A TALE OF TWO SETTLEMENTS
In the world of political theatre, there are very few, if any, accidents.
Attorney General Russell Coleman's announcement last week of settlement agreements in two major cases proves the point.
https://www.kentucky.com/news/politics-government/article298197918.html…;
https://www.lpm.org/news/2025-01-08/kentucky-hedge-fund-firms-reach-227…
THE KROGER OPIOID SETTLEMENT AND THE "GLOBAL" HEDGE FUND SETTLEMENT
• The Kroger opioid litigation settlement
On January 9, the Attorney General announced the settlement of litigation with a "massive grocery chain that asked for our trust and our business [while it] allowed the fire of addiction to spread across the commonwealth leaving pain and leaving so much brokenness in its aftermath."
https://www.kentucky.gov/Pages/Activity-stream.aspx?n=AttorneyGeneral&p…
There was no indication in the Attorney General's announcement that the grocery store chain denied liability.
"Today, with $110 million invested in recovery efforts in Kentucky, Krogers has agreed to be part of the solution," Coleman declared.
A Kroger spokeswoman later corrected Coleman's statements, expressing support for the settlement but explaining that "the claims that Kroger did not have internal training or guardrails around filling prescriptions for opioids are patently false."
https://www.courier-journal.com/story/news/2025/01/09/kentucky-attorney…
• The hedge fund litigation settlement
On January 8, the Attorney General Coleman announced the settlement of litigation in "a long-running lawsuit with major hedge funds over the management of Kentucky pension systems." In announcing the settlement, Coleman shifted his focus to the deserving public workforce, "As law enforcement, firefighters and other public servants, these Kentuckians dedicated their lives to our Commonwealth. It’s our Office’s responsibility to fight for them against those who put their pensions at risk."
https://www.kentucky.gov/Pages/Activity-stream.aspx?n=AttorneyGeneral&p…
"The settling hedge funds," Coleman was quick to note, "continue to deny liability and maintain that the [$227 million] settlement is to avoid the expense, distraction and inconvenience of further litigation."
• A side by side comparison of the announced settlement agreements
The Attorney General's announcement of the settlement agreement in the hedge fund litigation emphasized that the "settlement remains contingent upon the approval of the Franklin Circuit Court and the dismissal of other lawsuits not involving the Commonwealth."
More than one subject matter expert who has followed the hedge fund litigation believes this figure is misleading. The experts question Kentucky's actual recovery in the hedge fund case, noting that the announced $227 million settlement amount will ultimately be substantially lower. They explain that the "$145 million in assets that the Prisma-managed investment fund held in reserve" is not hedge fund money. Instead, it is Kentucky's money that will be returned to the state. The $227 million, they note, must also be reduced by substantial attorneys fees incurred by the Commonwealth.
The actual settlement amount -- not already ours and not owed in fees -- that "will be distributed among the Kentucky Public Pension Authority, the Kentucky Retirement System and the County Employee Retirement System" is significantly less than the stated $227 million. These experts estimate that Kentucky's recovery is closer to $50 million -- perhaps as low as $30 million.
https://x.com/tobecb/status/1878087994780868770?s=46&t=W5grKM-bCiMjf8hi…
The Attorney General's January 8 announcement of the settlement agreement in the hedge fund litigation -- approved by the various retirement systems during special meetings conducted a few days before -- emphasized that the "settlement remains contingent upon the approval of the Franklin Circuit Court and the dismissal of other lawsuits not involving the Commonwealth."
His announcement of the Krogers settlement was vague on the question of Bullitt Circuit Court approval. The parties to the Krogers settlement approved that settlement agreement on October 31, 2024. There was no explanation for the delay in announcing the Krogers settlement.
• The language of the announcements
The language of the announcement of the Krogers settlement emphasizes the defendant grocery store chain's culpability in the opioid epidemic -- a highly sensitive subject in Kentucky.
The language in the hedge fund settlement announcement portrays the defendant hedge funds in a more neutral light. The worst the Attorney General can say about these firms is that they "put. . . pensions at risk." Settlement, in the hedge funds' case, does not constitute an admission of liability. They "maintain that the settlement is to avoid the expense, distraction and inconvenience of further litigation" -- a nuisance settlement, at best.
• Timing of the announcements
The decision to announce settlements in two major cases -- coinciding with the tumultuous opening days of the legislative session -- is a curious one. The timing was likely to minimize media coverage of the settlements -- or, at least, to encourage less rigorous media and public scrutiny of the actual terms of the settlement agreements. As noted, the proposed settlement in the hedge fund litigation may ultimately represent a limited victory -- if any victory at all -- unless all parties to all hedge fund litigation agree to the settlement and the Franklin Circuit Court approves it, as announced, following the hearing on February 26 at 10:00 a.m.
WILL THE HEDGE FUND SETTLEMENT ACHIEVE "GLOBAL PEACE AND RESOLUTION ON ALL CLAIMS"
The proposed settlement of the hedge fund litigation is "intended to fully and finally resolve all Released Claims pursuant to terms of the Settlement Agreement that ever were asserted, could have been asserted, or hereafter may be asserted. In particular, it is the intent of the Settling Parties to achieve global peace and resolution on all claims arising out of the common nucleus of operative facts alleged in the Commonwealth’s Fund-of-Funds Litigation."
The single greatest bone of contention in finalizing the hedge fund settlement agreement -- if the court ignores the ostensibly lowball monetary bottom line -- is apt to be required "dismissal of other lawsuits."
It is by no means clear that the litigants in the "other lawsuits" will simply roll over.
DISCOVERY, TRANSPARENCY, AND LOOKING BEHIND THE CORPORATE CURTAIN
None of these hedge fund lawsuits has reached the discovery phase in seven years of litigation. That delay is attributed to the hedge fund's aggressive "motions practice" and setbacks in the federal courts.
https://www.nakedcapitalism.com/2024/11/long-running-kentucky-retiremen…;
One of the "other [pension] lawsuits" that must agree to settlement -- Tia Taylor, et al. v. KKR & Co, LP, et al., -- was positioned to begin discovery -- that thing hedge fund firms “aggressively” resist -- in May 2024. The Franklin Circuit Court was scheduled to hear Taylor's motion for open proceedings and open discovery that day. The hearing was ultimately derailed, and the court did not reach the issue.
In an op-ed published just before the May 2024 Taylor hearing, the Kentucky Open Government Coalition wrote:
"By any measure, Monday’s hearing is the critical next step in determining what direction the litigation will take and to how much the public will be privy.
"Our minds return to the Boston Globe/STAT’s successful legal battle to unseal discovery in Kentucky’s Purdue Pharma OxyContin litigation in 2018. The Court of Appeals wrote:
“'Kentucky’s presumption of public access to court records is broad because 'every citizen and taxpayer has an interest in the manner in which the government is operated (and to) . . . determine whether public officials are properly fulfilling the functions of their office . . . " Every claim of the Commonwealth against another, including the claim against Purdue, is the property of the people regarding which the public has a legitimate concern. On that basis, the right of access supersedes even the right to privacy ("right of privacy does not extend to affairs with which the public has a legitimate concern.")
https://law.justia.com/cases/kentucky/court-of-appeals/2018/2016-ca-000…
"With the exception of the Purdue Pharma OxyContin litigation, we can conceive of no public issue in which Kentucky’s citizens and taxpayers have a greater — or more 'legitimate' — interest and financial stake than Kentucky’s state pension. (https://www.pbs.org/video/pension-gamble-vlit6o/?source=googlehome&acti…) This fact clearly militates in favor of openness in the proceedings and records produced in discovery."
https://kentuckylantern.com/2024/05/20/transparency-should-be-the-rule-…;
TO SETTLE OR NOT TO SETTLE?
That is the question for the parties to "other [pension] lawsuits," the presiding judge, and, in the court of public opinion, Kentucky's public servants and taxpayers. What is best for Kentucky?
Discovery having stalled in the hedge fund litigation for seven years, there is little to guide us in determining the fairness of the settlement amount and the appropriateness of its terms -- as in Purdue, "the property of the people regarding which the public has a legitimate concern."
Both, indeed all, settlement agreements involving "claims of the Commonwealth against another, including the claim against Purdue Pharma," and the hedge fund firms, should be information based. These settlements must be assessed with eyes wide open, and with the maximum information that is, or should be, available rather than with eyes blinded by an information vacuum and political theatre.
In the world of corporate liability, injury to the public, and claims of the Commonwealth, the importance of transparency, disclosure, and accountability cannot be ignored.
https://www.ag.ky.gov/Press%20Release%20Attachments/2024.01.09%20Kentuc…
https://www.ag.ky.gov/Press%20Release%20Attachments/25.01.08%20Joint%20…
