Opioid Litigation-Funding Deals Are Up for Judge's Review

(Bloomberg) -- The judge overseeing more than 600 lawsuits targeting opioid makers is demanding local governments’ lawyers turn over information about any litigation-funding agreements and provide assurance that lenders won’t gain control over legal strategy or settlements.

U.S. District Judge Dan Polster in Cleveland issued the order Monday saying he wants to ensure the agreements don’t create conflicts of interest by affecting plaintiffs lawyers’ judgments in pursuing cases against opioid makers, such as Purdue Pharma LLP and Johnson & Johnson, and distributors such as McKesson Corp. and Cardinal Health Inc.

It would be improper for such financing agreements to give lenders “any control over litigation strategy or settlement decisions,’’ Polster said in the order.

At least two litigation-funding firms have ties to lawyers driving the opioid cases. Such firms provide financing for what may be costly litigation in return for sharing in a verdict or settlement.

Perry Weitz is chairman of Counsel Financial Services, a litigation funder, and the co-founding member of Weitz & Luxenberg, one of the nation’s largest mass tort firms. Ellen Relkin, an attorney at the firm, is a member of the opioid litigation’s executive committee.

Counsel Financial has “provided over $1.5 billion in working capital credit lines and other innovative financial products to the plaintiff’s bar since 2000,” according to its website.

Christopher Seeger, a founding partner of Seeger Weiss, is also a member of the executive committee. Until May 2016 he was a director of Esquire Financial Holdings, the parent of litigation funder Esquire Bank, he said in a filing in another case.

Calls or emails to Weitz, Seeger, Counsel Financial and Esquire Bank weren’t immediately returned.

Andrew Wheatley, a spokesman for J&J, didn’t immediately respond to a request for comment. Kristin Chasen, a McKesson spokeswoman, and Robert Josephson, a Purdue spokesman, declined to comment.

Polster-ordered settlement talks between pharma companies and local governments continue while both sides prepare for the first trial next year. State attorneys general also are holding separate settlement negotiations.

Litigation Funding on Rise in Big Cases, Panel Says

Hard-hit states including Ohio, Kentucky and West Virginia have accused drugmakers and distributors of understating the risks of prescription opioids, overstating their benefits, and failing to halt suspiciously large shipments to pharmacies. They’re seeking to recoup the costs of dealing with the nationwide epidemic.

Polster said in his order he won’t allow the defendants to delve into the details of the litigation funding “absent extraordinary circumstances.” He wants to know details of any lending arrangements, and he requested sworn statements from the lawyers and lenders that there won’t be any conflicts of interest and that the lenders won’t have control over strategy, advocacy or settlement decisions.

“The judge asked for the information that was really critical to make sure the attorneys’ aren’t doing anything that would violate their ethical obligations,” while allowing the details to remain confidential, said Charles Agee, founder of Nashville-based Westfleet Advisors, which advises clients on litigation funding and focuses on commercial cases. “It’s perfectly appropriate.”

The case is In Re: National Prescription Opiate Litigation, 17-md-2804, U.S. District Court, Northern District of Ohio (Cleveland).

©2018 Bloomberg L.P.