From Opioids to Guns: Cities, Counties Step Up Civil Suits

By Peter Hayes and Steven M. Sellers

Rutherford County, Tenn., faces a major public health problem. So like more than 400 other U.S. counties and cities facing health-care, emergency-response, and other costs tied to the opioid crisis, Rutherford is taking matters into its own hands. With some help, that is, from some seriously big hired guns.

The county recently filed suit against Purdue Pharma L.P., Johnson & Johnson, Janssen Pharmaceuticals Inc., Insys Therapeutics Inc., and a spate of other drug makers and distributors alleging public nuisance and violations of the Racketeering Influenced and Corrupt Organizations Act.

Rutherford’s action came on the heels of similar claims filed by New York City, Philadelphia, and a host of other local authorities. In fact, since January alone, opioid suits on behalf of more than 170 cities and counties from 23 different states have been filed in, or transferred to, federal court, according to Bloomberg Law data.

The latest actions join hundreds of other suits pending in federal consolidated proceedings in the U.S. District Court for the Northern District of Ohio, the bulk of which have been brought by cities and counties. A number of other local government suits also are pending in state courts.

But the suits represent a trend bigger than the opioid crisis. From tobacco and lead paint, to sub-prime lending and data breaches, from guns and climate change, to contaminated water and pharmaceuticals, cities and counties are increasingly pursuing civil claims over a wide variety of issues.

They are motivated by a combination of factors including regulatory and legislative constraints, the perception of federal and state officials not acting strongly enough to address problems with significant local impact, and the belief that representation will garner more settlement dollars for their local communities.

Another big reason for the uptick in localities suing over issues that typically used to be spearheaded by state and federal governments?

Contingent-fee arrangements in which counties and cities contract with private attorneys to represent them. It’s a practice honed, expanded, and adopted from the state attorneys general; one that gives cash-strapped governments access to some of the country’s top plaintiffs’ attorneys.

Rutherford County, for example, is represented by Lieff Cabraser Heimann & Bernstein.

Lieff Cabraser, a national plaintiffs’ firm with offices in San Francisco, New York, Seattle, and Nashville, represents a number of other cities and counties in the consolidated opioid litigation. Named partner Elizabeth Cabraser, who has been heavily involved in scores of other mass torts, also holds a leadership post in the federal cases.

But not everyone is a fan of the fast-growing trend toward more local governments suing over more issues. Critics include not only defendants, their attorneys, and big-business champions like the U.S. Chamber of Commerce, but even a former state attorney general once active in litigation against tobacco companies.

They say county and city suits can gum up nationwide settlement negotiations, and that oversight can be lacking over private contract attorneys who may be pursuing the litigation for their own interests, and not the county’s or city’s.

Close to the Action

The trend is for cities and counties to take up national and global issues that have a direct impact at the local level, Helen Kang, a professor at Golden Gate University Law School in San Francisco, told Bloomberg Law.

Kang teaches environmental law and leads the Environmental Law and Justice Clinic.

In addition to the opioid crisis, “on issues such as global warning, cities feel it immediately and have to spend funds to address those problems,” Kang said.

For example, the impact of climate change was brought home to Miami, which is experiencing dry-weather flooding, she said.

And in states that are reluctant to pursue civil enforcement claims, the cities and municipalities are stepping in, she said.

Kang points to Harris County, Texas, which has filed suit against opioid manufacturers.

“In a state like Texas, the state won’t do anything, and the federal government is willfully not enforcing environmental laws, so cities are picking up the slack,” Kang said.

Texas Attorney General Ken Paxton has joined other state attorneys general in investigating opioid makers but hasn’t yet filed any litigation itself.

Preemption, Economies of Scale

Several other professors have noted the trend. “City attorneys are increasingly seeing themselves as protectors of the wider public interest,” Richard Schragger, a professor at the University of Virginia Law School, told Bloomberg Law.

Schragger’s scholarship focuses on the intersection of constitutional law and local government law, federalism, urban policy and the constitutional and economic status of cities.

Another factor driving the uptick in state and local suits are state and federal laws and regulations, for example those related to guns and the environment, that bar localities from acting outside the courtroom, Schragger said.

“Cities are trying to find avenues to regulate things they can’t,” he said.

“With lead paint, the existing regulatory framework is not helping so you go after the paint manufacturers,” Schragger said. “With gun litigation, too, there was no regulation from above.”

Kathleen Hoke, a professor at the University of Maryland Law School in Baltimore, said these regulatory and legislative limitations explain the cities’ and counties’ involvement in the opioid litigation.

Hoke is the director of the Network for Public Health Law, Eastern Region and the Center for Tobacco Regulation.

Local public health officials struggle to get laws and policies passed, implemented, funded and enforced and face preemption in legislation that prevents the municipality from taking legislative action, Hoke told Bloomberg Law.

“That makes litigation the next man up if you will; what they cannot achieve in the hearing room, they may be able to achieve in the courtroom,” she said.

But municipalities often lack the funds to pursue litigation. And so cities and counties have turned to private counsel paid on a contingent-fee basis.

The private bar “is more experienced, prepared and willing to take on these large cases for municipalities and the municipalities are increasingly finding ways to contract with private counsel at little initial outlay,” Hoke said.

The private counsel “gather up several similarly situated municipalities,” and sometimes get together with a group of law firms, to “litigate with economies of scale,” she said.

Peter Merrigan, a plaintiffs’ lawyer with Sweeney Merrigan Law in Boston, is doing just that for dozens of Massachusetts cities and towns over the opioid crisis.

“This litigation has been compared to the tobacco litigation, where some cities received grants, but the money ultimately went to the state budget, so there’s no clear, linear connection between the litigation and the cities,” said Merrigan.

“This is a way to be sure some of the money goes back to the cities, the front lines where the costs are being incurred,” said Merrigan, who has filed four lawsuits and expects to represent as many as 60 towns.

The local focus is necessary because cash-strapped cities bear the brunt of the opioid crisis in first-responder costs, child protection services, and autopsies, Merrigan said.

National or Local?

While many applaud the trend, some, including a former state attorney general, defense attorneys, and industry groups like the Chamber of Commerce, have been critical of the litigation.

James Tierney—Maine’s attorney general from 1980 to 1990 and a veteran of litigation against tobacco companies—said the surge of city and county governments jumping into the opioid cases is counter-productive.

“Their presence in these suits drastically reduces the opportunity to settle the opioid cases, and that means delay and more people dying,” said Tierney. “All of these guys are going to show up and they’re all going to want their share.”

Tierney, who directs StateAG.org, an educational resource on the office of state attorney general, said a broad focus is necessary for any settlement with opioid manufacturers.

Attorneys general are also in a much better strategic position to decide when to sue opioid manufacturers, and what claims to make, because they have the authority to issue civil investigative demands to companies, Tierney said.

“Cities and counties don’t have that authority,” said Tierney, who also lectures at Harvard Law School. “The AGs are already down the road, and they know a lot.”

At least 41 state attorneys general are investigating major opioid manufacturers’ marketing practices. And, according to Tierney, at least 15 states have filed lawsuits. The Department of Justice also recently filed a statement of interest in the federal consolidated litigation.

“What we have with the opioid crisis is a national issue that should be resolved nationally through the attorneys general, whether through use of contingency fee counsel or not,” Tierney said.

Contingent-Fee Clashes

Bryan Quigley, an executive with the Chamber of Commerce’s Institute for Legal Reform in Washington, said he sees similar dangers ahead.

Plaintiffs’ lawyers “are using the same model they perfected in the AG cases, and these local lawsuits can create a tension within the state when the state itself is using such contracts,” Quigley said.

“We’re going to see this issue come to a head in some states where a state AG may want to do a universal settlement, but it’s hanging on all of these local cases” he said. And, the local cases are “certainly growing at the local level,” Quigley said.

Attorneys general typically have constitutional authority to hire outside counsel—and courts have upheld the arrangements—but nonetheless have taken legislative heat over their use of contingent-fee contracts in mass tort litigation.

The upshot was a wave of laws in at least 19 states that mandate transparency in such contracts, legal fee caps, and other oversight measures.

It’s unclear, however, whether such laws also apply to city and county government contracts with outside counsel.

“Without transparency into the attorney hiring process, there is always a risk of abuse, whether it is a state or a local government that is hiring outside contingency fee counsel,” said defense attorney Mark Behrens, of Shook, Hardy & Bacon in Washington.

“The lawyers’ goal is to recover lots of money, but that may not be the best way to tackle the issue of opioid addiction,” Behrens said.

Quigley agreed, saying that when the contracts are finalized, it’s unclear whether municipalities insist on oversight of the litigation by a government lawyer—a common safeguard when attorneys general enter into contingent-fee agreements.

The retention agreement between Ohio Attorney General Mike DeWine and six plaintiffs’ law firms for the state’s opioid litigation, for example, imposes detailed reporting standards and requires that pleadings be approved by the attorney general in advance.

Supreme Court Petition

The importance of the issue to industry defendants was evident in a recent petition filed with the U.S. Supreme Court.

Endo Pharmaceuticals Inc. contended that the New Hampshire attorney general’s use of outside counsel violated the company’s due process rights in its prosecution of opioid litigation against the company.

Endo had the support of the Chamber of Commerce, which filed a friend-of-the-court brief in the case.

The increase in contingent-fee contracts by public officials in “no less than 36 states, as well as various local government entities, has fostered a lucrative cottage industry of bounty-hunter prosecutors” in mass tort cases, with $14 billion in payouts, the chamber argued.

New Hampshire Deputy Attorney General Ann Rice replied that courts have consistently upheld contingent-fee contracts when government lawyers retain supervision of the case.

The Supreme Court declined to hear Endo’s case March 5, but the legal questions are likely to recur as localities push their cases in court.

Oversight of the municipal contracts may be one source for future litigation.

“To my knowledge, there are no state laws that track the hiring of outside counsel by cities and counties,” Quigley said.

But Joanne Doroshow, executive director of the Center for Justice & Democracy at New York Law School, said concerns about county and local governments’ contingent-fee arrangements are overblown.

The center, a consumer-oriented organization “dedicated to protecting our civil justice system,” tracks contingent-fee laws governing public contracts.

“Private attorneys have been used by attorneys general going back to the English common law, but companies don’t like having to pay back taxpayers for the damage they’ve caused,” Doroshow said.

“And remember, the taxpayer doesn’t pay their fees,” she said. “That comes out of the settlement.”

The National Association of Counties, the International City and County Management Association, and the National League of Cities offered no comment.

To contact the reporters on this story: Peter Hayes in Washington at PHayes@bloomberglaw.com, Steven M. Sellers in Washington at ssellers@bloomberglaw.comTo contact the editor responsible for this story: Steven Patrick at spatrick@bloomberglaw.com

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