New York towns seek to revive claims against the state over opioid settlement fund

MANHATTAN (CN) — New York state overreached its authority by establishing an opioid settlement fund that extinguished existing claims against pharmaceutical companies that perpetuated the epidemic, towns impacted by the crisis told the Second Circuit Friday.

In 2019, towns on Long Island including Brookhaven, Hempstead and Oyster Bay sued pharmaceutical companies that sold and distributed opioids in an attempt to hold them responsible for the financial harm the towns sustained.

The pain medications, such as fentanyl and oxycodone, are highly addictive contributed to a stark increase in drug addiction and overdose deaths. According to the U.S. Center for Disease Control and Prevention, nearly 645,000 people have died from an opioid-related overdose since 1999.

But before the towns could pursue financial relief, New York reached its own settlement with the pharmaceutical companies and signed into law in 2021 an opioid fund that would facilitate these settlements and retroactively extinguish claims against the opioid producers and distributors. The towns then filed suit against New York Attorney General Letitia James in 2022, claiming the state overreached by creating the fund since it barred them from pursuing their own claims against the pharmaceutical companies.

“The consequences are real and they matter: the towns will struggle to replace their aging fleets of emergency medical services vehicles, they will struggle to fund efforts to recruit employees and volunteers,  they will struggle to purchase the medications and equipment that those employees and volunteers need to serve on the front line of the battle against the opioid crisis,” the towns say in their brief.

The towns say a lower court erred in its decision to dismiss the towns’ claims against the state, and disagreed with the court’s finding that they don’t have standing to sue the state on this issue.

But Friday’s panel seemed hesitant to side with the towns, asserting that the U.S. Supreme Court has historically not allowed towns to sue in federal court on constitutional grounds.

“Under the Supremacy clause, neither we nor any federal court has allowed a municipality to sue a state in federal court on a constitutional violation,” U.S. Circuit Judge Joseph F. Bianco, a Donald Trump appointee, said Friday.

The towns argue they were deprived of their property rights to seek relief from the pharmaceutical companies for the damages they incurred as a result of the opioid epidemic, which should allow them to stake a claim under the 14th Amendment.

“The Legislature has recognized that municipalities have property rights that merit respect,” Nathan Holcomb, an attorney representing the towns, said Friday.

A lawyer for the New York Attorney General’s Office, further argued that the towns lack the right to sue the state for constitutional violations. “The municipalities don’t have enforceable constitutional rights vis-à-vie the state, and that’s the principle animating all of these decisions,” attorney Steven Yanni said.

U.S. Circuit Judge Steven Menashi, a Donald Trump appointee, questioned if that’s true in instances in which a state law takes away the town’s previously held constitutional rights.

Menashi presented a hypothetical in which the state of New York passes a law to prevent the Town of Hempstead from passing a local anti-discrimination law.

“You’re saying Hempstead could not sue New York, and Hempstead says we think you’re eliminating our legislative powers based on an invidious purpose, that it’s unconstitutional,” Menashi said Friday. “You’re saying Hempstead would not be able to challenge that?”

Yanni agreed, citing current Supreme Court precedent.

U.S. Circuit Judge Eunice Lee, a Joe Biden appointee, was also present in Friday’s panel. The judges did not indicate when they would rule.

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