Slatery touts win in opioid battles but tried to force East Tennessee DAs out of the fight

tennesseeoutlook.com-Outgoing Tennessee Attorney General Herbert Slatery recently claimed victory in a $450 million national settlement with Ireland-based drugmaker Endo International, yet five years ago he tried to derail legal efforts in Northeast Tennessee that led to a $35 million settlement that’s netting more money for nine counties than his Endo deal brought for the entire state.

The settlement negotiated by district attorneys general and their outside counsel also went directly to local governments for opioid abuse prevention and treatment.

From the outset, the district attorneys used an aggressive approach and its outside counsel prepared to go to trial, taking 50 to 60 depositions, causing Endo to refuse to cooperate, according to Sullivan County District Attorney Barry Staubus.

“And I don’t think the attorney general, I don’t think their (office’s) mindset was the same,” Staubus says.

Dubbed Sullivan Baby Doe for a child born addicted to opioids, the $2.4 billion lawsuit’s outcome netted proceeds for the baby’s care and $21 million for nine counties in Northeast Tennessee, after Sullivan County Chancellor E.G. Moody found Endo egregiously refused to share information necessary for the plaintiffs to prepare for trial.

In comparison, the entire state of Tennessee could get an estimated $7.1 million to $11.7 million – depending on when it’s paid – from the most recent national settlement with Endo negotiated by the Tennessee Attorney General’s Office, which led 30 states and the District of Columbia in reaching the deal.

A group of district attorneys general in Northeast Tennessee partnered with the Nashville law firm of Branstetter, Stranch & Jennings to pursue a lawsuit against opioid manufacturers despite opposition to their suit from Attorney General Herbert Slatery — and won $35 million.

With Endo filing for Chapter 11 bankruptcy, the amount could be further muddied and, ultimately, part of the final award would go to the state government, potentially leaving even less for counties and cities in East and Middle Tennessee to divvy up for opioid addiction treatment or services.

According to a default judgment ordered by Moody, the plaintiffs introduced enough expert testimony to support their $2.4 billion claim for damages against the drug maker, which it proved knew too many opioids were flooding the market. Endo’s own records show that 75% of abuse of a reformulated type of Opana ER that some people were injecting took place in Tennessee as the company aggressively marketed opioids to prescribers, according to the document.

But as the group of DA’s pursued the case with Nashville-based Branstetter, Stranch & Jennings, the Attorney General’s Office tried to assert its authority and take them all out of the equation.

According to spokeswoman Samantha Fisher, the Attorney General’s Office intervened “to defend the constitutionality of the statute, which we do whenever statutes are challenged.”

She notes the East Tennessee district attorneys pursued the Drug Dealer Liability Act, which was a different strategy than the Attorney General’s Office took in its case. Fisher adds that the state’s case is likely to be dismissed because of the bankruptcy but that the proposed settlement “would allow Tennessee and other states and local governments to recover millions for abatement.”

Slatery, however, who left office Wednesday, Aug. 31, after his term ended, clearly objected to the use of trial attorneys.

In an op-ed published this week in the Memphis Commercial Appeal, Slatery wrote that the Tennessee Attorney General’s Office refuses to use private-contingency fee lawyers in opioid cases, contending they’ve received millions of dollars in legal fees.

He does acknowledge in the op-ed that the state hired outside counsel in a lawsuit against Walgreens but paid it for hourly fees billed at a reduced rate. To use an outside law firm, the attorney general must have the governor’s approval as well as the eyes of the governor, secretary of state and attorney general on the fee invoices, he wrote.

A spokesperson for Slatery said the Attorney General’s office intervened in the DA’s suit “to defend the constitutionality of the statute, which we do whenever statutes are challenged.”

It’s not clear whether the philosophy of the Attorney General’s Office will change.

Slatery’s replacement, Jonathan Skrmetti, his chief deputy attorney general from 2018 to 2021, managed 160 attorneys and served as a negotiator in a $26 billion multi-state opioid settlement. He’s been Gov. Bill Lee’s chief counsel since December 2021.

Skrmetti was on staff through much of the Baby Doe case as Slatery tried to take over the case.

However, district attorneys – representing local governments who filed suit against Endo and other major pharmaceutical companies in 2017 – argued that their strategy would net more money from industry, enabling local governments to provide more services to battle the opioid crisis.

Led by Staubus, DAs in Northeast Tennessee fended off the effort by Slatery to scuttle the lawsuit they filed against pharmaceutical giants that led to the $35 million settlement in 2021.

The group of DAs felt they were in the best position to take on the case and win the biggest award, according to Staubus, money that wouldn’t have to go through “Nashville” and could directly target the region’s opioid problem, which was substantial.

From 2006 through 2014, more than 416 million pain pills were supplied to the nine-county area in Northeast Tennessee, 138.4 million to Sullivan County alone, 76.1 million to Washington County and 74.7 million to Hamblen County.

After four years of litigation and bankruptcies by Purdue Pharma and Mallinckrodt PLC — the latter of which manufactures and distributes the opioid Roxycodone — the DAs won a settlement with Endo in Sullivan Baby Doe (originally Staubus vs. Purdue).

Once legal fees and the court-sealed amount set aside for Baby Doe were distributed, local governments in three Northeast Tennessee received the $21 million, much of which they are planning to use to outfit an opioid treatment center at a former state prison in Carter County. The Washington County Commission this week approved using $1.9 million for the facility where people addicted to opioids could seek treatment, rehabilitation, vocational and job training and help in finding jobs and, possibly, reconnecting with families. Other funds are going toward drug recovery courts.

Staubus stands by the decision to take on the pharmaceutical industry without the Attorney General’s Office, saying they are “vindicated” by the settlement amounts.

“I felt like we could get more money because we were focused. We had a game plan that was far more aggressive, and I felt like we had excellent attorneys leading the charge,” Staubus says.

Staubus and District Attorneys Dan Armstrong and Ken Baldwin from Northeast Tennessee championed the case and, led by the Nashville-based law firm, obtained the settlement when the chancellor determined that Endo defaulted by not sharing information pertinent for trial.

Endo didn’t want to produce documents showing its sales force and managers hedged on the illicit diversion of opioids by pill mills and other prescribers. It finally provided 400,000 pages of proof after a court-ordered deadline of Feb. 14, 2020 for presenting evidence.

In short, the chancellor found Endo in contempt and determined the company lost the case before it could go to trial and the only decision was to set the damages, forcing the drug producer to settle.

The district attorneys took the money – much of which went straight to local governments with no strings attached – before Endo could file bankruptcy.

Staubus, an appointee of former Gov. Bill Haslam who since won election to the post, stops short of criticizing Slatery, pointing out only that the Attorney General’s Office felt it had the jurisdiction and was in the best position to lead the litigation and decide where the money would go.

As prosecutors, however, Staubus says “we were in the best position to understand what the drug problem was and what the needs were, and we just didn’t think we needed to beg Nashville to give us money. And we felt like we could be just as effective in our negotiations or our litigation as they were in obtaining that money.”

Staubus also says his fight with Endo wouldn’t have been successful without outside counsel because of the complexity and enormity of the case.

Slatery, however, makes no effort to hide his opposition to the use of private law firms to do battle with the pharmaceutical industry.

He further defended his office in the op-ed, noting the state has had 15 to 18 attorneys working on opioid cases since 2016. As a result, millions of dollars are coming into an Opioid Abatement Trust Fund to be distributed by an independent council to counties and cities.

In that vein, Slatery wanted to wrench the Baby Doe case from the DAs and Branstetter, Stranch & Jennings, a private-contingency firm. But he might not have been prepared to take on the case at that point. He withdrew a motion to intervene a day after the outside law firm responded.

Gerard Stranch, partner with Branstetter, Stranch & Jennings, says Northeast Tennessee district attorneys won out for a simple reason.

“We got a better deal because we worked our case all the way up to trial, and if they didn’t pay us the money we wanted, they were going to have to go through a trial,” Stranch says. “We invited the state in to negotiate with us against Endo, and they declined.”

Democratic state Sen. Jeff Yarbro, a Nashville attorney, takes a cautious approach to Slatery’s work on global opioid settlements.

“Tennessee would have fared better if the Attorney General had coordinated his efforts with the district attorneys and local governments rather than try to control them,” Yarbro says. “Concentrating the negotiation and settlement of thousands of claims in a single person is a high-risk strategy that can lead to settling claims for a fraction of their value and insufficient accountability for wrong-doers.”

Genesis of dissent

District attorneys general from 14 districts signed a letter to Slatery in March 2018 declaring their opposition to his efforts to derail their lawsuit, part of which was based on their decision to use outside counsel.

“We find it troubling that you are taking a position adverse to our goals in this litigation. As we have stated to you many, many times before, we are hopeful that you would be an asset in our fight against the drug producers who drown our communities in illegal opioids. We are disappointed in your attempts to undermine our litigation,” the letter states.

In fact, Staubus says in hindsight he wishes the DAs had been able to team up with the Attorney General’s Office, but that never worked out.

The group of district attorneys also noted they were disappointed the state filed motions to intervene in each of their pending lawsuits and contacted each court to schedule “unnecessarily expedited” hearings without notifying them or their counsel.

The DAs felt those actions by Slatery’s office were “calculated to prejudice us” in the pending lawsuits and “provoke” rather than lead to “reasonable dialogue.”

Furthermore, in the pending motions and in your recent communications with our attorneys, your office refuses to state why it is seeking to intervene, and will not confirm or deny whether the purpose of intervening will be (to) scuttle our lawsuits without any further discovery into the nature and scope of human devastation and economic toll that the major drug producers, pill mills, and others have wrought on the communities that we serve,” the letter states.

In arguing the attorney general was overstepping his authority, the district attorneys also said Slatery’s claim that they were unauthorized to hire outside counsel was “without merit.” They pointed out the costs of the lawsuit were borne by the outside law firm, not taxpayers.

The district attorneys also contended Slatery’s office was not in the “best position … to obtain the best possible monetary recovery” for communities. It pointed out a $2 billion annual cost of the opioid crisis included $46 million for babies with birth defects and $422.5 million for hospitalizations from opioid abuse.

Damages from the Tennessee Consumer Protection Act are “dwarfed” by those from the Drug Dealer Liability Act, under which the state didn’t have authority to file a claim, the district attorneys argued. Those included policing, prosecutions, jails, hospital stays, rehabilitation centers, medical expenses and educational services for those addicted to opioids, including babies.

“We need those remedies to save our communities, not statutory damages put into the state common fund that never make it back to our hometowns,” the district attorneys’ letter says.

Furthermore, they pointed toward a 2007 settlement by 27 state attorney generals with Purdue Pharma for $19.5 million, which netted $400,000 in attorney fees for the Tennessee Attorney General’s Office, $175,750 for the state’s general fund and only $143,750 for consumer education projects to pay for further investigations or litigation at the discretion of the AG’s Office.

Tennessee also entered a 10-year agreement requiring Purdue and the state to monitor and enforce suspected diversion of Oxycontin in Tennessee, but despite holding the enforcement authority, the Attorney General’s Office failed to follow through, and Tennessee settled the claims “for pennies on the dollar,” the letter says

“The limited monies that were received went into state coffers in Nashville, not into the hands of the smaller communities bearing the greatest need,” the DAs said. “The results of this failed effort have been another decade lost to growing opioid-fueled abuse, addiction and death.”
 

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5/27/24