Sixth Circuit Rejects Creation of a “Negotiation Class” in National Opioid Litigation
Class actions have been an established pillar of U.S. litigation for decades. Because class action litigation can effectively resolve large-scale disputes, parties sometimes have used class actions to try to address a wide variety of social ills—from car-safety measures, to tobacco- and asbestos-related illnesses, to the current prescription opioid crisis. Some of these attempts have failed—for example, in the case of asbestos litigation, where the U.S. Supreme Court rejected certification of large victim classes in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), and Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999). Other attempts have been more successful, such as the 1990s-era settlement of Medicaid lawsuits brought by state governments against tobacco companies for the recovery of tobacco-related healthcare costs.
The ongoing opioid crisis has resulted in thousands of lawsuits against prescription-drug manufacturers, distributors, and pharmacies, including numerous lawsuits brought by cities and counties saddled with social and healthcare costs of their residents. In 2017, these local government lawsuits were consolidated in a multidistrict litigation before Judge Polster in the Northern District of Ohio. In addition to shepherding the litigants through discovery and scheduling bellwether trials, the district court sought to facilitate a rapid settlement because he recognized that individuals were continuing to die as the litigation lingered. To that end, Judge Polster worked with the parties to certify a creative new type of class—a “negotiation class.” Such a class was novel because it required members to opt out of the class before a settlement was reached, thereby reducing the risk that class members holding large claims would opt out of the class post-settlement and encouraging defendants to settle by reducing their risk of further litigation. This certified negotiation class would have been binding on all counties and cities in the United States—more than 35,400 separately identified municipalities—unless they opted out of the class. Fewer than 400 purported class members opted out, and roughly 50 parties objected. Judge Polster certified the negotiation class over their objections, and the objectors appealed.
On September 24, 2020, in In re National Prescription Opiate Litigation, a divided Sixth Circuit panel rejected outright the concept of a “negotiation class,” nixing this creative attempt by the parties and the district court to encourage settlement between thousands of plaintiff municipalities and dozens of defendant drug companies, and sending the cases back to the district court for ongoing pretrial management and coordination. In rejecting certification of a “negotiation class,” the Sixth Circuit strictly construed the text of the Federal Rules of Civil Procedure, including Rule 23, which does not mention a “negotiation class.” Yet a strong dissent—which was nearly twice as long as the opinion itself—may offer a roadmap for parties and federal courts outside the Sixth Circuit to break with the majority’s decision and certify negotiation classes in the future.
- The Sixth Circuit strictly construed the language of Federal Rule of Civil Procedure 23 and held that a “negotiation class”—defined as a class constituted for the purpose of fostering global settlement, rather than for litigating common issues or endorsement of a concluded final settlement—cannot be certified.
- The thousands of cases consolidated in In re National Prescription Opioid Litigation have been returned to the Northern District of Ohio for management of pretrial proceedings, and multiple bellwether trials are currently scheduled (although with some delays from the coronavirus pandemic). The individual lawsuits, which originate from nearly all 50 states and several U.S. territories, are likely to proceed for decades.
- Negotiation classes may not be dead-on-arrival. The dissent forcefully advocated for the flexible reading that has historically been accorded to the text of Rule 23 and may provide encouragement—and a roadmap—to future efforts to certify a negotiation class elsewhere.
Over the last decade, growing government expenditures tied to increasing levels of opioid addiction have caused an explosion of lawsuits against drug companies. Many of these lawsuits have been brought by cities and counties that have borne the brunt of social and healthcare costs of this crisis. In 2017, the Judicial Panel on Multidistrict Litigation transferred a host of these lawsuits to U.S. District Judge Polster in the Northern District of Ohio, and the consolidated proceeding now includes thousands of individual actions. The plaintiffs generally have brought both state-law claims and federal Racketeer Influenced Corrupt Organization Act (“RICO”) claims, alleging that the manufacturers of opioids misrepresented the risks inherent in their use and that distributors failed to properly monitor and respond to suspicious orders—all of which allegedly contributed to the ongoing epidemic.
As the multidistrict litigation moved slowly towards bellwether trials, the district court encouraged the parties to settle. The opioid cases present decades-old challenges to reaching a settlement, however. In a typical class action that is resolved by settlement, class members may opt out after a settlement is fully negotiated and submitted to the court for approval, and a settlement class is certified. Such opt outs ordinarily pose only minimal disruption. Here, however, the plaintiffs are well-resourced governmental entities, many of which have large, developed claims. The defendants therefore feared that many plaintiffs could opt out of a settlement and force the defendants to expend large sums litigating—even after having dedicated significant resources to a settlement. The specter of these opt outs made the composition of a settlement class uncertain and prevented successful negotiation of a settlement. These problems are not new: as noted above, in past decades U.S. courts have struggled with similar problems in mass asbestos and tobacco litigation, where the sheer volume of claims, diversity of plaintiffs, and potential for opt outs have hindered settlement attempts.
In response to this problem, the lead plaintiffs in the opioid litigation moved to certify a “negotiation class”—a creative, never-before-tried form of class certification. Instead of certifying a settlement class after a settlement was reached, here the proposal was to certify a class for the purpose of negotiations, and force individual plaintiffs to choose whether to opt out before the negotiations had significantly advanced. This early opt-out process would give the defendants certainty that the settlement would not be undone by a spate of post-settlement opt outs. In exchange, the plaintiffs would have received two protections: (i) before deciding whether to opt out, plaintiffs would know what overall percentage of any settlement they would personally receive (even if they did not know the actual settlement amount or other terms); and (ii) any settlement would need to be approved by a “supermajority”—75%—of class members, in each of six different votes designed to capture different cross-sections of the class.
The motion was opposed by several groups of actors, not all of whom were purported members of the class. A number of defendants objected to the legality of the certification, as did a small group of six purported class members. In addition, the Attorneys General of 37 states, the District of Columbia, and Guam—while neither class members nor defendants—objected to the proposed certification on the grounds that the certification of plaintiff counties would impinge on state rights to litigate the same claims on behalf of their residents. These states have brought their own lawsuits against the drug companies, and so the certification of the local government negotiation class presented unwanted competition with the state Attorneys General’s ability to settle the disputes—as they had done in the historic tobacco cases.
The district court rejected these objections and certified the negotiation class. The court held that Federal Rule of Civil Procedure 23 allows for a negotiation class, and that the other requirements of Rule 23 were satisfied—including that questions of law or fact common to the class predominated. The latter determination relied on the RICO claims asserted by the majority of the purported class members, along with any other claims or issues arising out of a “common factual predicate.” The district court did not explain, however, which claims would be captured by this “common factual predicate,” leading to uncertainty by potential class members (and objectors) as to whether state law claims would also be captured by the class certification—and barred by res judicata if the negotiation produced a settlement.
The Sixth Circuit’s Decision
The Sixth Circuit (Clay and McKeague, JJ., with Moore, J., dissenting) reversed, holding that (i) the language and structure of Rule 23 does not permit a court to certify a negotiation class; and (ii) the district court’s certification of the RICO claims for negotiation “papered over” the predominance inquiry by sidelining many purported class members’ state-law claims, which necessarily varied between purported class members from different states. In essence, the Sixth Circuit believed itself to be following the Supreme Court in Amchem by reading Rule 23 rigidly and refusing to expand the tools available to litigants to resolve complex litigation.
First, the majority ruled that language of Rule 23 does not allow courts to certify a class formed for the purpose of negotiations with defendants. In the majority’s view, the language of Rule 23 permits only two types of certified classes: “settlement classes,” in which a class is certified after the class counsel reaches a settlement with the defendants, and “litigation classes,” in which a class is certified based on common issues of fact or law for the purposes of litigation. The majority rejected the district court’s conclusion that Rule 23 is “open-ended,” instead holding that Rule 23’s plain language describes the outside boundaries of permissible certification procedures. In the majority’s view, since Rule 23 does not mention a “negotiation class,” it leaves no room for the use of such a tool.
The majority was unconvinced that because judges created the concept of the settlement class, they should likewise be allowed to create the concept of a negotiation class. The plaintiffs argued that the use of a settlement class was developed by district courts in the 1970s and was added to the text of Rule 23 after decades of use and blessing by the U.S. Supreme Court in Amchem. But the majority rejected this argument. As the majority explained, Rule 23 had contained support for a settlement class in the 1970s—requiring that “a class action shall not be dismissed or compromised without approval of the court”—and that in contrast, the current text of the rule contains no support for a negotiation class.
Second, the majority held that the district court impermissibly certified a class empowered to negotiate state-law claims while focusing its predominance analysis solely on federal claims. The court noted that the district court certified the class to negotiate global settlements for federal claims and claims “arising out of a common factual predicate,” but analyzed the “predominance of common issues of law or fact” (as required by Rule 23) for only the federal claims. In the majority’s view, because the state-law claims were possibly covered by certification of the negotiation class, the district court’s order created “confusion” over the scope of negotiations, and so risked depriving class members of control over their state-law claims. The majority thus reversed the district court’s certification of the negotiation class.
Judge Moore penned a dissent that was twice as long as the majority opinion. Taking the majority head-on, she argued that the historical judicial invention of the settlement class—and its later endorsement by the U.S. Supreme Court in Amchem—demonstrates the flexibility with which courts should read Rule 23. She noted that the Supreme Court has rejected a textualist interpretation of the Federal Rules, and that district courts regularly use tools that the Federal Rules’ do not expressly provide for, such as recalling a jury, hearing a motion in limine, and dismissing a case for forum non conveniens—not to mention the complex standards applied to dismissal and summary-judgment motions. In Judge Moore’s mind, all of these examples reflect the Federal Rules’ overarching purpose: “to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. Or, as the Supreme Court has put it, district courts should interpret the Federal Rules to “manage their own affairs so as to achieve the orderly and expeditious disposition of cases” rather than limit the Rules through strict readings of their text. Dietz v. Bouldin, 136 S. Ct. 1885, 1891 (2016). But even under a purely textual analysis, Judge Moore argued, Rule 23 allows settlement classes. She explained that “settlement” and “negotiation” classes are indistinguishable in the text of Rule 23, which provides that claims of a class “may be settled” after certification, meaning that the district court retains flexibility to certify a class at any point before settlement, including for negotiation.
The dissent also rejected the majority’s concerns about whether the certification of federal claims impermissibly impinged on the purported class members’ state-law claims. Judge Moore noted that it is common practice to certify only certain issues, even when predominance has not been satisfied for the cause of action as a whole and argued that certification in this case should not have given the majority pause. In her analysis, any individual issues present in the plaintiffs’ state-law claims “do not drown out the common [issues],” and she therefore would have affirmed certification of a negotiation class.
The opioid litigation is not the first attempt to use class actions to address pressing social problems—this strategy consistently reappears wherever there are historic mass litigations, such as the asbestos and tobacco cases. The Sixth Circuit’s rejection of a negotiation class joins the ranks of similar class-action decisions, such as Amchem and Ortiz, in curbing creative attempts to use class actions to resolve such intractable social problems. The lead counsel for the purported class have filed a petition seeking an en banc rehearing, and if unsuccessful, will likely petition the U.S. Supreme Court for certiorari. Without reversal by a higher court, however, any effort to resolve opioid litigation quickly through class certification mechanisms is now unlikely to succeed. Cases will continue to be litigated one-by-one, and bellwether trails will now move forward.
Yet the underlying problems remain, and plaintiffs in other cases may try again in the hopes that other courts of appeals may be more amenable to using class actions to address prominent social conflicts. Indeed, Judge Moore’s dissent provided a roadmap for parties and courts seeking prudential and textual arguments to support certification of a negotiation class. This 40-page endorsement did not limit itself to approval of the district court’s decision in this case—it wholeheartedly embraced the concept of a negotiation class, calling it “resourceful” and “innovative.” It is easy to see how a different court of appeals might adopt her analysis, particularly when faced with increasingly large and complex multidistrict litigations and class actions. A different court might also draw on the work of two prominent professors specializing in complex litigation—Francis McGovern (the court-appointed special master below) of Duke University School of Law, and William Rubenstein of Harvard Law School. Both the district court and the panel cited an article by these authors that proposed the idea of a negotiation class to solve the negotiation difficulties created by post-settlement opt outs by plaintiffs. Support for a negotiation class may therefore find more fertile ground before another court of appeals. Or as the majority acknowledged, it is possible that in the coming years, Rule 23 could be amended to expressly allow courts to certify negotiation classes.
 Interestingly, both the majority and the dissent relied heavily on Amchem, for opposite propositions: the majority, for the argument that Rule 23 should be limited to its text; the dissent, for the argument that Rule 23 leaves room for judicial innovation. Amchem—which approved settlement classes generally but imposed strict limitations on such classes—thus reflects the tension between judicial creativity in class actions and judicial restraint in interpreting the Federal Rules of Civil Procedure.