(Reuters) - For us class action geeks, Tuesday was a landmark day. U.S. District Judge Dan Polster of Cleveland certified a first-of-its-kind ‘negotiating class’ to promote global settlements with defendants in multidistrict litigation against opioid manufacturers, distributors and sellers.
Despite opposition from nearly 40 state attorneys general and seven drug distributors and pharmacy chains, Judge Polster determined that the negotiating class is a “legitimate,” albeit novel procedure that “is more likely to promote global settlement than it is … to impede it.”
I emailed lawyers for all of the seven defendants that opposed the negotiating class, asking if they planned to request an interlocutory appeal of Judge Polster’s certification order. None responded. Nor did a representative of the Ohio Attorney General, who helped spearhead the AGs’ opposition.
The judge’s opinion and accompanying order means that all cities and counties in the U.S. will receive notice that court-appointed plaintiffs’ lawyers will attempt to reach settlements with defendants on behalf of all local governments. They can also figure out their share of prospective settlements based on the allocation formulas spelled out in the negotiating class proposal. The judge said the notice provides class members with enough information to decide whether to bind themselves to the negotiation process – and to receive a vote on whether to approve settlement offers, which must win assent from 75% to be accepted. Class members who don’t like their allocation or otherwise don’t want to be part of the class have until Nov. 22 to opt out.
Importantly, Judge Polster emphasized that the negotiating class mechanism is not intended to resolve disputes between local governments that are part of the class action and state governments pursuing their own opioid claims in state court. The plaintiffs’ lawyers he appointed as lead negotiators for the MDL class – Jayne Conroy of Simmons Hanly Conroy and Christopher Seeger of Seeger Weiss – are not authorized to negotiate on behalf of local governments competing with their own state AGs for settlement money. “This order does not alter existing law with respect to the relationship between any state and its political subdivisions,” the judge wrote.
State AGs, you probably recall, have pushed hard against certification of a class of local governments. They’re not parties in the MDL before Judge Polster, who has acknowledged that he does not have jurisdiction over the AGs or their state-court suits against many of the same defendants who have been sued in federal court. But in a July 23 letter, AGs from 37 states and the District of Columbia argued that the negotiating class mechanism is both unconstitutional, because it impinges on state sovereignty, and unworkable, because Judge Polster cannot approve a settlement that purports to allocate settlement money among local governments without the states’ approval. The state AGs insisted that instead of streamlining talks, the negotiating class would add layers of complexity and delay to settlement negotiations.
Judge Polster suggested in Wednesday’s opinion that the states were perhaps exaggerating the consequences of his certification of a negotiating class, which “does not interfere with the states settling their own cases any way they want … This process simply provides an option – and in the court’s opinion, it is a powerful, creative and helpful one.”
In a statement Thursday, Ohio AG Dave Yost, who helped spearhead opposition to the negotiating class, said, “This process is fundamentally flawed because it binds people to buy a pig in a poke. Every community has to make a determination whether they’re in or out before they even know what the deal is.”
As you know, Rule 23 of the Federal Rules of Civil Procedure, which governs class actions in federal court, contemplates only two basic kinds of certifiable classes: settlement classes and litigation classes. And, of course, classes are certified in particular cases. Seven of the defendants in the MDL argued that the proposed negotiating class broke the rules, establishing a sort of “National League of Cities” outside of the bounds of Article III of the Constitution. “Neither Article III nor Rule 23 provides a generalized authorization for courts to create organizations to pursue other activities in the interests of their members – including the negotiation of contracts,” the defendants said in their brief. And even if a negotiating class were theoretically certifiable, they argued, this class is ridden with conflicts. For one thing, class members have overlapping boundaries: municipalities may be within cities, which are themselves within counties. Moreover, defendants said, many plaintiffs’ lawyers in the MDL, including many who represent local governments selected to serve as class representatives, also represent states suing opioid defendants.
That duality “flies in the face of the very definition of the role of an adequate class representative, which is to serve with undivided loyalty to the class,” defendants said. “A class representative who is represented by counsel whose own loyalties are divided is, by definition, unable to fill the class representative role.”
Judge Polster dismissed the conflict argument as a red herring, noting that the cities, counties and municipalities selected to serve as class representatives are capable of balancing their responsibilities to the class with advice from their lawyers. And besides, he said, the lawyers appointed as class counsel do not represent states (although the judge also said those lawyers may consult with members of the MDL steering committee, many of whom are from firms that do simultaneously represent state and local governments in opioid litigation).
More importantly, in the bigger scheme of class action procedures, Judge Polster rejected defendants’ arguments that Rule 23 and Article III do not allow the certification of negotiating classes. The text of the rule, the judge said, “does not dictate, nor therefore limit, the uses to which the class action mechanism can be applied.” In fact, Judge Polster noted, before Rule 23 was amended to address the certification of settlement classes, courts – including the Supreme Court – were already signing off on the procedure.
Refuting defendants’ constitutional arguments, Judge Polster said the certification of a negotiating class would actually serve a crucial judicial purpose by assuring that absent class members are represented in negotiations by class counsel with a duty to protect their interests. If federal judges have authority to approve settlement classes, Polster said, they must also have the power to certify negotiating classes to discuss those settlements.
There is no guarantee that the opioids negotiating class will ever reach an overarching deal with any defendant, especially because all of the defendants continue to refute the plaintiffs’ essential theory that they engaged in deceptive marketing and sales practices that led to an epidemic of prescription opioid abuse. Defendants would prefer global settlements that resolve all claims against them – not just those of local governments in the MDL but also those of AGs with state-court cases. Purdue Pharma is reportedly on the verge of a settlement with the MDL plaintiffs and 23 state AGs, but more than a dozen other states have said they won’t go along with the deal, and several have vowed to forge on with suits naming members of the family that owns the company. That’s not the kind of global peace defendants are looking for.
But as Judge Polster said, difficult cases present opportunities for creative solutions. The formal framework for a negotiating class was first outlined in June, in a draft article for a Duke law review by Duke law professor Francis McGovern, a special master in the opioid MDL, and Harvard law professor William Rubenstein, who is acting as an expert for Polster in the MDL. Just a few months later, the professors’ proposal is a tangible procedure that could help resolve what is perhaps the biggest litigation in U.S. history. If it works, it could change the way major cases are litigated.