of a role going forward.

Rutland City Mayor David Allaire said Wednesday that Rutland was planning to join the national litigation, but that city officials didn’t have the time or energy to work with outside attorneys. The city’s Board of Aldermen voted Monday night to stay in the national settlement class and forgo filing a separate suit. “We’re convinced, at least at this point right now, that this is the best way to go,” Allaire said.

That’s also the path Donovan is now recommending. “You can participate in the potential fruits of a settlement without having to file a lawsuit, hire attorneys, and most important incur additional attorneys’ fees and costs,” he wrote in the Nov. 1 letter.

But the dollar amount of a potential settlement is still unclear. In Kirby, selectboard members voted Monday night to opt out of the suit because they believed the payout would be insignificant. “We’re a small town,” said Town Clerk Wanda Grant this week. “We don’t feel we would benefit much from it.”

Donovan’s guidance to Vermont towns comes as two of the state’s lawsuits remain stalled in bankruptcy court. The state opted out of a proposed settlement with Purdue Pharma in September, saying the deal did not provide certainty of a payout. Because Purdue filed for bankruptcy as a result of that settlement, the remaining suits against the company and the Sacklers are now under the jurisdiction of a U.S. bankruptcy court in White Plains, NY.

According to the Washington Post, Judge Robert Drain on Wednesday agreed to block litigation in those cases until April. Donovan declined to discuss specifics on the bankruptcy court proceedings, saying only, “I think there’s many more chapters to be written in this negotiation.”

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