Report to Mayor and City Council
Tuesday, August 06, 2024
Consent
SUBJECT:
Title
CONSIDER APPROVAL OF FORMS, AGREEMENTS AND RESOLUTION NO. 24-079 ALLOWING THE CITY OF CARSON TO PARTICIPATE IN ADDITIONAL NATIONAL OPIOID SETTLEMENT WITH KROGER CO. (CITY COUNCIL)
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I. SUMMARY
In 2021, the City entered into settlement agreements with McKesson Corporation, Cardinal Health, Inc., AmerisourceBergen Corporation, Johnson & Johnson, Janssen Pharmaceuticals, Inc. and Ortho-McNeil-Janssen Pharmaceuticals, Inc., who are manufacturers and distributors of opioids (“2021 Settling Defendants”). The 2021 settlement agreements concerned litigation (the City was not a party to this litigation) by various States, cities, and counties relating to the 2021 Settling Defendants’ manufacture and distribution of opioids and, in particular, the impact of such activities upon the national opioid epidemic. The 2021 Settlement Agreements required that a “critical mass” of public agencies participate in order for them to become effective, which was achieved in 2022.
In 2023, the City Council approved City’s participation in an opioid settlement with additional manufacturers and retailers of opioids named as additional defendants in litigation aimed at addressing the opioids crisis including Teva, Allergan, Walmart, Walgreens, and CVS (“2023 Settling Defendants”). The terms of the 2023 Settlement Agreements are similar to the 2021 Settlement Agreements, which includes the requirement that a critical mass of participation be achieved, provides for a broad release of the 2023 Settling Defendants from liability relating to opioids, and, further, direct or indirect payment of settlement funds to the various local agencies agreeing to participate. The City Council directed settlement payments under the 2021 and 2023 settlements to be made to the County with the understanding that City may change its election so that it receives direct payment at any time.
Now, a new national settlement has been reached with Kroger Co. The terms of the Kroger settlement are similar to the 2021 and 2023 Settlement Agreements. It is requested that the City Council approve City opting into the 2024 settlement with Kroger Co. and provide authorization similar to those given for the 2021 and 2023 settlements.
II. RECOMMENDATION
Recommendation
TAKE the following actions:
1. APPROVE Settlement Agreement and Participation Form for the City’s participation in the National Opioid Settlement Agreement with Kroger Co.
2. APPROVE the California State-Subdivision Agreement Regarding Distribution and Use of Settlement Funds relating to the National Opioid Settlement Agreement with Kroger Co.
3. ADOPT Resolution No. 24-079 approving and authorizing the City Manager to carry out all necessary acts such that the City can participate in the National Opioid Settlement with Kroger Co., including signing necessary documents and transmittal thereof as necessary.
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III. ALTERNATIVES
By not opting into the settlement and therefore, not releasing claims that may be available to City, City will reserve its option to file any actions against Kroger Co.
IV. BACKGROUND
In 2021, the City entered into settlement agreements with McKesson Corporation, Cardinal Health, Inc., AmerisourceBergen Corporation, Johnson & Johnson, Janssen Pharmaceuticals, Inc. and Ortho-McNeil-Janssen Pharmaceuticals, Inc., who are manufacturers and distributors of opioids (“2021 Settling Defendants”). The 2021 settlement agreements concerned litigation (the City was not a party to this litigation) by various States, cities, and counties relating to the 2021 Settling Defendants’ manufacture and distribution of opioids and, in particular, the impact of such activities upon the national opioid epidemic. The 2021 Settlement Agreements required that a “critical mass” of public agencies participate in order for it to become effective, which was achieved in 2022.
In 2023, the City Council approved the City’s participation in an opioid settlement with additional manufacturers and retailers of opioids who were named as additional defendants in litigation aimed at addressing the opioid crisis in California, including Teva, Allergan, Walmart, Walgreens, and CVS.
The terms of the 2023 Settlement Agreements were similar to the 2021 Settlement Agreements, which includes the requirement that a critical mass of participation be achieved, provided for a broad release of the 2023 Settling Defendants from liability relating to opioids, and, further, direct or indirect payment of settlement funds to the various local agencies agreeing to participate.
Releases for both 2021 and 2023 settlements were very broad, covering any activities by all settling defendants relating to opioids. The releases arguably also include a release from liability relating to land use matters for facilities that manufactured, distributed, or sold opioids within the City, although this position appears to be untenable as not being within the scope of the intention of the settlements.
At this time, a new national settlement has been reached with Kroger Co. The terms of the Kroger settlement are similar to the 2021 and 2023 Settlement Agreements, which again includes the requirement that a critical mass of participation be achieved, provides for a broad release of Kroger Co. from liability relating to opioids, similar to the releases provided in the 2021 and 2023 settlements and, further, direct or indirect payment of settlement funds to the various local agencies agreeing to participate. Additional information about these settlements can be found here: <https://nationalopioidsettlement.com/kroger-co-settlement/>
The 2024 Settlement Agreement could provide up to approximately $1.2 billion nationally which assumes maximum participation by agencies. Similar to the prior settlement agreements, the more local agencies that participate, the more funds will be available for distribution including to the City of Carson. The actual amount will not be known until the process is completed. Approximately 10.19% (or roughly $122 million) will be allocated to the State of California and its participating subdivisions. Once the City’s share has been determined, it will be distributed over an 11-year period (the estimated amounts initially allocated to the City for the 2021 settlement was $300,000 distributed over 18 years and the amount for the 2023 settlement was $230,000 distributed over a 5 to 15 year period). Similar to the 2021 and 2023 Settlement Agreements, the use of the funds is restricted to opioid remediation (e.g., addiction treatment and abatement programs). By default, these funds are allocated to the County, but the City is able to elect to receive a direct distribution; however, use of the funds also requires strict accounting requirements. These requirements only apply to the City if it elects to receive direct distribution and does not apply to the City if the funds go to the County.
In terms of enforcement, the State enforces the expenditure requirements. Because of this, and because the County is already required to utilize the funds toward opioid addiction/harm abatement activities within the County based on data specific to the City of Carson and additionally, already has the infrastructure and programs in place to implement these abatement activities whereas the same cannot be said for the City, it is recommended that the funds be allocated to the County similar to what the City elected to do for the 2021 and 2023 Settlement Agreements. It should be noted here that the City may change its election so that it receives direct payment at any time.
Approval of Recommendation Nos. 1 and 2 would authorize the City to participate in the National Opioid Settlement with Kroger Co. on the terms and conditions of the Kroger settlement agreement and, further, approve agreements with the State of California on the distribution of settlement funds, similar to the 2021 and 2023 Settlement Agreements (Exhibits 1, 2, and 3).
Approval of Recommendation No. 3 (Exhibit 4) would approve and authorize the City Manager to carry out all necessary acts such that the City can participate in the National Opioid Settlement with Kroger Co., including signing necessary documents and transmittal thereof as necessary.
Council approval and authorization for execution, submission, and receipt of all required documents must be completed before August 12, 2024.
V. FISCAL IMPACT
None. Any funds allocated will automatically be transferred to the County of Los Angeles.
VI. EXHIBITS
1. Settlement Participation Form for the City’s participation in the National Opioid Settlement with Kroger Co. (pgs. 5 - 7)
2. Proposed California State-Subdivision Agreements Regarding Distribution and Use of Settlement Funds in the Kroger Co. Settlement Agreement. (pgs. 8 - 36)
3. 2024 Settlement Agreement with Kroger Co. (pgs. 37 - 497)
4. Resolution No. 24-079 approving and authorizing the City Manager to carry out all necessary acts such that the City can participate in the National Opioid Settlement with Kroger Co., including signing necessary documents and transmittal thereof as necessary. (pgs. 498 - 500)
Prepared by: City Attorney's Office and City Manager's Office