Cities Reject $50 Billion Opioid Settlement

and on Bloomberg dot com slash podcasts. A fifty billion dollar offer by drugmakers and distributors to sell the opioid litigation has ignited a fight between state attorneys general and thousands of local governments over how much the pharmaceutical industry should pay for its role in creating the opioid crisis. Many attorneys general are backing the offers, while lawyers for local governments are rejecting them. Joining me is Eric Gordon,

a professor at the Raw School of Business. Municipalities learned a hard lesson from the Big Tobacco Settlement. So is the problem that despite what seems like a large number, they think it isn't enough. Is that the only problem? I think it's not so much just the amount. The these want to make sure they get what they think is their fair share. As you said, in the tobacco settlement, the city thought that the states hogged the money, and they don't want to repeat of that. And there's a

second issue. There's the timing of when they'll get the money. So they don't want to get the money over ten or twenty years. They want to get the money now because whatever is the link or lack of link to the opioid things, a lot of cities are in big financial trouble and a billion dollars today is a lot more valuable than a hundred million dollars a year over

ten years. States also opposed the deal. So when you look at those numbers, how far away from a global settlement are we or can that all change really quickly? I think it can change quickly, not easily, but you know, I think the judge can do some head hitting, and I think the States in the city says a tough choice, which is get this settled, even for an amount that isn't the amount we hope for, and get it settled now and start getting money now, or battle this out

over what could be two, three or four years. So I think the pressure is on to settle it, but you know, there's some history that makes it a little tougher and there's a lot of elbowing going on. Interestingly, I'm not sure the toughest fight is between the plaintiffs and the defendants. I think the toughest fight is amongst the plaintiffs themselves. Let's talk about the two sixty million dollars settlement. On the eve of the first federal opioid trial.

The lawyers were negotiating until about one in the morning, others were getting ready for trial. Before they settled. That trial would have been what's called a bell weather. Which side fared best in the settlement, the plaintiff, Ohio counties or the drug distributors. It's hard to tell which of

them fared better. What you can say is that the bell weather really didn't become much of a bell weather because in the bell weather, you get to see the other side present their case, you get to see their witnesses under cross examination, and you get to see a real fact finder in this case, a real jury make a decision, and on that basis, you have a lot more information to decide what terms you're willing to offer

or accept in a settlement. Here, they didn't go through that, as you said, I mean literally on the courthouse steps. They settled it. So the bell weather didn't work all that terrifically as a bell Weather. The one thing it did do is it gave a range of settlement amounts. It was two hundred and fifty million dollars, not two and a half billion dollars. So we sort of know the order of magnitude in which people are willing to settle, but we haven't seen what happens when you really go

into the courtroom. So it's only sort of a half bell Weather. And one of the factors there seemed to be the ability of the municipalities to get the money quickly. Yeah,

the municipalities wanted the money, and they wanted it. Now they're in financial trouble today and these things of spreading the money over ten years or getting you know, sort of payment and kind getting anti opioid drugs over the course of ten years was not as appealing to them as getting millions of dollars of cash in the door right now. The lawyer for the cities and counties is one of the best plaintiffs lawyers in the country, and

he was preparing a real show at trial. So is a problem also going to be the plaintiff's attorneys and how much they get and how tough they are. Well they're tough, but those of us who have litigated or negotiated deal us know that you'd rather face a really smart, really experienced opponent, even if he or she is really tough, because at least their experience and they know how to settle things. It's much tougher to deal with an amateur.

I think there's some disappointment that we didn't get to see the plaintiff show, because they always put on a good show. The plaintiffs attorneys are going to ask for lots and lots of money in June. You know from our other conversations, I'm not always a fan of plaintiff's lawyers who skim off millions of dollars and leave their clients with very little, but this case is quite different. In this case, the plaintiffs lawyers did a tremendous amount

of work. They went through piles and piles of documents and evidence, so they're going to want a lot of money and they probably have earned it. Did the plaintiffs lawyers really do the groundwork rather than the attorneys generals of the dates? It was a team effort, but clearly the plaintiffs lawyers added some value because the attorneys general are not staffed to do cases like this, especially the attorneys general from some of the smaller states, so they

all worked together. But I think it would have been tough for the attorneys general to get the results they've gotten and are likely to get without the help of really experienced plaintiffs attorneys. Is the opioid litigation a lot like the tobacco litigation or is it different because of the opioid crisis that the country is still suffering through. I think the opioid litigation is tougher because the damage

is more horrifying. In the tobacco litigation, people died of lung cancer, and that's a horrifying way to die, but people died quietly and privately. The opioid crisis is very public. You walk down the streets of almost any town, small towns as well as big cities, and you see the results of the opioid crisis, and it reached people who had no idea about the dangers. We we knew about the dangers of tobacco for a long time, and people

kept smoking anyway. A lot of the people who suffered in the opioid crisis, we're just taking pills that their doctor prescribed um and they look to their doctors for prescribing things that would make them better, uh not addicts. So I the opioid thing is I think a level even worse than the tobacco disaster. Is that why the manufacturers and distributors want to settle fast without even going to trial. They're not even going through trials to see

what will happen before they say will settle. I think a lot of the defendants think that there's no chance of getting a fair trial. I think they fear that when the story of the opioid crisis is told to the jurors, that the jurors are just going to sock it to them without paying much attention to the science as the law. I think they're just frightened about the prospect of no, no such thing as a real fair trial for them. Did we learn anything from the Oklahoma trial?

We all we learned that there it was a fact finder. It was a judge, not a jury, but a tough judge who you expect to be less emotional than a jury, said well you're guilty, you did really horrible stuff, and you're going to pay a lot of money. If you lose in front of a judge, you're almost certainly going to lose in front of a jury. Is there anybody to tell what the timeline is here? We're talking months years.

I think we're talking months, not years, and we could be surprised and get a settlement within a couple of weeks, but I think months is more realistic. I think there's going to be urgency on the side of the cities and states who need the money to not wait for years, And I think on the defendant side, they want to get this behind them. They want some certainty on it.

The stock market does not like uncertainty and might be discounting the value of the companies by even more than the companies will end up paying, So both sides have reasons to get it settled sooner rather than later. Thanks Eric, that's Eric Gordon, a professor at the Raw School of Business. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple podcast, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Bolso. This is Bloomberg