October 26, 2022
A recent Law 360 story by Jeff Montgomery, “Del. Court Demands Info on $2.7M Atty Fee in Opioid Deal” reports that, citing unsatisfactory answers to questions about a flat, $2.7 million attorney fee payout request as part of Delaware's $100 million share of a nationwide opioid damage settlement, Delaware's chancellor cautioned she might sever the fee from the deal pending a fuller explanation. In a letter to Cross & Simon LLC, Chancellor Kathaleen St. J. McCormick gave those seeking to wrap up the deal a choice between severing the fee award from the settlement for now or accepting a three-day deadline for briefs on the issue.
The chancellor said the request to direct the state's Prescription Opioid Distribution Commission to pay $2.7 million to unnamed outside attorneys "gave me pause for a few reasons." Among the concerns, the chancellor said, is that "in analogous circumstances, this court exercises its own business judgment when approving attorneys' fees in representative litigation from a settlement fund."
At issue is Delaware's share of a $4 billion fund for state and local governments, carved out of an overall $26 billion settlement that, for Delaware, resolves investigations and litigation over the role that Johnson & Johnson and distributors Cardinal, McKesson and AmerisourceBergen played in creating and accelerating the opioid crisis. Delaware Attorney General Kathleen Jennings announced the state's portion of the settlement in July 2021. A complaint and final consent judgment were filed together in the Court of Chancery on Aug. 24, 2022.
Funds from the settlement will finance addiction treatment and prevention as well as other services and programs. The agreement also mandates producer, distributor and health care reforms to prevent a recurrence of the crisis, including Johnson & Johnson's exit from opioid production. Attorneys for Delaware told the chancellor that "court approval is not required," but said in a letter earlier this month that they are prepared to submit documents for a traditional court fee analysis if required.
Michael L. Vild of Cross & Simon said in a letter Oct. 13 that "this matter involves a two-party contract between the state and its counsel, unrelated to the state's agreement with the defendants. There are no unrepresented or absent third parties." That explanation, the chancellor said, "gave me pause." Included in the overall settlement, the chancellor said, are provisions for establishment of an outside counsel fund, and statements in some parts of the settlement agreement say that payment of fees from the settlement fund is "disfavored."
A related agreement, "Remediating Opioids Across Delaware through State-Municipal Abatement Partnership," also discourages attorney fee payments from the settlement fund, the chancellor observed, adding that a multistep review and approval process is called for under some provisions. "The parties effectively ask that I shortcut the statutory process for authorizing distributions by ordering the commission to distribute the $2.7 million to the state's outside counsel, without any opportunity for public comment or investigation by the commission, without any role of the consortium, and without the requisite approvals," the chancellor wrote. "Maybe that is warranted and appropriate, but the parties did not expressly address this aspect of the relief requested."
Acknowledging concerns about delaying the payment, the chancellor suggested a three-day window for supplemental briefs on the issue or severing the fee provisions from the order, allowing the rest of the funds to go forward, pending a resolution on fee terms.