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AG Derek Schmidt objects to paying private law firms millions more from any State recovery in national opioid litigation

Release Date: Feb 24, 2020

TOPEKA – (February 24, 2020) – A new demand by private attorneys to receive a seven-percent share off the top of any recovery from the national opioid litigation should be rejected, Kansas Attorney General Derek Schmidt today told the federal court overseeing litigation by more than 2,500 local governments and others.

“In essence, the [private attorneys’] proposed order would impose a seven percent tax on recoveries that were made possible by the strength of States’ legal claims, which are not within the jurisdiction of this Court,” Schmidt and 36 other state attorneys general wrote to U.S. District Judge Dan Polster, who is overseeing opioid litigation brought by more than 2,500 local governments and others nationwide and transferred to Cleveland, Ohio. “Under the proposed order, that money would be given to private attorneys retained by [local-government] subdivisions … rather than used to help victims of the opioid crisis. That is unacceptable, and in complete contradiction to the Court’s stated goal of directing funds towards remediation.”

The attorneys general sent today’s letter in opposition to a motion filed January 28 by the Plaintiffs Executive Committee (PEC), the lead group of private attorneys representing local governments and others in the litigation. The PEC motion seeks to establish a “common benefit fund” to award attorneys’ fees and litigation costs to private counsel representing local governments in the cases. The order, if granted, would direct that seven percent of the total monetary recovery awarded by the court or agreed upon by settlement be set aside to pay the attorney’s fees and costs for private counsel. The seven percent assessment would be applied not only to the portion of the recovery for local government clients, but also to the states’ portion of the recovery. The newly requested seven-percent assessment would not reduce the amount of attorney’s fees the local government and other plaintiffs previously agreed to pay their private attorneys from funds eventually recovered if the litigation is successful.

The letter also points out that in addition to its jurisdictional flaws – for example, seeking to “tax” recoveries by states that are not part of the transferred cases –  the PEC proposed order would be detrimental to obtaining settlements from many opioid manufacturers and distributors. A bipartisan group of State Attorneys General, including Kansas, has been attempting to work collaboratively for more than two years with the PEC to develop a settlement framework that would allow for maximum relief to injured states and citizens, in part by minimizing the attorney’s fees paid to outside counsel and preserving those funds instead to provide remediation such as drug treatment and other services.  The PEC proposed order undermines the states’ ability to negotiate global settlement terms.

In a further effort to protect and enhance public recoveries in massive cases like the national opioid litigation, Schmidt has requested a bill in the Legislature that would in the future deter large private law firms from “shopping” for public-entity clients in Kansas without any oversight. Current Kansas law prohibits the state from entering into potentially large contingent-fee contracts with private attorneys without case-by-case legislative oversight and competitive bidding, but those statutory limitations do not apply to local units of government. The proposed bill, House Bill 2461, would authorize the attorney general to coordinate major public litigation that is financed by contingent fees, a funding mechanism that allows a public entity to pay its private outside attorneys with funds that otherwise could be available to compensate other public entities in the state. The legislation was requested last month in the House Judiciary Committee and remains under consideration. A similar measure, Senate Bill 444, is under consideration by the Senate Judiciary Committee.

A copy of Schmidt’s written testimony in support of H.B. 2461 may be found at https://bit.ly/2wEu9ik. A copy of today’s letter sent to Judge Polster may be found at https://bit.ly/2TasCZ4.  

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