Federal judge nixes drug companies' attempt to void city's contract with Cohen Milstein firm in opioid lawsuit

Bethany Krajelis Mar. 4, 2015, 12:57pm

A federal judge on Monday denied a request for relief from a group of pharmaceutical companies being sued by the City of Chicago over the marketing of opioid painkillers.

The companies in September filed a joint motion, asking a judge to invalidate the contract between the city and Cohen Milstein Sellers & Toll-- the law firm the city hired in 2013 to investigate and litigate the opioid matter-- and issue an injunction barring the city from using the firm in this or any similar suit.

They claimed they were entitled to this relief because the city improperly delegated governmental police power to a financially-interested private party, with the police power being investigative subpoena power and the private party being Cohen Milstein.

Further, the drug companies argued, the firm's involvement violates city ethics rules and its financial interest in the outcome of the case creates a conflict of interest that violates their due process rights.

In denying the motion, U.S. District Judge Jorge L. Alonso rejected those arguments and their latest attempt to get Cohen Milstein-- a firm with 80 attorneys and offices in Washington, D.C., New York, Chicago, Philadelphia, Denver and Florida that is representing two California counties in similar litigation-- booted from the case.

A judge in December denied a request to disqualify the firm and its partner, Linda Singer, based on Singer's past position as attorney general for the District of Columbia, which received a hefty settlement after suing one of the drug companies in a similar action during her time in office.

In April 2013, the city retained Cohen Milstein to represent it in its investigation and potential litigation over the marketing of opioid drugs like OxyContin and Percocet. The agreement provided the firm would be paid on a contingent fee basis and the city would -have complete control over the investigation and litigation.

Based on agreement and the city's False Claims Ordinance, Cohen Milstein served investigative subpoenas on the drug companies that would later be named defendants. The objected, claiming the ordinance doesn't allow the city to delegate its subpoena power to the law firm.

The city then withdrew some of the subpoenas and reissued them through Assistant Corporation Counsel Michael Dolesh in the city's law department to at least three of the drug companies, all of which compiled in part or whole.

In June 2014, the city sued Purdue Pharma, Purdue Pharma Inc., The Purdue Frederick Company Inc., Johnson & Johnson, Janssen Pharmaceuticals Inc., Endo Health Solutions Inc., Actavis PLC, Teva Pharmaceutical Industries Ltd. and Cephalon Inc.

In the lawsuit that was later removed from state court to Chicago's federal court, the city accused the companies of overstating the benefits of their drugs in a way that increased addiction and the city's prescription and healthcare-related costs.

The motion at the crux of the Alonso's Monday ruling was filed by seven of the defendant drug companies in September.

In regards to the subpoena power argument, the companies argued that the False Claims Ordinance doesn't let corporation counsel delegate subpoena power to outside counsel.

"Even if that is true, an issue the Court does not decide, it is immaterial here," Alonso wrote in his ruling, pointing to the city's move to have the subpoenas reissued. "Because the moving defendants were not required to comply with the Cohen-issued subpoenas, they could not have been harmed by them, even if they were erroneously issued."

The judge also rejected the defendants' claim that the reissued subpoenas were defective as well because the ordinance provides subpoena power to only a single individual, the corporation counsel.

Alonso, however, said the defendants failed to point to a part of the ordinance or the city's Municipal Code that forbids the delegation of this power and added that, "[i]n fact, the Code suggests that delegation is the norm."

"Moreover," the judge wrote, "even if the subpoenas were improperly issued, defendants offer no authority for the notion that voiding the City’s contract with Cohen would be the appropriate remedy for that harm rather than that set forth in the Code," which provides a person served a subpoena can ask the circuit court to modify or set aside the subpoena.

"Defendants’ apparent failure to use this process to contest the subpoenas is not a basis for invalidating the City’s contract with Cohen," Alonso held.

The judge also rejected the defendants' argument that the contract between the city and Cohen Milstein should be voided based on the City's Ethics Ordinance, which prevents city officials and employees from participating in city decisions or acts when they have a financial interest at stake.

Like the city's Ethics Board, Alsono said Cohen Milstein is a city contractor, not an employee, and thus, is not subject to the ordinance because it doesn't receive employee benefits or get paid from city payroll, among other factors. He also said the firm is not a city official for purposes of the defendants' Ethics Ordinance argument because it was not elected or appointed.

And lastly, Alonso said Cohen Milstein's financial interest in the outcome of the case does not create a conflict of interest that violates the defendants' due process rights.

Pointing to other cases in which courts have held government entities can hire outside counsel on a contingent fee basis if certain safeguards are put in place, Alonso said the city's agreement with Cohen Milstein did just that.

"Because the City retains control over the investigation and litigation of this case, its retention of Cohen does not violate defendants’ due process rights," he wrote.

Court records show a hearing over the defendants' motion to dismiss the city's suit is set for March 19.

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