SAN FRANCISCO (CN) — A company accused of helping drive a nationwide opioid crisis with aggressive marketing strategies asked a federal judge on Thursday to swat down a series of lawsuits brought by local governments, arguing a prior settlement makes it immune from liability.
McKinsey & Company Inc., a global consulting firm, became the first defendant to reach a settlement with all 50 states, five territories and the District of Columbia in a sprawling maze of opioid litigation over the last few months.
McKinsey and its affiliated corporate entities say the $642 million in settlements released it from liability for claims now asserted by hundreds of cities, counties and school districts in 23 different states.
During a hearing on its motion to dismiss the consolidated lawsuits, a McKinsey lawyer said attorneys general were authorized to resolve all claims arising from his client's conduct, including claims now asserted by political subdivisions within those states.
“Plaintiffs essentially seek to recover the costs of addressing public health, law enforcement and other public interests,” McKinsey attorney David Cheifetz said. “Those were the same relief sought by the attorneys general.”
McKinsey has been accused of devising strategies for Oxycontin maker Perdue Pharma to boost sales of high-dose pills with deceptive messaging to doctors that downplayed the risks of addiction. As part of the global settlement reached with 50 states, the company admitted no wrongdoing.
Lawyers representing hundreds of local governments and school districts say release waivers in those deals did not cover claims that can only be brought by a local government, such as violations of a local public nuisance ordinance.
“The position that McKinsey is taking is that there’s an overarching principle in American law that political subdivisions of a state are non-entities and therefore they have no identity outside of the state that created them, and the state can always act to intervene and override and erase their claims,” plaintiffs’ attorney Samuel Issacharoff said, adding that federal courts have consistently rejected that notion in multiple opinions.
The settlements specifically released McKinsey from claims that the attorneys general have authority to bring. Two states — Washington and West Virginia — obtained special language in their deals that did not waive the rights of political subdivisions to file their own claims against the consulting firm.
Lead plaintiffs’ counsel Elizabeth Cabraser said the court will need to engage in a detailed examination of each state’s laws to determine if an attorney general had sole authority to bring such claims against McKinsey.
“What I hear Ms. Cabraser saying to me is, ‘You know judge, you gotta do the work,’” U.S. District Judge Charles Breyer responded.
Breyer did not indicate which conflicting interpretation of the release waivers he might adopt — if they released all claims an attorney general could bring, including claims that a local government could assert, or claims that only an attorney general, and not a local government, could file.
Moving beyond the issue of release waivers, McKinsey argued that several of those lawsuits and others brought by tribal governments, health benefit trust funds and private citizens should be dismissed for a different reason. The company says it can't be held liable for claims asserted in 19 states because it did no consulting work for Perdue Pharma's in those states, even if its marketing strategies were designed to be implemented in those states.
“The question here is not whether McKinsey knew what it was telling plaintiff might have an effect in the subject states,” McKinsey attorney Mark David McPherson said. “It’s whether McKinsey directed its own conduct in the subject states. The answer is no.”
Representing the plaintiffs, attorney Catherine Humphreville cited the Ninth Circuit’s 1987 ruling in Lake v. Lake, which found a defendant could be subject to jurisdiction in a state if it “took those actions ‘for the very purpose of having their consequences felt in the forum state."
“The law makes clear it’s where the actions are targeted to and not where the actions are performed,” Humphreville said.
The judge responded skeptically to that argument.
“They don’t implement the marketing, do they,” Breyer asked.
Humphreville noted that McKinsey consultants did ride-alongs with Perdue sales reps in Tennessee, establishing that they not only targeted their marketing at those states but also had a physical presence in those states.
McPherson replied that “fact-finding” activities like a ride-along can't give rise to jurisdiction. Perdue Pharma, not McKinsey, was the one who implemented marketing strategies in those states, he said.
After taking in all the arguments, Judge Breyer said he would review the issues and let both sides know if further briefing or arguments are needed before he renders his decision.
“I know this is a serious case and it has serious implications so I won’t back-burner it,” Breyer said.
McKinsey's client, Perdue Pharma, and its billionaire owners the Sacklers reached a $6 billion settlement with multiple states in early March to resolve claims over their role in spawning the nation’s opioid crisis, which has contributed to more than a million drug overdose deaths since 1999.
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