Introduction

On August 26, 2019, Cleveland County, Oklahoma, District Court Judge Thad Balkman issued a 42-page decision ordering Johnson & Johnson to pay more than $570 million for harm it allegedly caused the state of Oklahoma by marketing its opioid products. Just a week later, Judge Dan Polster in the Northern District of Ohio, where nearly 2,000 opioid-related cases are proceeding together in a multidistrict litigation, cleared the way for the first of a series of trials by denying a series of summary judgment motions.

The Oklahoma decision is significant because the State of Oklahoma had brought the case under a theory that Johnson & Johnson had created a public nuisance. Monetary awards under a common-law nuisance claim are tied to the cost of remediating the nuisance. As a result, the judgment is specifically tied to a remediation plan based on public health, rather than punitive damages principles. Many of the nearly 2,000 cases being litigated together in Ohio were brought under state-law public nuisance claims as well. A settlement or judgment in these cases, in which Judge Polster has recently certified a “Negotiation Class,” may provide funding for the sort of evidence-based abatement programs that have already begun to slow the crisis where they have been implemented.

Allegations in Opioid Litigation

The broad allegations against opioid manufacturers and distributors (and, to a lesser extent, pharmacies) have been widely reported. As typically alleged in these types of lawsuits, beginning in the mid-1990s, manufacturers, including Purdue Pharmaceutical (manufacturer of OxyContin) and Johnson & Johnson’s Janssen (manufacturer of the opioid patch Duragesic), promoted opioids as a safe treatment for pain, while simultaneously suggesting that pain, and particularly chronic pain, was undertreated. While some literature suggested in the early 1990s that pain had indeed been undertreated, plaintiffs in the opioid litigations have introduced evidence that they claim shows that manufacturers were dismissive of the risks of addiction.

According to these lawsuits, the push by opioid manufacturers swayed public opinion and even independent organizations to support higher prescription rates. By 2000, the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO, and since renamed the Joint Commission) introduced pain management standards suggesting that pain could be considered the “fifth vital sign”—although it retreated from that stance less than two years later as opioid prescription rates rose dramatically. Prescription rates continued to rise throughout the 2000s.

Manufacturers and distributors were alleged to have failed to note certain “red flags”—high numbers of prescriptions issued by particular pharmacies or locations, unusual patterns in rates of opioid usage, and even long lines at pain clinics or individuals passed out in waiting rooms. Last year, the public disclosure of certain emails between members of the Sackler family (owners of Purdue) raised the intensity of the debate regarding personal responsibility and led certain states (including New York) to name the family members individually in opioid-related litigation.

Prior Opioid Cases—Criminal and Civil Penalties

The federal government has pursued criminal and regulatory cases against opioid manufacturers and distributors for years. Over ten years ago, Purdue paid $600 million in fines—at the time one of the largest settlements by a pharmaceutical company—when it and three executives pleaded guilty to “misbranding” for falsely touting benefits beyond those the Food and Drug Administration (FDA) had approved. In 2017, two distributors, Mallinckrodt and McKesson, agreed to pay $35 million and $150 million respectively in civil penalties for allegedly violating the Controlled Substances Act by failing to report suspicious orders. And in May of this year, the top executives, including the founder of Insys Therapeutics, which manufactured a fentanyl-based nasal spray, were found guilty of racketeering charges based on kickbacks paid to doctors to prescribe the drug. But because these cases were criminal or regulatory in nature, the fines and penalties were not calibrated based on the cost of remediation. Instead, they funded ever more aggressive regulatory and enforcement efforts. Critics suggest that these programs, aimed principally at lawbreakers, are insufficient to end the crisis.

The Nuisance Theory and the Multidistrict Litigation

In contrast to the criminal and regulatory actions, the only claim for relief in the Oklahoma trial was for violating the Oklahoma public nuisance statute. Public nuisance statutes are ordinarily used in lawsuits against those who improperly dispose of refuse or create environmental hazards. Typically, they provide that a public body or even a private citizen may take action to abate the nuisance without incurring liability for damaging property. But most nuisance statutes—including Oklahoma’s—also allow someone injured by the nuisance to bring a suit, at which point a court may “cause such nuisance to be abated and to assess all the costs thereof” against the person who caused it. Okl. Stat. §5017.

The idea of using nuisance law to bring opioid-related lawsuits can be traced to Paul Farrell Jr., a West Virginia personal injury lawyer who convinced officials in seven counties to sue distributors under that state’s public nuisance law in early 2017. Those county lawsuits—and eventually more, brought under a variety of theories—now make up the more than 2,000 that are being handled by Judge Polster in the Northern District of Ohio’s multidistrict litigation (MDL). On September 3, Judge Polster denied a series of summary judgment motions, setting the stage for a trial on October 21, 2019.

With the trial date pending and against the backdrop of the judgment in the Oklahoma case, there were two major developments in the MDL on September 11, 2019. First, details of a possible global settlement by Purdue came to light. The proposed settlement would include a $3 billion payment from the Sackler family, which owns Purdue. According to the terms of the proposed settlement, Purdue would file for bankruptcy and would be restructured as a public trust. The resulting trust would be allowed to continue to manufacture opioids but required to turn the profits over to the plaintiffs in the litigation.

Second, as described in detail below, Judge Polster certified a “Negotiation Class” a novel concept previously proposed in academic articles that may have an enormous impact not only on the MDL but also on the outstanding attorneys general cases.

Oklahoma and the State Attorneys General

Once the cities and counties started filing opioid-related lawsuits in early 2017, state attorneys general quickly followed suit. Oklahoma’s lawsuit, originally filed in June 2017, originally alleged that Purdue, Teva, and Johnson & Johnson (along with various subsidiaries and affiliates) had violated Consumer Protection and Medicaid False Claims Act statutes, had engaged in fraud and unjustly enriched themselves, and had created a public nuisance. In September 2017, a coalition of 41 attorneys general began a joint investigation of opioid manufacturers and distributors. By the time Oklahoma’s case reached trial, Teva and Purdue had settled, and all the claims had been voluntarily dismissed except the allegations that Johnson & Johnson had created a public nuisance. The trial created the first test of whether public nuisance law was a viable theory under which to bring opioid-related cases.

The nuisance theory faced significant hurdles throughout the Oklahoma litigation. Ordinarily, a nuisance is a tangible thing affecting real property, such as a building in disrepair. In addition, most nuisance laws (including Oklahoma’s) require that to prevail, a plaintiff must show that the public nuisance can be abated. So the Oklahoma plaintiffs not only had to introduce evidence that the state was harmed by Johnson & Johnson’s actions during the opioid crisis, but they also had to prove that the nuisance could be abated, introduce an abatement plan and tally the cost of implementing it.

The Trial and the Funding for Abatement Plans

During a six-week trial, the state of Oklahoma argued that Johnson & Johnson and its affiliates had seen Purdue’s success in marketing OxyContin and had then used similar tactics to market their own opioids. The court found that Johnson & Johnson’s strategy was “its promotion of the concept that chronic pain was undertreated (creating a problem) and increased opioid prescribing was the solution.” (Findings of Fact ¶ 20.) Plaintiffs introduced evidence that Johnson & Johnson used and promoted the term “pseudoaddiction” to convince doctors that patients who showed signs of addiction “were not actually suffering from addiction, but from the undertreatment of pain; and the solution, according to Defendants’ marketing, was to prescribe the patient more opioids.” (Id. ¶ 22.)

Judge Balkman found that Johnson & Johnson and its affiliates had lobbied government agencies in an effort to minimize the perceived risks of opioid addiction as a means of “increasing opioid prescriptions.” (Id. ¶¶ 23–26.) The court found that the marketing “caused exponentially increasing rates of addiction, overdose deaths, and Neonatal Abstinence Syndrome,” and therefore violated the public nuisance law because they were unlawful acts that “annoy[], injure [], or endanger[] the comfort, repose, health, or safety of others.” (Conclusions of Law ¶ 10, citing 50 Okla. Stat. § 1.)

Because the case had been brought under a nuisance theory, Oklahoma had to introduce evidence that the crisis could be remediated and detail the costs of a remediation program to recover. To do so, it introduced evidence describing an abatement program designed by Terri White, Commissioner of the Oklahoma Department of Mental Health and Substance Abuse Services. The state’s abatement plan, developed using a public health approach and relying on best practice documents from multiple sources, includes:

  1. Establishing treatment programs and services to provide services to any Oklahoman in need of them;
  2. Providing housing and employment services, along with guidance services for juveniles, to minimize contact with the criminal justice system;
  3. Offering public medication and disposal services;
  4. Creating a Screening, Brief Intervention and Referral to Treatment (SBIRT) practice dissemination program in which all primary care and emergency practices statewide would participate;
  5. Developing pain prevention and non-opioid pain management therapies to implement statewide;
  6. Expanding and targeting distribution of the anti-overdose medication naloxone; and
  7. Implementing multiple smaller programs including creating a medical case management program, developing continuing education programs, improving hospital management and infrastructure, and funding neonatal screening and treatment programs.

While the abatement plan was developed with an emphasis on public health, it includes additional funding for regulatory and enforcement agencies to cope with the increased workload caused by the opioid crisis. The court considered the evidence of the costs of the plan and concluded that the costs of the first year would total $572,102,028. Because the state had not introduced sufficient evidence regarding the cost of subsequent years, the court ordered only that Johnson & Johnson pay the amount for the first year of the program. This judgment, if paid, will directly fund the evidence-based plan designed and submitted by Commissioner White.

The Oklahoma model shows that an evidence-based, public health-oriented framework can set forth an estimate of the costs of addressing the opioid crisis and can also provide controls for how the money is used. As Manatt Health has previously reported, cutting-edge responses to the crisis such as those in North CarolinaPennsylvaniaColorado and Mississippi have already shown signs of success. Oklahoma’s legal success—based in large part on reframing the crisis in terms of public health instead of a punitive framework—has set the stage for other states and localities to develop and implement well-designed abatement programs.

The “Negotiation Class”

Meanwhile, with just over a month to go before trial in the bellwether MDL cases, Judge Polster approved a “Negotiation Class,” a new concept in class action litigation that was proposed by Francis E. McGovern and William Rubenstein, respectively the special master and the court’s expert in the MDL. In a “Negotiation Class,” class members would choose to opt in or opt out of a settlement before the settlement is negotiated. The process provides clarity to the defendants, who would know how many lawsuits will remain outstanding and could calculate their settlement offers accordingly. Any settlement offers would be subject to a vote by the negotiation class members and would require a 75% supermajority of yes votes to be approved.

The “Negotiation Class” addresses a key concern in the nearly 2,000 lawsuits that have been filed in the MDL—how to allocate any settlement funds between tribes, states, counties and cities. A group of plaintiffs leading the opioid litigation has developed a plan whereby any settlement would be allocated as follows: 75% will go to counties according to a public health formula and will be distributed to county and city governments within the county through agreement, 15% will be reserved for a “Special Needs Fund” to address any costs (including litigation costs) not addressed in the public health formula, and 10% will be reserved for fees for the private attorneys in the case. A website already has been set up through which a county’s share of a projected settlement can be calculated.

Issues to Watch

While some plaintiffs’ groups have praised the decision to certify a Negotiation Class, 47 attorneys general (most suing in state court and not part of the MDL) opposed it. Settlements along the lines of the one contemplated by Purdue, which would provide funding to local governments and leave the corporate entity in bankruptcy, could leave states without any recourse in their ongoing cases. And as the Oklahoma decision showed, the potential liability for manufacturers in state litigation is significant.

Even the settlements reached to date may not satisfy those seeking significant public health funding through the opioid litigation. For example, as the contours of the Purdue settlement become more clear, some attorneys general, including those of Massachusetts and Connecticut, have suggested that it does not go far enough—and that they may continue to pursue members of the Sackler family individually. Since some funding to the plaintiffs would come from further sales of opioids (by Purdue Pharmaceutical as a public trust company), there is a danger that the counties themselves would not be sufficiently incentivized to curb sales.

Overall, the Oklahoma decision set off a week of significant developments in many of the opioid cases. As the negotiation class gets to work and the first MDL trial approaches in October, more news is almost certain in the coming month.