Albany Cnty. v. McKesson Corp. (In re Nat'l Prescription Opiate Litig.)

Decision Date24 September 2020
Docket NumberNos. 19-4097/4099,s. 19-4097/4099
Citation976 F.3d 664
Parties IN RE: NATIONAL PRESCRIPTION OPIATE LITIGATION. Albany County, New York, Negotiation Class's Class Representatives; Co-Lead Negotiation Class Counsel; Co-Negotiation Class Counsel, Plaintiffs-Appellees, City of North Royalton, Ohio ; City of East Cleveland, Ohio; City of Mayfield Heights, Ohio; City of Lyndhurst, Ohio ; City of Huron, Ohio ; City of Wickliffe, Ohio, Plaintiffs-Appellants, v. McKesson Corporation; Cardinal Health, Inc.; AmerisourceBergen Drug Corporation; Prescription Supply, Inc.; Discount Drug Mart, Inc.; Walmart, Inc.; Walgreen Company; Walgreen Eastern Co., Inc.; CVS Pharmacy, Inc.; CVS Indiana, LLC; CVS Rx Services, Inc.; Rite Aid of Maryland, Inc., dba Rite Aid of Mid-Atlantic Customer Support Center, Defendants-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

CLAY, Circuit Judge.

The latest appeal in this multi-district litigation ("MDL") relating to the opioid crisis centers on the district court's order certifying a "negotiation class" under Federal Rule of Civil Procedure 23. The court has certified a class of all cities and counties throughout the United States for purposes of negotiating a settlement between class members and opioid manufacturers, distributors, and pharmacies. Appellants, objecting opioid distributors and retail pharmacies ("Defendants"), as well as six objecting Ohio cities, appeal the district court's order certifying this negotiation class. Appellees, putative representatives of the negotiation class ("Plaintiffs"), request us to approve this novel form of class action. For the reasons provided below, we decline to do so, and therefore REVERSE the district court's order.


The national prescription opioid MDL, consolidated in the Northern District of Ohio, consists of over 1,300 public-entity-led lawsuits, primarily filed by cities and counties. In re Nat'l Prescription Opiate Litig. , 927 F.3d 919, 923 (6th Cir. 2019). These cities and counties allege that opioid manufacturers, opioid distributors, and opioid-selling pharmacies and retailers acted in concert to mislead medical professionals into prescribing, and millions of Americans into taking and often becoming addicted to, opiates. In re Nat'l Prescription Opiate Litig. , 2018 WL 4895856, at *2–5, *36–37 (N.D. Ohio Oct. 5, 2018), report and recommendation adopted in part and rejected in part , 2018 WL 6628898 (N.D. Ohio Dec. 19, 2018). Plaintiffs allege that approximately 350,000 individuals in the United States died from an opioid overdose between 1999 and 2016. Id. at *2. The opioid industry's practices allegedly harmed Plaintiffs by forcing them to divert significant funding to emergency public health and public safety responses to the crisis. Id. at *37. Plaintiffs across the MDL allege numerous causes of action, including claims based upon the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. , its state analogues, state statutory public nuisance law, and several other state common law claims. Id . at *5, *31, *35, *41, *44, *46.

Throughout its time overseeing the MDL, the district court has repeatedly sought to facilitate settlements between the parties. See, e.g. , In re Nat'l Prescription Opiate Litig. , 332 F.R.D. 532, 536 (N.D. Ohio 2019) ("From the outset of this MDL, the Court has encouraged the parties to settle the case."); R. 800, Op. & Order, PageID # 18971 (noting that the court's order will assist "in litigating (and hopefully settling) these cases").1 Plaintiffs aligned themselves with that goal when, on June 14, 2019, attorneys representing fifty-one cities and counties moved to certify a negotiation class under Federal Rule of Civil Procedure 23(b)(3). In re Nat'l Prescription Opiate Litig. , 332 F.R.D. at 537. Plaintiffs sought to include within the class every city and county within the United States, some 34,458 identified municipal entities, id. at 543, unless a prospective class member exercised its right to opt-out within sixty days of class certification. Id. at 539.

The idea for a negotiation class was developed by Professor Francis E. McGovern, a special master appointed to aid the district court in the MDL, in collaboration with Professor William B. Rubenstein. See Francis E. McGovern & William B. Rubenstein, The Negotiation Class: A Cooperative Approach to Large Claim Class Actions (Duke Law Sch. Pub. Law & Legal Theory Series, Paper No. 2019-41, 2019), The primary difference between a negotiation class and a litigation class is that rather than forming a class to aggregate and try common issues, as with a litigation class, the negotiation class is designed to attempt to reach a settlement while the individual MDL cases continue along their respective litigation paths. In re Nat'l Prescription Opiate Litig. , 332 F.R.D. at 539.

The difference between a negotiation class and a settlement class is that in the case of a negotiation class, the class certification and opt-out process occur prior to a settlement being reached. Id. at 537. This is to "fix a class size and provide the Defendants a sense of the precise scope of the group with whom they are negotiating," before settlement talks begin. Id. The court indicated that class members would likely not have a second opportunity to opt-out; they must decide at the negotiation class certification stage—without knowing the settlement figure—whether they wish to "bind themselves to a negotiation process, from which they will receive a known portion of the outcome and in which they will get a right to vote on the settlement." Id. at 540.2

Despite not knowing the terms of the proposed settlement before deciding to opt-out of the class, putative class members’ rights are allegedly protected in two ways. For one, Plaintiffs developed a county-level formula allocating any eventual settlement with Defendants. Prospective class members could use the formula (available online) to ascertain what percentage of a settlement their county could expect to receive.3 Id. at 537. This is meant to give prospective class members sufficient information to determine if they stand to gain access to a large enough percentage of any possible settlement to justify remaining in the negotiation class. Second, a proposed agreement could only be accepted by the class if a supermajority (i.e., 75%) of six categories of voting class members assent to it. Id . If a settlement receives supermajority support, then the parties may move for judicial approval of the agreement. The district court would then need to determine that the proposal is "fair, reasonable, and adequate" in accordance with Rule 23(e). This process is supposed to eliminate one common obstacle to settlement in cases involving classes certified under 23(b)(3): the uncertainty defendants have with respect to whether enough putative class members will not opt-out of a settlement class after a monetary figure is reached.4 From a defendant's perspective, if too many class members opt-out, then the size of the settlement class may no longer justify the cost of the agreement because the defendant will remain exposed to litigation by the opt-out members. However, in the case of this negotiation class, as long as the settlement is approved by a supermajority of the class, every member—including those who oppose the settlement—will be bound by it.

Several distributor and pharmacy defendants objected to Plaintiffs’ motion, as did six putative city class members, thirty-seven state Attorneys General, and the Attorneys General of the District of Columbia and Guam. In re Nat'l Prescription Opiate Litig. , 332 F.R.D. at 537–38. On September 11, 2019, the district court disregarded these complaints and certified the class. The court found that:

[T]here is nothing coercive about this process: no Defendant has to employ it. There is nothing exclusive about this process: it does not interfere with the States settling their own cases any way they want, and it does not stop parties in the MDL from settling in other ways. And there is nothing intrusive about this process: it does not stop any litigation from continuing and in no way interferes with the upcoming bellwether trials in this MDL. This process simply provides an option – and in the Court's opinion, it is a powerful, creative, and helpful one.

Id. at 537. The district court also found that Plaintiffsfederal RICO and Controlled Substances Act ("CSA") claims, 21 U.S.C. § 801 et seq. , which were brought by many Plaintiffs in the MDL, satisfied the threshold requirements of Rule 23(a) as well as the predominance and superiority requirements of Rule 23(b)(3). Id . at 548–51. On January 10, 2020, Plaintiffs informed the district court that only 556 of the 34,458 putative class members opted-out of the negotiation class.

The aggrieved Defendants and putative classes members then filed motions in this Court for permission to file an appeal of the class certification order under Federal Rule of Civil Procedure 23(f). See No. 19-0305, Doc. # 1 (motion by the objecting distributor and pharmacy defendants); No. 19-0306, Doc. # 1 (motion by the six objecting putative class member cities). Plaintiffs filed an opposition to these motions, but a motions panel of this Court rejected their arguments and granted the motions for permission to appeal. This consolidated appeal followed.


Plaintiffs first contend that this appeal was improvidently granted because the district court did not reach a final decision suitable for appellate review. However, we already rejected this argument when Plaintiffs raised it before the motions panel in opposition to Defendants’ petition under Rule 23(f) to appeal the district court's certification order. The motions panel concluded that "the district court entered a final order to certify...

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