States and localities (towns and counties) have brought a range of sometimes-overlapping lawsuits against companies alleged to have contributed to the opioid epidemic, with some success. One major multi-district litigation (“MDL”) settlement involving three opioid distributors and one manufacturer included a provision connecting payment to states’ ability to ensure localities surrender their claims. Consistent with this provision, Georgia recently enacted legislation extinguishing locality claims (claims of government entities, not individuals), including future locality claims. This blog post describes the settlement and locality claim extinction legislation, which are important in and of themselves and for their implications for the coordination of state and local claims in public health litigation more broadly.
What is the Settlement?
The three largest pharmaceutical distributors: McKesson, Cardinal Health, and AmerisourceBergen, and manufacturer Johnson & Johnson (“J&J”) announced on July 21, 2021 a Multi-State National Settlement agreement with an MDL Plaintiffs’ Executive Committee and several State Attorneys General. The settlement seeks to resolve all opioids litigation brought by participating states and localities against these three distributors and manufacturer. Per this agreement, AmerisourceBergen, Cardinal Health, and McKesson will respectively pay $6.1, $6, and $7.4 billion over the course of the next 18 years.
The amount each state will receive from the settlement, once specific conditions are met, depends on the state’s population and a formula that considers the portion of the state’s population injured by the opioid epidemic. The agreement includes an interesting incentive structure component to ensure the termination of existing claims against the companies. As the Opioid Settlement Tracker describes it, the agreement stipulates that “for a state to receive 100% of its payout funds it must convince their localities to surrender their opioid cases against the offeror-companies.” The payout funds are made up of two types of installments; “base payments” and “incentive payments.” Base payments are about 55% of the net abatement amount and are earned by states signing on to the settlement. Incentives are about 45% and are earned by limiting future litigation and obtaining releases from subdivisions. Both payment types, as part of the agreement, are subject to the same allocation scheme; 15% to its State Fund, 70% to its Abatement Accounts Fund, and 15% to its Subdivision Fund. These three components of the Settlement fund are the same for each state.
What legislation did Georgia pass?
As detailed in the distributor settlement agreement, Georgia was required to pass legislation to ensure “the termination of existing claims” and block future suits. Spearheaded by the Attorney General’s office, Georgia House Representative James Burchett and Senator Brian Strickland introduced House Bill 1321 and Senate Bill 500. These pieces of proposed legislation “provide for a litigation bar on governmental entities regarding certain statewide opioid litigation.” According to GPB, they were written in accordance with the Distributor Settlement Agreement as to maximize the payout the State receives in the settlement.
Georgia SB 500 passed the Senate on March 1st, the House on March 25th, and was signed into law by Governor Brian Kemp on May 2. This puts the state in the position to receive the full $636,320,843.82 available for allocation under the conditions of the settlement agreement pending the Governor’s signature. The law prevents Georgia government entities from bringing action against AmerisourceBergen, Cardinal Health, and McKesson having to do with the opioid epidemic.
Specifically, as passed, Senate Bill 500 amends Title 10 of the Official Code of Georgia. The legislation provides that “[e]ntry into a state-wide opioid settlement agreement shall serve to bar any and all past, present or future claims on behalf of any governmental entity seeking to recover against any business or person that is a released entity under the terms of the relevant settlement.” Regarding the interaction between state and locality claims, the bill contains the following language pertaining to claims litigated by local governments in Section 1:
While local governments generally have the authority to pursue and litigate claims against businesses and individuals to protect their own interests, in certain limited circumstances involving particular industries, the interests of the state as a whole are best served by having a unified settlement structure that benefits both the state and its local governments and brings full and complete closure to the claims that were asserted or could have been asserted and maximizes the state and local governments' potential recovery to address this extraordinary crisis.
Regarding the bill, Governor Kemp was quoted as saying, "we appreciate the Office of the Attorney General [Chris Carr] for working to represent the interests of Georgians throughout this litigation, and we look forward to ensuring these funds are leveraged to help us combat the scourge of opioid misuse in our state."
Putting the settlement and extinction of locality claims in context
The extinction of locality claims in Georgia and other states is a distinctive and intriguing aspect of this opioid settlement. It reflects a creative effort to coordinate ex post, but it raises questions about implications for who controls the distribution of settlement funds and, relatedly, the effectiveness of their use. When states obtained billions in settlement funds as a result of litigation against tobacco companies, concerns were raised that the funds were not put to good use. A website called Opioid Settlement Tracker created by Christine Minhee, a scholar out of the University of Washington School of Law, seeks to hold states accountable for how they spend their settlement money by informing the public about those expenditures. With a settlement scheduled to pay out over an 18 year period—and now, with future claims extinguished (at least in Georgia)—such accountability measures will be pivotal. Finally, the extinction provision may come to serve as precedent for future public health litigation as an ex post tool to coordinate among states and localities with overlapping claims.