Opioid Memo from Legal
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Justin S. Pierce Stephen B. Coleman Aaron D. Arnson Trish Stuhan Christina Estes-Werther Jon M. Paladini Joseph D. Estes 7730 E. Greenway Road, Suite 105 Scottsdale, Arizona 85260 2812 N. Norwalk, Suite 107 Mesa, Arizona 85215 Dominic L. Verstegen Allen H. Quist Jenny J. Winkler Justin B. Petersen Michelle N. Stinson Alexandra N. Cayton Matthew W. Schiumo ATTORNEY CONTACT: Christina Estes-Werther Direct Line: 602-772-5524 Email: Christina@PierceColeman.com Tel.: 602-772-5506 Fax: 877-772-1025 Website: www.piercecoleman.com MEMORANDUM To: Crystal Dyches, El Mirage City Manager Cc: Justin Pierce, El Mirage City Attorney From: Christina Estes-Werther Re: Summary of Kroger Opioid Settlement Terms and Subdivision Settlement Participation Form Date: June 7, 2024 The purpose of this Memo is to provide an overview of the settlement terms for the new Kroger Settlement and outline next steps for the City of El Mirage (“City”) if it seeks to participate in the Kroger Settlement. The full settlement documents for Kroger are on file with the City Clerk. Background In 2021, Arizona participated in national opioid settlements with J&J and Distributors McKesson, Cardinal Health, and AmerisourceBergen and the City participated in this settlement agreement (“2021 National Settlements”). In 2022, five additional Defendants – Teva, Allergan, Walmart, Walgreens and CVS - agreed to enter into settlement agreements (“2022 National Settlements”). Settlement monies are allocated to the County with the requirement that the City be consulted about the use of funds and distributed in accordance with the One Arizona Distribution of Opioid Settlement Funds Agreement (“One Arizona Funds Agreement”).1 As of March 2024, Kroger Co. (“Kroger”)2 has agreed settle its opioid lawsuit if as part of the Consent Judgment between Kroger and the Settling States, the parties (1) approve the Settlement Agreement and (2) the Settling States release Kroger from any and all claims based on, arising out of, relating to, or concerning any actual or alleged act, failure to act, negligence, statement, error, omission, breach of any duty, conduct, event, transaction, agreement, misstatement, misleading statement or other activity by Kroger relating to compounding, counseling, manufacturing, packaging, marketing, or prescribing opioid products (“Released Claims”). The State of Arizona is a Settling State and the City has 1 For the full One Arizona Funds Agreement, visit https://www.one-arizona.com/ 2 Referred to as Kroger or Released Entities, which includes all past and future members of Kroger. See Section I (MMM). Crystal Dyches June 7, 2024 Page 2 the opportunity to “opt in” and benefit from the proceeds of these settlements through a State-Subdivision Agreement outlining the allocation, distribution and/or use of funds allocated to the City. Section VII (B). Municipal Participation in the Settlement A Notice was sent by email from opioidsparticipation@rubris.com to the City on May 30, 2024 providing notice of the Settlement Agreement and the deadline for becoming an Initial Participating Subdivision. Section VII (A). In order to participate in the Kroger settlement proceeds, the City must execute and submit a Subdivision Settlement Participation Form (“Participation Form”) before August 12, 2024 for the City to be considered an “Initial Participating Subdivision”; however, the Arizona Attorney General’s Office is requesting that the City submit the Participation Form by July 31, 2024 to allow sufficient time for any municipalities that may have difficulty with the electronic submissions and have to submit the Participation Form via regular mail. If for any reason the Settlement Agreement does not become effective, the Form is void. Section VII (D). By executing and returning a Participation Form: 1. The City is aware of and has reviewed and understands the terms in Participation Form; 2. The City agrees that Plaintiff’s Executive Committee may execute and file on behalf of the City a Stipulation of Dismissal with Prejudice substantially in the form online at https://nationalopioidsettlement.com/wp-content/uploads/2023/01/form-of-Master-Stipulation-of- Dismissal.pdf 3. The City agrees to the terms of the applicable settlement agreement pertaining to Participating Subdivisions; 4. The City is entitled to the benefits of the Settlement Agreement; 5. The City agrees to use monies it receives as required under such settlement; 6. The City submits to the jurisdiction of the court where the Consent Judgment is filed for purposes limited to that court’s role under such settlement to resolve disputes; 7. The City has the right to enforce the Settlement Agreement; 8. The City releases all claims within the scope of such settlement, including a general release pursuant to § 1542 of the California Civil Code; 9. The City takes on all rights and obligations of a Participating Subdivision as set forth in the Settlement Agreement; and 10. Nothing in the Subdivision Settlement Participation is intended to modify in any way the terms of the Settlement Agreement. The primary provision for the City to consider is the release of all claims against Kroger in exchange for settlement monies. Section X. The release language is as follows: “As of the Effective Date, the Released Entities are hereby released and forever discharged from all of the Releasors’ Released Claims. Each Settling State (for itself and its Releasors) and Participating Subdivisions hereby absolutely, unconditionally, and irrevocably covenants not to bring, file, or claim, or to cause, assist or permit to be brought, filed, or claimed, or to otherwise seek to establish liability for any Released Claims against Crystal Dyches June 7, 2024 Page 3 any Released Entity in any forum whatsoever. The releases provided for in this Agreement are intended by the Parties to be broad and shall be interpreted so as to give the Released Entities the broadest possible bar against any liability relating in any way to Released Claims and extend to the full extent of the power of each Settling State and its Attorney General to release claims. This Agreement shall be a complete bar to any Released Claim.” Additional requirements include that the City will not seek contributions, payments or indemnification from other parties relating to this Settlement Agreement, including any amounts paid under this Agreement; provisions if a party declares bankruptcy; management of other claims outside of the Agreement; indemnification and contribution prohibitions for amounts paid under the Agreement; a general release under § 1542 of the California Civil Code, which encompasses claims not known or suspected to exist; and that the City does not waive, release or limit any criminal liability, workers’ compensation claims, claims for liability under tax or securities laws, claims against parties who are not Released Entities or private individuals and any claims arising under this Agreement for enforcement of this Agreement. Timeline Following Participation Form Submission Following the deadline for subdivision participation, the State of Arizona and the other Settling States shall notify Kroger and the Enforcement Committee of their decision and if participating, within seven (7) calendar days of notification (“Initial Participation Date”), all signatures and releases will be provided to Kroger. Section VIII (A). Within thirty (30) days after the Initial Participation Date (“Reference Date”), Kroger must inform the Settling States of whether conditions are satisfied under Section VIII and if there are sufficient eligible states and subdivisions to proceed with the settlement. If the settlement moves forward, the Parties will file the Consent Judgments and Participation Forms, which are effective as of the Reference Date. If the settlement does not proceed, the Settlement Agreement and releases shall be void. Section VIII (B),(C). The Settlement Agreement is terminated if the Consent Judgment is not timely entered within one hundred eighty (180) days or is not approved by the court unless an extension is granted. Section XIII (W). Distribution and Use of Settlement Funds The amount to be distributed to Arizona under the Kroger Settlement is currently unknown and depends on the level of participation by eligible states and subdivisions. The Settlement Agreement requires a Settlement Fund to be established and Kroger shall make annual payments over a period of years to the Fund. Section IV. Settlement funds will be disbursed to Settling States and Participating Subdivisions unless otherwise permitted in the Agreement (Exhibit G) and subject to additional reporting requirements. Section IV (B). Jane Fallon at the Arizona Attorney General’s Office has confirmed that distribution will occur in the same manner as previous opioid settlements pursuant to the One Arizona Funds Agreement with the counties receiving the regional funds and using those monies in consultation with the participating cities and towns. Distribution is based on population figures published by the U.S. Census Bureau’s population estimates for July 1, 2019, released May 2020. Section XIII (A). Crystal Dyches June 7, 2024 Page 4 Similar to the previous settlement, the settlement funds must be used in connection with future opioid-remediation efforts including care, treatment and other programs and expenditures designed to address the misuse and abuse of opioid products; treat or mitigate opioid use or related disorders; or mitigate other alleged effects of the opioid epidemic. See Exhibit E. Reporting Requirements Each settlement requires reporting to demonstrate that the settlement funds are allocated to opioid- remediation efforts or any other lawful purpose. See Subsection F. Compliance Reporting and Accountability in the One Arizona Funds Agreement. More information will be provided once the Settlement Agreement is in effect, settlement amount is known, and distribution is confirmed to the State of Arizona. Next Steps 1. Place an action item on the agenda prior to July 31, 2024 for Council to decide if the City will participate in the Settlement Agreement. The full settlement documents are on file with the City Clerk. 2. If the Council approves opting in to the Settlement Agreement, the City’s designated point of contact will submit the Participation Form by July 31, 2024. The Participation Form, which will be available on or around June 14, 2024, can be signed by one of three methods: a. Electronic Signature via DocuSign; b. Manual Signature returned via DocuSign; or c. Manual Signature returned via electronic mail. 3. Once the settlement is finalized, the release against Kroger will be in effect and Rubris and the Attorney General’s Office will provide additional information about the distribution formula and reporting requirements. Please contact me with any questions at (602) 772-5524 or Christina@PierceColeman.com.