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Contingency Fee Agreement Approved in Opioid Marketing Litigation

July 5, 2017 | Posted in : Contingency Fees / POF, Ethics & Professional Responsibility, Fee Agreements, Fee Issues on Appeal

A recent NLJ story by Kristen Rasmussen, “N.H. High Court OKs Contingency Fee Agreement in Opioid Marketing Litigation,” reports that the New Hampshire Supreme Court recently dealt Big Pharma another blow as it challenges the government's practice of hiring attorneys on a contingency fee basis in litigation accusing the companies of deceptively marketing opioid painkillers.

In a recent spate of lawsuits across the country, plaintiffs lawyers have teamed with state and local governments, suing pharmaceutical companies through contingency fee agreements for their alleged role in creating the prescription opioid and heroin addiction epidemic.  Such litigation is pending in federal, state and county courts in Ohio, New York, Mississippi, New Hampshire, Chicago and two California counties.

In many of these cases, the pharmaceutical companies challenged the public-private contingency fee arrangements with little success.  And a ruling by the New Hampshire Supreme Court on June 30 means they won't have success there either.  The state's high court ruled that the pharmaceutical companies do not have standing to challenge the agreement, reversing the trial court's prior decision.

In March 2016, that lower court — the Merrimack Superior Court — ruled that New Hampshire state law requiring the Legislature to approve the hiring of outside counsel by the Attorney General's Office doesn't allow the use of a contingency fee arrangement to make "an end run to avoid the statutory approval process."

The pharmaceutical companies — Actavis Pharma Inc., Endo Pharmaceuticals Inc., Janssen Pharmaceuticals Inc., Purdue Pharma Inc. and Teva Pharmaceuticals USA Inc. — successfully argued that then-New Hampshire Attorney General Joseph Foster's contingency fee agreement with successful plaintiffs firm Cohen Milstein Sellers & Toll was thus invalid.

Interpreting state law in this manner "would contravene the Legislature's clear intent to exercise control over additional appropriations for hiring outside counsel and recovery funds obtained by the [AG's Office] on behalf of the state," presiding Judge Diane Nicolosi wrote.  "In executing the retainer agreement with Cohen Milstein, the OAG acted outside its statutory authority to hire outside counsel and the retainer agreement is therefore ultra vires and void."

On June 30, however, the state Supreme Court reversed — largely on standing grounds — the lower court and sent the case back to it.  The state Supreme Court found that the pharmaceutical companies did not have standing to make an ultra vires challenge to a government contract that they are not a party to and that is based on their allegation that the AG Office's conduct in entering a contingency fee agreement violated statutory requirements.  In so ruling, the court rejected the pharmaceutical companies' argument that standing principles do not apply to them because they were not the party that initiated the lawsuit.

"Contrary to their representations otherwise, the defendants are themselves seeking affirmative judicial relief ... " Chief Justice Linda Stewart Dalianis wrote in the eight-page opinion.  The court also ruled that the pharmaceutical companies did not have standing to sue under the state's ethics code, noting that "there is nothing in the ethics code to support a conclusion that the Legislature intended to create a private right of action for its violation."