Law & Courts

School Districts Are Poised For a $23 Million Payout in New Opioid Settlement

By Mark Lieberman — September 29, 2023 4 min read
Sa Thao signs the 2022 Mobile Recovery National Bus during a stop at the Capitol in Sacramento, Calif., on Sept. 7, 2022. Across the country, people in recovery and relatives of those killed by opioid overdoses are pressing for roles in determining how billions in opioid settlement money will be used. That push is one of the missions of the monthlong nationwide bus tour. Thao was addicted to methamphetamine but through recovery programs has been clean for 18 months.
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School districts would be eligible to apply for $23 million in grants as part of a settlement local governments have negotiated with the global consulting firm McKinsey over its alleged role in facilitating the opioid crisis, according to a class-action settlement proposal filed in federal court this week.

If the judge agrees, every school district in the nation will be able to apply for grants to address the effects of the opioid crisis on their operations, including rising costs of special education services and counseling for students with disabilities caused by direct or indirect opioid exposure. Lawyers proposed this approach instead of dividing $23 million equally among the nation’s 13,000 districts, which would have meant each one would receive only $1,800.

School districts across the country have been pursuing several strands of legal action against companies that manufactured and marketed addictive opioids that have led to tens of thousands of deaths and countless more addiction struggles in the last two decades. They’ve argued in legal filings that the companies should bear the costs of programs to help prevent opioid addiction and support community members who are suffering.

Fourteen districts in five states served as lead plaintiffs in the lawsuit against McKinsey, arguing that they incurred steep costs to provide services to a surge of students experiencing the long-term effects of conditions like neonatal abstinence syndrome, which occurs in children whose mothers were addicted to opioids while they were pregnant.

The newly announced $23 million settlement is one-tenth of the $230 million sum McKinsey agreed on Sept. 26 to offer to local governments nationwide.

School districts have already received commitments for an additional $33.5 million in recent years by settling similar litigation with opioid manufacturers including Purdue Pharma and Mallinckrodt.

If the settlement proceeds as proposed, those 14 districts—seven in Kentucky, one in Florida, and two each in Maine, New York, and Tennessee—will each automatically receive a $10,000 grant.

“We think this is an outstanding settlement and creates a fair result for districts,” said Cyrus Mehri, one of the lead lawyers representing districts in litigation against McKinsey.

At the same time, $23 million is far smaller than the likely full financial impact of opioids on school districts’ budgets, Mehri acknowledged.

“While none of these moneys are more than a speck against the magnitude of the problem, I do think it’s a really important step in the evolution of school districts asserting public nuisance claims to protect themselves from catastrophes like the opioid crisis that frustrate their mission and divert their resources,” he said.

The settlement is also fairly novel. Comparable settlements between school districts and major companies typically involve a handful of individual school districts, not the collective nationwide group of districts, Mehri said.

This case, along with the settlement between school districts and vape companies like Juul, “serves as a blueprint for other issues that will impact the public schools,” said Lynn Rossi Scott, an attorney who worked on districts’ litigation against vape manufacturers. Juul last year settled cases against it with more than $1 billion for school districts, Native American tribes, and individuals.

Lawsuits allege McKinsey helped opioid manufacturers market and distribute opioids despite their widely documented public health risks. In a statement published on its website, McKinsey said it does not admit any liability or wrongdoing in the case, but chose to settle to aid efforts to fight the opioid epidemic. “We continue to believe that our past work was lawful and deny allegations to the contrary,” the statement reads.

What happens next?

In the coming weeks, U.S. District Judge Charles Breyer from the Northern District of California will weigh in on the proposed class-action settlement. Then each of America’s 13,000 districts would have the option to stay out of the settlement and continue to pursue litigation of their own against McKinsey, or apply for grants from the $23 million pool of funding set aside for schools.

Once the class of school districts is finalized, districts would be able to apply for grants to help fund addiction recovery programs, as well as special education and mental health services for students and families whose lives have been harmed by opioid addiction.

Andrés Alonso, a trustee on the board of the Carnegie Foundation who previously served as CEO of the Baltimore City public school system and deputy chancellor of the New York City public schools, will oversee the grantmaking process for doling out the $56.5 million, according to documents outlining the terms of the settlement.

Districts in areas most affected by the opioid crisis will get priority consideration, as will low-wealth districts, districts that propose projects using matching funds from other sources, and districts that propose efforts to emphasize support for students under the age of 8.

State governments have collectively received $50 billion in settlement funds from their own lawsuits against opioid companies. But most haven’t included any school district representatives on the commissions they’ve assembled to dole out those dollars. The $23 million from the new McKinsey settlement, by contrast, is specifically for K-12 schools.

If Breyer approves the class-action settlement, lawyers will send letters to each school district, and to each state’s education chief, asking them to help districts decide whether to participate in or opt out of the settlement. They also plan to post notices in publications commonly read by district administrators, including Education Week, the settlement says.

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