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  Agenda Item   13.    
City Council Meeting
Meeting Date: 04/18/2023  
FROM: Bill Gallardo

Subject:
2022 State and Local Government National Class Action Opioid Lawsuit Settlement 
RECOMMENDATION
Adopt Resolution No. 2023-023 to authorize the City Manager to sign settlement participation forms and related documents, and take any other necessary or appropriate actions, for the City to participate in the settlement of five (5) national class action lawsuits against opioid distributors Teva, Allergan, Walmart, Walgreens, and CVS.
BACKGROUND/DISCUSSION

National Opioid Litigation

California and its cities and counties stand to receive up to $1.8 billion for opioid substance use prevention, harm reduction, treatment, and recovery. This is in addition to the $2.2 billion previously provided by the national class action lawsuit against opioid distributors McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation (collectively, "Distributors"), and against opioid manufacturers Johnson & Johnson, Janssen Pharmaceuticals, Inc., Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Janssen Pharmaceutica, Inc. (collectively, Janssen').

Since 2017, the State of California, 51 of 58 California counties, and approximately 28 California municipalities filed lawsuits against opioid manufacturers and distributors seeking to abate the opioid crisis. Similar lawsuits were filed by almost all other states and many cities and local governments within those states. Since the Summer of 2021, nine Defendant families have executed National Opioid Settlements. First, in July 2021, Janssen and the Distributors entered into National Opioids Settlements (“2021 National Settlements”). More recently, between November and December of 2022, five additional defendants have entered into National Opioids Settlements (“2022 National Settlements”). Those defendants include:  Teva, Allergan, Walmart, Walgreens, and CVS.

Key Terms of the 2022 National Settlement Agreements

The proposed national Settlement Agreements will provide substantial funds to states and eligible local governments (any county or municipality above 10,000 in population) for abatement of the opioid epidemic across the country, and will impose transformative changes in the way the settling defendants conduct their business. The 2022 National Settlements are “opt in” settlements that are open only to states, as well as state subdivisions (e.g., municipalities, counties, parishes, cities, towns, incorporated townships, villages, and boroughs) and certain special districts. The settlement proceeds to be paid to local governments will be in proportion to the number of state and local governments that approve each settlement. The City has until April 18, 2023 to opt in to participate in the settlement agreements. After April 18, 2023, the extent of subdivision participation will be used to determine whether participation for each deal is sufficient for the settlement to move forward and whether a state earns its maximum potential payment under the settlement. Participating subdivisions would receive abatement proceeds through annual payments continuing over a period of years, ranging for each defendant, with some defendant payments being made as long as until 2036.
 
Each of the 2022 National Settlements requires that at least 85% to 95.5% of abatement funds be used to fund opioid-remediation efforts, with at least 70% of abatement funds required to be used in connection with future opioid-remediation efforts. The 2022 National Settlements effectively define “opioid remediation” as including care, treatment, and other programs and expenditures (including reimbursement for past such programs or expenditures, except where the agreement restricts the use of funds solely to future opioid remediation) designed to (1) address the misuse and abuse of opioid products, (2) treat or mitigate opioid use or related disorders, or (3) mitigate other alleged effects of, including on those injured as a result of, the opioid epidemic. The 2022 National Settlements include broad and non-exhaustive lists of qualifying opioid-remediation expenditures. A list of approved uses (Exhibit E of the Settlement Agreements) is set forth in Attachment B to this staff report.  

Why Should a Municipality Sign On?
  • This proposal is a product of years of litigation and years of settlement negotiations.
  • Negotiators have put forward this deal because they believe it is the best deal to be had.
  • Money is critical to addressing the opioid epidemic at this time.
  • Litigation has real risk.
  • Further insolvencies and bankruptcies of the defendants are a real risk.
  • Even if a municipality does not want to perform the reporting requirements or be subject to the use restrictions in the settlements, by opting-in to participate in the settlement agreements, the county in which it is located gets money to combat the opioid epidemic.
What is the Process to Opt In?

In order to opt in to receive a share of the five settlements, a “participation form” for each settlement must be signed (electronically through Docusign or by hard copy). Additionally, five Proposed California State Subdivision Agreements”, one for each of the settling defendants, must also be signed.

When is the Deadline for Participating?

April 18, 2023.
FISCAL IMPACT/SUMMARY
The amount that the City may be allocated under the settlement is unknown at this time because it is contingent upon the specific amount that the State of California receives, which ultimately depends on the number of state and local governments that participate in the settlement. Once that amount is determined, staff will seek direction from the City Council on whether to have the City receive direct payments (which are subject to use restrictions and involve reporting requirements) or instead allow the City's allocation to be paid to the county.
RESPECTFULLY SUBMITTED:
William Gallardo, City Manager
Prepared by:  Melissa Davis, Management Analyst II
Concurrence:  D. Craig Fox, Assistant City Attorney
Attachments
Resolution No. 2023-023
List of Remediation Uses (Exhibit E to the Settlement Agreements)

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