The Verdict - Napoli Shkolnik Newsletter - Special Cities Counties and Municipalities Edition

CITIES, COUNTIES AND MUNICIPALITIES EDITION

ISSUE NO.11 SUMMER 2019

POTENTIAL CLAIMS BY CITIES, COUNTIES AND MUNICIPALITIES Cities, counties and municipalities are often cheated, overcharged or otherwise damaged by large corporations, and are increasingly taking action to recover their losses. In the past, last of knowledge of the corporate wrongdoing, and/or lack of resources prevented cities, counties and municipalities from taking action. But over recent years, local governments are increasingly taking action to recover their losses — often with the help of capable counsel. The following are some ex-

The firm and its partners are featured in

amples of actions brought or that could potentially be

Times Square, New York for being nationally

brought by cities, counties and municipalities to recov-

and regionally ranked in the “Best Law Firms”

er the substantial damages they have suffered at the

category by U.S. News & World Report.

hands of major corporations.

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Law360 Quotes Paul J. Napoli

Napoli added that their argument is supported by official state data, as he said, “a detailed report for the state comptroller found the counties were taken advantage of in the past, this is their opportunity to redress the past abuses by these carriers.”

NY Counties Join Battle Over 911 Fees Against Telecoms, Law360 (May 2, 2019).

911 SURCHARGE LITIGATION Cities, counties and municipalities are frequently required to provide 911 emergency services to their citizens. In recent years, 911 services have been upgraded to provide computerized 911 services, including call tracing, GPS capabilities (which enable 911 dispatch to locate the caller), the capability to contact 911 via text message, and other technological enhancements. All these services are essential and life-saving, but come at substantial cost.

To finance the cost of providing 911 services (which total billions of dollars nationwide), cities, counties and municipalities frequently impose a surcharge on landline and wireless telephone service. Such 911 surcharges are calculated as a set fee per telephone number or telephone line (including wireless lines and “Voice of Internet Protocol” lines, or telephone access provided using Internet service). These surcharges have been instrumental in providing a means for cities, counties and municipalities to finance the significant cost of providing 911 emergency services.

However, the telephone service providers have not been collecting near enough to finance the cost of 911 emergency services — leaving a multibillion dollar deficit Collecting the surcharge is contrary to the interests of telephone service providers because doing so could potentially negatively affect their relationships with their customers. Indeed, certain telephone service providers have declined to collect the correct 911 surcharge, and/ or have turned a blind eye against customers’ failure to pay it, to appear more attractive than competitors who have been collecting the surcharge. Further, telephone service provides have advised customers how to decrease the number of lines they use — and, thus, their 911 surcharges. The cities, counties and

municipalities are the ultimate losers in this competitive game between telephone service providers, because far less than the full amount of the 911 surcharge due is collected – leading to deficits in funding, and local governments having to dip into their own pockets to fund 911 services.

As just a small example of the telephone service providers’ failure to comply with their statutory obligations, George Maragos, Comptroller of Nassau County, released a report entitled “Limited Review of E911 Emergency Telephone System Surcharge Revenues.” This report provided a review of the 911 Surcharge revenues received in Nassau County from Verizon on landline, VoIP, and wireless carriers during 2012–2014.

Nassau County Audit Report Findings Verizon owes the County $466,916 because it failed to pay part of the monthly surcharge on phone bills due to the County. The review noted that from the period 2011

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through 2014, Verizon improperly deducted an amount

intended beneficiaries of the 911 law, and that there

ranging from 1% to 3% beyond the 2% administrative

was no government enforcement mechanism for the

fee permitted by law.

911 surcharge, implying that it was up to “private attorneys general” — such as the plaintiff counties –

E911 surcharge revenue from eight communications

to enforce the law. The Sixth Circuit also held that the

carriers totaling over $85,600 was not accrued in 2014

Counties’ allegations of misrepresentations by the

at year end.

telephone service providers — including regarding, for

Most communications service providers were not

example, the number of telephone lines assessed and

providing the County with annual accountings of the

billed, and the number of telephone lines omitted and

surcharge amounts billed and collected and with the

not billed — stated a claim for fraud.

names and addresses of customers who have refused or failed to pay the surcharge, as both NYS County Law and the Nassau County Administrative Code provide for.

In addition, the Police Department has not established

This groundbreaking decision by the Sixth Circuit has paved the way for other cities, counties and municipalities to bring similar actions. For example, Gwinnett and Cobb County, Georgia filed lawsuits in

written procedures for the E911 surcharge revenue

state and federal court alleging 15 phone providers failed

collection process.

to collect millions in fees from customers to support

To remedy these violations, several cities, counties and

the counties’ 911 systems. Other cities, counties and

municipalities, with the help of counsel, have brought

municipalities, with the help of experienced counsel,

lawsuits against the telephone service providers

can bring similar actions against their relevant service

based upon their failure to collect the 911 surcharge

provides, and recover potentially hundreds of millions

as required, as well as their fraud in misrepresenting

in uncollected 911 surcharges owed.

that they have collected the full amount of the 911 surcharge due when they clearly have not. For example, several counties in Tennessee brought suit against AT&T Tennessee alleging, for example that the defendant telephone company — to reduce costs, offer lower prices, and obtain more customers — engaged in a covert practice of omitting fees mandated by Tennessee statute. See Hamilton County Emergency

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Communications District v. AT&T Tennessee, No. 1:11-cv00330. The District Court dismissed the action, ruling (i) that there was no private right of action under the Tennessee statute, meaning the legislature did not intend that individuals, cities, towns or municipalities could bring suit under it, and (ii) that AT&T did not engage in knowing wrongdoing. But the Sixth Circuit reversed, noting that the counties were clearly the

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Paul J. Napoli

GENERIC DRUG ANTITRUST LITIGATION In 2014, the Department of Justice began an inves-

the initial investigation, pleaded guilty to fixing prices for two generic drugs, doxycycline and glyburide, and agreed to cooperate.

tigation into the pricing of various generic pharma-

In the wake of the Federal investigation, the state at-

ceuticals. In particular, the DOJ has been investigat-

torneys’ general of 47 states brought a civil action al-

ing price fixing and market allocation agreements

leging price fixing, market division, and other antitrust

involving numerous generic pharmaceutical prod-

violations by 16 defendant pharmaceutical companies

ucts, including doxycycline, an antibiotic, and glybu-

related to fifteen (15) generic prescription drugs. As al-

ride, a treatment for diabetes. Many drug companies,

leged, Defendants’ anticompetitive conduct falls prin-

including Teva, Mylan, Heritage Pharmaceuticals,

cipally into two categories, First, to avoid competing

Dr. Reddy’s, and Allergan, have been the subject of

with one another and thus eroding the prices for a

the investigation. The DOJ investigation has grown

myriad of generic drugs, Defendants — either upon

and presently includes at least 16 companies and

their entry into a given generic market or upon the

300 drugs, plus almost every state attorney general

entry of a new competitor into that market — com-

and federal law enforcement. In early 2017, Jeffrey

municated with each other to determine and agree

Glatzer and Jason Malek, two executives of Heritage

on how much market share each would control and

Pharmaceuticals, the company that was the focus of

which customers each competitor was entitled to.

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Our attorneys strive to achieve the maximum compensation and results for all our clients.

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The defendant pharmaceutical companies then implemented the agreement by either refusing to bid for particular customers or by providing a cover bid that they knew would not be successful. Second, and often in conjunction with the market allocation schemes, competitors in a particular market communicated — either in person, by telephone, or by text message — and agreed to collectively raise and/ or maintain prices for a particular generic drug. The complaint sets forth detailed allegations of the antitrust conspiracy, including that deals were negotiated by phone, email, and text, and at industry functions.

Pharmaceutical sales reps would attend “girls’ nights out” — ostensibly events for women in the industry — and discuss sensitive information, according to the states. Based on this wrongdoing, the complaint alleges causes of action under the Federal antitrust laws, under state antitrust laws, under state consumer protection statutes, and common law. See In Re: Generic Pharmaceuticals Pricing Antitrust Litigation, Case number 2:16-md-02724, in the U.S. District Court for

trict of Pennsylvania before Judge Cynthia Rufe.

Many, if not the majority of cities, counties, and municipalities “self-insure,” meaning that they themselves pay the costs of medical care and pharmaceuticals for their employees and dependents. Put simply, these local government bodies themselves pay for or reimburse the costs of medical care, including prescription drugs. As demonstrated by the various lawsuits being brought against many pharmaceutical companies that manufacture generic drugs, these costs have been inflated – often thousand-fold — by, for example, price fixing, agreements to divide markets, agreements to maintain minimum pricing, and other unlawful antitrust conspiracies. Cities, counties and municipalities may want to consider, with the help of experienced counsel, bringing antitrust actions against the guilty pharmaceutical

manufacturers

similar

to

those

brought by the states, and thereby recover the potentially hundreds of millions in not billions of dollars they have over-expended on prescription drugs.

the Eastern District of Pennsylvania.

Cities, states, municipalities may recover millions of dollars they have over-extended on prescription drugs.

We publish pertinent information on your favorite social media platforms.

In addition to the action brought by the states, numerous health care plans, welfare benefit funds, private insurers, and other health coverage providers have brought suit, including Humana and UnitedHealth Care. These “end payor plaintiffs” seek to likewise recover the hundreds of millions, if not billions they have overpaid for generic prescription drugs as a result of the alleged antitrust conspiracy. Both the action brought by the states, and these various other actions, have been consolidated by the Panel on Multidistrict Litigation in one forum, specifically in the Eastern Dis-

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PFAS and Their

Statute of Limitations in Toxic Tort Cases: CPLR

The Emerging Crisis

Implications for Landfills

214-f and Beyond

of PFAS Exposure

NYSASWM Newsletter

Paul Napoli and Michelle Greene, New York Law Journal

The New York Law Journal

March 1, 2019

January 9, 2019

October 6, 2017

ENVIRONMENTAL LITIGATION

Clean Water Act (“CWA”), which prohibits the discharge of pollutants, contains a citizen suit provision (33 U.S.C.

Cities, counties and municipalities have also been taking action against corporations for the environmental violations and damage they have caused. The Federal statutory scheme as well as common law provides various mechanisms for cities, towns and municipalities to seek redress for the significant costs of environmental clean-up and other costs they have expended as a result of dumping and other environmental violations by guilty corporations. For example, RCRA (the Resource Conservation and Recovery Act) specifically allows a plaintiff, including cities, counties and municipalities to seek to compel the defendant corporation to clean up pollution, including by means of providing for injunctive relief and abatement of polluting activities. The CERCLA law, or the Comprehensive Environmental Response, Compensation, and Liability Act, allows plaintiffs to seek

§ 1365(a)(1)), which allows “any citizen” (including cities, counties and municipalities) to commence an action against “any person” (including corporations) to seek injunctive relief and recover damages caused by the discharge of the hazardous substances.

Recourse is also available under common law, including under theories of (i) strict liability, applicable where a corporation conducts an “abnormally dangerous” activity (in which case the corporation can be held liable despite having exercised all possible care); (ii) public nuisance, which provides for recovery for activities such as the contamination of an aquifer or other natural resources, or noise or air pollution; and (iii) trespass, which is applicable where contaminants invade land or resources held by local governments.

to recover costs incurred in removing hazardous wastes

Local governments have used these various mechanisms

and repairing contaminated sites. In addition, the

of seeking relief for environmental contamination and

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other harms by commencing litigation against the

Co., et al., Case No. 17-cv-6980. Subsequently nine

violator corporations. For example, the City of Lake

(9) additional county water suppliers followed suit,

Elmo, Minnesota brought suit against 3M Company

specifically Port Washington Water District, Roslyn

(“3M”), a manufacturer of PFAS. PFAS is a man-made

Water District, Water Authority of Great Neck North,

chemical used in fire-suppressing foam previously

Oyster Bay Water District, Garden City Park Water

used by firefighters and a number of consumer

District, West Hempstead Water District, Carle Place

products, including carpets, clothing, non-stick pans,

Water District, Jericho Water District, and Albertson

paints, polishes, waxes, cleaning products, and food

Water District. These counties serve an additional

packaging. The lawsuit alleges that 3M had disposed of

200,000 residential and business customers. The

PFAS-containing wastes at its facility and a local landfill,

cost to clean up the contaminated water supply is

resulting in contamination of groundwater, including

estimated to be in excess of $300 million.

the local drinking water supply. Lake Elmo sought recovery of costs it spent constructing an alternate water supply. See City of Lake Elmo v. 3M Co., No. 162557 ADM/SER, 2017 WL 630740 (D. Minn. Feb. 15, 2017). The plaintiff City of Lake Elmo overcame 3M’s motion to dismiss and other arguments. In related litigation, the state of Minnesota was able to recover a $850,000,000 settlement from 3M, some of which funds are supposed to be used to help clean of St. Elmo’s water supply.

In sum, there are several viable means of legal redress for cities, counties and municipalities facing harm to their citizens – and millions and millions in clean-up costs caused by the dumping and other environmental wrongdoing by major corporations. With the help of informed counsel, cities, counties and municipalities can seek legal redress and substantial recoveries for such environmental and other wrongs – and resultant millions in damages — such corporations have caused.

In another action seeking to recover damages for environmental contamination at the hands of major corporations, several Long Island counties brought suit against Dow Chemical, Ferro Corp., and Vulcan Materials Co. based upon their dumping of 1,4 dioxane,

Read about PFC Exposure, potential sources and serious associated health effects.

a manufacturing solvent used in the manufacture of industrial degreasers, laundry detergents and

Download at bit.ly/waterdistricts

other household products. The lawsuit claims the defendants’ dumping of 1,4 dioxane has contaminated the counties drinking water. The lawsuits — which seek unspecified damages and cleanup costs — cite defective design, failure to warn about the dangers, negligence, public nuisance and trespass. The first lawsuit was filed in 2017 by the Suffolk County Water Authority, which serves about 1.2 million residents.

See Suffolk County Water Authority v. The Dow Chemical

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RECENT COURT APPOINTMENTS

Hunter J. Shkolnik, Partner Plaintiffs’ Executive Committee in In Re: National Prescription Opiate Litigation, MDL 2804 by United States District Court Judge Dan Aaron Polster of the Northern District of Ohio.

From left, Paul J. Napoli, Of Counsel with Partners Marie Napoli and Hunter J. Shkolnik.

Co-Liaison Counsel in the Flint Water Crisis Litigation by United States District Judge Judith E. Levy of the U.S. District Court for the Eastern District of Michigan.

ABOUT THE FIRM

Napoli Shkolnik PLLC is a national litigation firm provid-

Paul J. Napoli, Of Counsel

ing representation to persons in class action lawsuits

Plaintiffs’ Co-Lead Counsel in In Re: Aqueous Film-

and complex commercial cases, as well as victims of

Forming Foams Products Liability Litigation (MDL No.

environmental contamination disasters, aviation acci-

2:18-mn-2873-RMG) by United States District Court

dents, defective prescriptions drugs and medical de-

Judge Richard Mark Gergel for the District of South

vices, asbestos-related illnesses, and other serious per-

Carolina, Charleston Division.

sonal injury matters. With their principal offices in New York City and additional offices in California, Delaware, Florida, Illinois, Kansas, Michigan, New Jersey, Texas, and Washington DC as well as affiliates throughout the United States, Napoli Shkolnik PLLC is readily available to clients.

Plaintiffs’ Liaison Counsel in the West Virginia Opioid Litigation (Civil Action No. 17-C-248) by Honorable David W. Hummel, Jr. of the Second Judicial Circuit Court, Division 2 of Marshall County, West Virginia.

Liaison Counsel in the Colorado PFOA / PFOS Toxic

A MISSION-BASED PARTNERSHIP

Tort Litigation (Bell, et al. v. The 3M Company, et

Hill Harper, Executive Director

al., No. 1:16-cv-02351-RBJ) by Honorable R. Brooke

Dedicated to seeking justice for vulnerable, underrepresented individ-

Jackson of the United States District Court for the District of Colorado.

uals and communities through liti-

Co-Lead Counsel in the New York Opioid Cost

gation, education, awareness and

Recovery Litigation by Justice Jerry Garguilo of

remuneration.

the Supreme Court of the State of New York for

This

partnership

provides a legal voice to those individuals and groups

Suffolk County.

who have been wronged or silenced.

Photography by Albert Cheung Photography; Tom Rumble; Ula Kuzma; Bigstock: boris fedorenko, Cision, Uncle Frank, Inc.

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