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Opening Salvos in the Opioid Litigation Wars

State attorneys general from 41 of the 50 states are investigating the opioid industry. New York Attorney General Eric Schneiderman said he is committed to “using every tool at our disposal” to pursue the $500 billion Big Pharma industry, and has unleashed Martin Act subpoenas upon numerous opioid manufacturers and distributors. The press release put out by the Attorney General of Connecticut, George Jepsen, urges haste:

We recognize that time is our enemy and that we should pursue all means to ease this crisis as quickly as possible. For that reason, we have encouraged and will continue to encourage the pharmaceutical industry – both manufacturers and distributors – to engage constructively with the attorneys general towards meaningful agreements that may be achievable sooner than full-scale investigations and litigation may permit. As we have shown in other contexts, broad coalitions of attorneys general can effectively impact national problems through litigation or settlements, often more effectively than they can when acting alone. Our collective efforts are particularly important at a time when many Americans despair about the capacity of government to function effectively in the face of challenges. (Emphasis added)

Connecticut AG Jepson’s announcement of the meteoric rise in the number of states joining in the investigations, his jab at legislative passivity while flexing that most unlawful of state powers—namely, regulation by litigation—and the anything-but-subtle suggestion of a fast settlement bodes ill for the rule of law.

Those who watched this play out in the 1990s with the tobacco and gun companies will recognize that a multi-billion dollar settlement of these amassed claims is likely on the horizon. The Financial Times has predicted a “tidal wave” of litigation that will snowball into a global settlement. Once an industry finds itself in a position where it faces a plaintiff at every level of government in nearly every state, cities, towns, counties and states jostle to put their claims into suit to get a piece of the action, “particularly when it doesn’t cost politicians anything,” as Richard Ausness, a professor at the Kentucky College of Law, told the FT.

Which leads to the heart of the question. Any settlement will likely follow the template of the tobacco Master Settlement Agreement, a quarter of a trillion-dollar wealth transfer that bloated state governments, levied unlegislated and cruelly regressive taxes on smokers, and sent $20 billion in unappropriated public money to the state AGs’ favorite donors: the mass-tort trial lawyers who have become government-financed Lawyer Barons.

A similar settlement on opioids would temporarily ease fiscal crises in the many states that have frittered away their tobacco-settlement money; but it would only encourage more such lawless and unlegislated regulation of other targets. Furthermore, it will lead to higher pharmaceutical prices and higher healthcare costs and premiums, in a process that is utterly opaque to the public, taxed without representation to enrich the lawyers (many of them former state Attorneys General stepping into a self-engineered path to personal wealth) and the governments with which they are in league.

The term “regulation by litigation” was coined by Robert Reich, Secretary of Labor in the Clinton administration. To his great credit, in 2000, Reich leveled a blistering charge that these governmental prosecutions were “blatant end-runs around the democratic process” prosecuted with the goal of “threatening the industries with such large penalties that they’ll agree to a deal,” so that “no judge will ever scrutinize these theories.”

Added Reich:

We used to be a nation of laws, but this new strategy presents an entirely novel means of legislating—with settlement negotiations of large civil lawsuits initiated by the executive branch. This is nothing short of faux legislation, which sacrifices democracy to the discretion of administration officials operating in utter secrecy.

Dickie Scruggs, a billion-dollar player in this game, calls it a three-legged stool, of which litigation is the shortest because these cases, brought on dubious legal theories, are “designed to settle.” As Peter J. Boyer wrote in the New Yorker, “the most important player in Scruggs’ informal syndicate was his law school classmate Mike Moore,” Mississippi’s AG at the time of the tobacco litigation, and now an aspiring opioid lawyer for a large consortium of states. Alliances of states are the second leg of the stool, and Scruggs, the impresario of one such alliance, earned over $1 billion in fees because he could bring the power of the states to bear upon these mass tort claims. The trial bar assembles a critical mass of state AGs, piles on billion-dollar claims, and demands discovery so onerous as to force a settlement.

The third leg is to demonize the target in a concerted public relations campaign using heightened rhetoric broadcast by a doting media—and not a day goes by without articles about the opioid epidemic creating a “state of emergency.” These concerted suits and blistering PR rattle Wall Street and scare off investors, a big incentive to push the industry to the table.

Regulation by litigation is a liberating way to practice law. Practitioners like Scruggs admit that “it doesn’t matter what the evidence or the law is.” (Boyer quoted Scruggs’ words from a 2002 panel discussion.) Those engineering the tobacco and gun lawsuits on equally dubious theories in the 1990s confessed that “these cases are not made to win, they are made to settle.”

As to whether these cases would be an effective way to address the problem of opioid addiction, we can say that the press has wised up a little since the 1990s. In a radio piece entitled, “Opioids as the New Big Tobacco,” NPR’s Ailsa Chang trenchantly concluded her interview of Joe Rice, one of the wealthiest of the tobacco litigants, noting that “the tobacco money was never all that useful in preventing addiction.” The Atlantic’s Alana Semuels examined the question, writing that “there’s reason to believe that the windfall, if there is any, from the recent spate of opioid lawsuits may also not be helpful in stopping abuse.” Semuels adds: “there may be no way to guarantee that states are using the money to address opioid addiction,” and concludes: “In the end, looking for someone to blame for the epidemic might be less useful than figuring out how to stop it.”

A compelling reason to watch this situation closely is that a quick settlement allows the Lawyer Barons to siphon off a huge percentage of a multi-billion dollar global settlement and claim it’s a done deal. One clue that this may be happening even as we speak is the Lawyer Barons’ lack of transparency about the fees. In the NPR interview, reporter Chang asks Joe Rice: “May I ask how much money you personally made in the tobacco cases?” His response: “You may ask. I’m not going to answer.”

Similarly, Americanlawyer.com’s reporter got this opaque response from the office of the Attorney General of Kentucky, which “did not provide details about the contingency-fee agreement or the amount recovered by plaintiffs lawyers” in a prior settlement with opioid producers. Interviewed by the Wall Street Journal, Moore, the former Mississippi AG (who, like several former state attorneys general, is now one of the aspiring Lawyer Barons) feigns a studied indifference: Moore “said he had no agreement specifying how he would be paid. It ‘doesn’t concern me.’”[1]

More attention ought to be paid to the Compacts Clause of the U.S. Constitution. The clause provides, in Article 1, section 10: “No State shall, without the Consent of Congress . . . enter into any Agreement or Compact with another State.” The anticipated multistate “global” settlement will involve just this. Widely ignored in the tobacco and other mass settlements, this seldom-enforced clause is a powerful means to put an end to this lawless, costly, and unlegislated form of regulation.

The American legal system, for all its flaws and excesses, used to enjoy the support of most Americans, and command widespread respect abroad. These suits, which flout the rule of law, turn state AGs into hosts of “Who Wants to Be a Billionaire?”, courts into mere functionaries presiding over “Let’s Make a Deal,” and legislatures that have abdicated the exercise of their lawmaking and spending powers into passive and illicit revenue recipients of government for sale—when “The Price is Right.”

[1] Jeanne Whalen, “Lawyers Hope to Do to Opioid Makers What they Did to Big Tobacco,” Wall Street Journal, July 23, 2017.

Reader Discussion

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on September 28, 2017 at 10:00:51 am

How about *RICO* charges against the AG's?

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gabe
on September 28, 2017 at 10:16:32 am

As bad as the tobacco litigation was, this strikes me as far worse. Opioids are drugs approved by the FDA, which legally cannot be sold or used without a doctor's prescription, and which (unlike tobacco) is unavoidable addictive. How can drug manufacturers be held liable under state law for a product regulated and approved by the federal government? This is an attempt to coerce a wealth transfer--larceny--in search of a rationale.

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Mark Pulliam
on September 28, 2017 at 11:04:50 am

Yep- and it is worse than mere financial gain that is involved - Policy making is the real objective and perhaps the more invidious exponent of this form of "liti-law-making."

See:

https://www.amazon.com/Federalism-Trial-Attorneys-Policymaking-Contemporary/dp/0700620893/ref=sr_1_1?s=books&ie=UTF8&qid=1506610865&sr=1-1&keywords=state+attorney+generals

Paul Nollette does a nice job detailing the machinations of States AG in this short book.

I still say - *RICO* the buggers - what COTUS calls "compact" - we used to call collusion.

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gabe
on September 28, 2017 at 13:02:35 pm

"Ohio’s legal theory is based on a straightforward and compelling argument: The state and its citizens have suffered significant harms from the opioid epidemic, which was caused in large part by drug companies’ calculated scheme to overstate the benefits and downplay the risks of opioids." https://theconversation.com/a-look-inside-ohios-lawsuit-against-opioid-manufacturers-79322

l won't prejudge the case, but if you are engaged in fraud, you shouldn't be able to hide behind Uncle Sam's coat-tail.

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Miss Creant
on September 28, 2017 at 15:38:42 pm

I doubt that pharmaceutical companies are blameless in all of this; I suspect they were presented with an opportunity and they exploited it for financial gain. But I also suspect that the sine qua non cause of the opioid crisis is the "experts" who are increasingly the high priests of public policy.

In the 1990s and early 2000s, the crisis was not opioid addiction, it was untreated pain. Doctors and medical students were told that pain was "the fourth vital sign." Nurses were told that "pain is whatever the patient says it is,: and to "always believe the patient's report of pain." Editorials in medical journals by these experts assured doctors and other healthcare providers that the risk of addiction was "very low" and that opioids were underutilized. State medical boards disciplined doctors for "undertreating pain;" a physician in California was criminally charged with "elder abuse" for treating a cancer patient's pain with acetaminophen.

And, as often happens with experts, the experts were wrong, "often in error, never in doubt." The narrative changed almost over night. Vicodin became a taboo word. State medical boards started yanking licenses from physicians deemed to have too liberal pain management philosophies. Patient's with chronic pain and opioid dependency were left to fend for themselves, seemingly without a second thought, and some turned to alternatives, like heroin.

So the experts got rich and got to feel good about their compassion. Pharmaceutical companies got rich and could brag about how they were improving the lives of patients with pain. Now lawyers will get rich and brag about how they are looking out for the little guy, when that is a total sham. And who gets screwed? The little guy, the honest, decent everyday American with a back problem or diabetes or degenerative joint disease, who was a victim when his pain wasn't being treated and is now a victim when it is, and upon whose misery fortunes will be made.

All of which is a demonstration of the first rule of health care policy: It doesn't determine who gets care; it determines who gets rich.

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z9z99
on September 28, 2017 at 15:44:41 pm

"fifth vital sign," not fourth vital sign."

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z9z99
on September 28, 2017 at 21:31:34 pm

I have to be " Blunt " on this one. Do we know how much these AG's are going to be paid under the table to settle this one? I just can't stand myself watching this unfold again. "Extortionist "at government level again. I do understand the crisis. There's has to be another way to get the two main players, NY's and Conn's AG's out of the picture. They look like masters extortionist at the scale never seen before in this country. They are looking to be as John Gotti, untouchable? What this nation is coming to be in democratic circles is beyond me. The reason that we are in these mess you can blame it on both houses of congress, for accepting all the dirty funds from the lobbyist in K street to influence their votes in DC. Then when someone comes in and tries to clean up they hate his guts??? The corruption in that town is going to bring this country down unless we do something about it??? Don't mind me I am only one. Thank The Lord that I am prepared.

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Abelardo Aguilu
on September 29, 2017 at 09:25:10 am

"...but if you are engaged in fraud, you shouldn’t be able to hide behind Uncle Sam’s coat-tail."

I would agree with that. Where I differ is in accepting the narrative that the "crisis" is of as great a depth and breadth as our experts would have us believe.

As Z99 states below, it was not just the drug companies but the medical profession and their regulators who sang the praises of opiods.

BTW: I would be willing to bet that the overwhelming preponderance of opioid users DO NOT abuse the drug.

BTW2: Comes news this morning that Washington State and Yep, you guessed it, Seattle have now joined the suit. I think Seattle NEEDS to join in so that it can pay for the $250 million dollars of BIKE LANES it promised to install in the middle of its main downtown thoroughfares. And MissC says that it is the Big Bad GOP that is responsible for traffic jams! _ Ha.

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gabe
on October 04, 2017 at 11:43:22 am

I must correct myself. The physician in California was not criminally charged. He was found civilly liable for $1.25 million under an elder abuse statute that also provided for criminal penalties.

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z9z99

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.