Opioid MDL Proposal Modeled on Aggregate Litigation Principles Section 3.17
In addition to the opioid state trial currently underway in Oklahoma, hundreds of opioid cases have been filed and consolidated into multidistrict litigation (MDL) in the U.S. District Court, Northern District of Ohio, under Judge Dan Aaron Polster. On Friday, June 14, plaintiffs filed a motion to create a “negotiation class” that includes every municipality in the U.S., providing local governments the option to opt-out, as well as the requirement of a “supermajority” vote.
Those who stay in know that they will have voting rights with respect to any resulting settlement, and they will know how the votes are to be counted and weighted. They also know how any lump sum settlement reached under this class structure with defendants would be allocated as among the class members. They thus have the information essential for their own decisions regarding participation in the Negotiation Class, and they may begin the process of determining the intra-county level share between each county and its constituent incorporated places. The subsequent class negotiations enable all cities and counties to take more active participation in the settlement negotiation process than they could ever do separately. In this Class, they are neither passive beneficiaries nor absent members. They are active, voting participants.
The voting process and supermajority requirement proposed as the mechanism through which the Negotiation Class decides to accept or reject settlement offers is adopted from the aggregate settlement mechanism articulated by the American Law Institute’s Principles of the Law of Aggregate Litigation § 3.17 (American Law Institute 2010) (“ALI Principles”) and the 75% voting approval requirement utilized in asbestos bankruptcy plans, codified as 11 U.S.C. § 524(g)(2)(B)(ii)(IV)(bb); see also In re Combustion Engineering, 391 F.3d 190, 234 n. 45, 237 (3d Cir. 2004). This supermajority voting mechanism has thus been proposed in the general aggregate litigation context, and enacted to provide statutory protection in the specific bankruptcy context, to add direct participation and choice features to solve mass claims problems like the one faced in the Opioids litigation: how to resolve thousands of claims and potential claims in a single, inclusive, fair, and effective process that gives the claimants the optimal settlement amount and the Selling Defendants global peace. It is especially applicable to sophisticated parties, such as the cities and counties whose actions are joined in this MDL. As the ALI Principles notes, approval of group settlements by voting rules are well-designed and have been approved for sophisticated clients. Id.
In addition to looking to the Principles, the motion also drew guidance from the law review article “The Negotiation Class: A Cooperative Approach to Class Actions Involving Large Stakeholders” by Francis E. McGovern of Duke Law School and William B. Rubenstein of Harvard Law School, who served on the Members Consultative Group and as an Adviser on the Principles project, respectively. The abstract, in part reads:
Our proposed mechanism for harnessing claimants’ cooperative instincts is a new form of class certification that we call “negotiation class certification.” Under this approach, class members would work together to generate a metric for distributing a lump sum settlement across the class.
By establishing the contours of the class prior to settlement discussions, negotiation class certification would provide the defendant with a precise sense of the scope of finality a settlement would produce, hence encouraging a fulsome offer. The proposal is a novel use of Rule 23, but it is, in many ways, a less ambitious one than certification of a settlement class, although the latter approach, controversial at its inception, has been a “stock device” in class action practice for nearly a quarter century. And while novel, negotiation class certification is consistent with the requirements of both Rule 23 and the Constitution.
NYU Law Professor Samuel Issacharoff, Reporter on ALI’s Principles of Aggregate Litigation, characterized the motion as “the most elaborate and direct form of class member participation that has ever been tried.”
The following is the Black Letter of Section 3.17 of Principles of the Law, Aggregate Litigation:
§ 3.17 Circumstances Required for Aggregate Settlements to Be Binding
(a) A lawyer or group of lawyers who represent two or more claimants on a non-class basis may settle the claims of those claimants on an aggregate basis provided that each claimant gives informed consent in writing. Informed consent requires that each claimant be able to review the settlements of all other persons subject to the aggregate settlement or the formula by which the settlement will be divided among all claimants. Further, informed consent requires that the total financial interest of claimants' counsel be disclosed to each claimant.
(b) In lieu of the requirements set forth in subsection (a), individual claimants may, before the receipt of a proposed settlement offer, enter into an agreement in writing through shared counsel allowing each participating claimant to be bound by a substantial-majority vote of all claimants concerning an aggregate-settlement proposal (or, if the settlement significantly distinguishes among different categories of claimants, a separate substantial-majority vote of each category of claimants). An agreement under this subsection must meet each of the following requirements:
(1) The power to approve a settlement offer must at all times rest with the claimants collectively and may under no circumstances be assigned to claimants' counsel. Claimants may exercise their collective decisionmaking power to approve a settlement through the selection of an independent agent other than counsel.
(2) The agreement among the claimants may occur at the time the lawyer-client relationship is formed or thereafter, but only if all participating claimants give informed consent. Informed consent requires that the claimants' lawyer fully disclose all the terms of the agreement to the claimants to facilitate informed decisionmaking regarding:
(A) Whether to enter into the settlement agreement;
(B) Whether to subsequently challenge the fairness of the settlement agreement under subsection (d) or (e);
(C) Whether to subsequently challenge the compliance of the settlement agreement with the requirements set forth in subsections (b) and (c); and
(D) The desirability of seeking, along with a reasonable opportunity to seek, the advice of independent legal counsel.
(3) The agreement must specify the procedures by which all participating claimants are to approve a settlement offer. The agreement may also specify the manner of allocating the proceeds of a settlement among the claimants or may provide for future development of an appropriate allocation mechanism.
(4) Before claimants enter into the agreement, their lawyer or group of lawyers must explain to all claimants that the mechanism under subsection (a) is available as an alternative means of settling an aggregate lawsuit under this Section. A lawyer or group of lawyers may not terminate an existing relationship solely because the claimant declines to enter into an agreement under subsection (b), and the lawyer must so inform the client. A lawyer who is simultaneously representing claimants proceeding under subsection (a) and claimants proceeding under subsection (b) must notify the subsection (a) claimants that they continue to exercise independent control over their cases and that they may refuse an offered settlement after its terms are disclosed.
(c) An agreement pursuant to subsection (b) is permissible only in cases involving a substantial amount in controversy, a large number of claimants, and when the agreement requires approval by a substantial majority of claimants, with the foregoing minimum criteria to be determined by the applicable legislative or rulemaking body.
(d) The enforceability of an agreement under subsection (b) should depend on whether, based on all facts and circumstances, the agreement is fair and reasonable from a procedural standpoint. Facts and circumstances to be considered include the timing of the agreement, the sophistication of the claimants, the information disclosed to the claimants, whether the terms of the settlement were reviewed by a neutral or special master as defined in §3.09(a)(2), whether the claimants have some prior common relationship, and whether the claims of the claimants are similar.
(e) In addition to the requirements of subsection (d), the enforceability of a settlement approved through an agreement under subsection (b) should depend on whether, under all the facts and circumstances, the settlement is substantively fair and reasonable. Facts and circumstances to be considered include the costs, risks, probability of success, and delays in achieving a verdict; whether the claimants are treated equitably (relative to each other) based on their facts and circumstances; and whether particular claimants are disadvantaged by the settlement considered as a whole.
(f) Responsibility for compliance with the prerequisites for the enforceability of an agreement under subsection (b) rests with the claimants' lawyer.
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