Opioid settlement disbursements must be transparent, state high court rules in row over nonprofit foundation

The nonprofit foundation responsible for disbursing hundreds of millions of dollars of opioid settlement money in Ohio is subject to state freedom of information laws, the state supreme court ruled Thursday.

Big money is flowing out of opioid settlements, such as the $10 billion deal struck by pharmacies CVS and Walgreens. Ohio will see some $450 million of that money, Emily Field reported for Law360 (limited free access). At least half of it will be disbursed by a nonprofit organization that state and local governments created for the purpose, the OneOhio Recovery Foundation.

A representative of Harm Reduction Ohio (HRO), another nonprofit organization, concerned with preventing overdose deaths, was shown the door at a OneOhio meeting not open to the public. OneOhio subsequently refused to reply to record requests under the Ohio public records act (PRA).

That will change now, as the Ohio Supreme Court ruled unanimously that OneOhio is the functional equivalent of a public entity, the test for bringing quasi-private actors within the scope of the PRA. To determine functional equivalence, the court explained, a totality-of-the-circumstances, multi-factor test asks:

(1) whether the entity performs a governmental function,
(2) the level of government funding, 
(3) the extent of government involvement or regulation, and 
(4) whether the entity was created by the government or to avoid the requirements of the Public Records Act.

The burden of proof is "clear and convincing," which is no low hurdle. 

The factors are common in functional equivalence tests in state sunshine laws in the United States. The devil is in the application. Characteristically, HRO and OneOhio posited very different analyses.

Though the multi-factor test makes no one factor dispositive, funding often proves controlling in cases such as these, even to the point that some states employ a disjunctive formulation along the lines of "state funding or state power." Here, the parties looked at the problem from differing angles. HRO characterized the money under the control of OneOhio, an entity created by government, as public money. OneOhio rather looked to the source of the money, private corporations, and to the ultimate beneficiaries, private-person recipients of state aid.

HRO had it right, the court decided. The analysis was bolstered by the inescapable conclusion that OneOhio was created by state and local governments through a memorandum of understanding specifically about how they would handle the money. OneOhio tried to resist the fourth factor by articulating it as conjunctive, thus, requiring an intent to evade the PRA. But the court had none of it.

Another somewhat superfluous argument by OneOhio merits mention. The foundation argued that subjecting it to the PRA would makes its funds vulnerable to raiding for other purposes by the legislature. Neither here nor there, the court opined. I suggest moreover that OneOhio's PRA accessibility is the result not the cause of its public status.

What's interesting about the argument from a tort perspective, though, is that OneOhio pointed to the example of tobacco settlement money. The Ohio executive and legislature responded to the 2008 financial crisis by diverting $230m in proceeds from the 1998 Master Settlement Agreement with Big Tobacco to unrelated purposes, namely, balancing the budget and fostering job creation. The Ohio Supreme Court upheld the diversion against constitutional challenges in 2010.

The application in the states of functional equivalence and similar tests to extend sunshine laws to quasi-private actors is highly variable, as much a function of the eye, or prejudices, of the beholder, as of any mathematical formula. That makes it difficult to extrapolate from the Ohio case beyond Ohio.

Still, I find this case offering a compelling analysis to access the infamously secret records of university foundations in other states. Those records, too, often are secreted upon the rationale that the funds originate with private donors. Consistently with the instant case, but not representing a majority rule in the states, the Ohio Supreme Court sided with a newspaper in 1992 in granting PRA access to the donor rolls of the nonprofit University of Toledo Foundation.

The instant case is State ex rel. Harm Reduction Ohio v. OneOhio Recovery Foundation, No. 2023-Ohio-1547 (May 11, 2023).