REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Attorney to Execute the Participation Agreement to opt in to the Proposed National Opioid Settlement as a Non-Litigating Entity Involving Six Remnant Defendants (Associated Pharmacies, JM Smith Corporation, Louisiana Wholesale Drug Company, Morris and Dickson Co., North Carolina Mutual Wholesale Drug Company; and United Natural Foods, including its subsidiaries)
Report
BACKGROUND
In February 2026, a new proposed settlement was announced to resolve the nationwide litigation involving national prescription opiate litigation. The lawsuits alleged that these six remaining regional distributors or dispensers (Associated Pharmacies, JM Smith Corporation, Louisiana Wholesale Drug Company, Morris and Dickson Co., North Carolina Mutual Wholesale Drug Company, and United Natural Foods, including their subsidiaries SuperValu and Advantage Logistics) distributed opiates and worsened the nationwide opioid crisis. The proposed settlement calls for a combined settlement of $97,625,000 to resolve claims made by local governments, including those municipalities like Sunnyvale that were not parties to the litigation.
Over the last ten years, prescription drug manufacturers, distributors, and pharmacies have proposed or finalized opioid settlements totaling more than $50 billion resulting from lawsuits and claims that these companies fueled the opioid crisis. The City Attorney previously requested Council authorization to participate in opioid settlements in 2021 (RTC No. 21-1125), 2024 (RTC No. 24-0799), and 2025 (RTC Nos. 25-0886 and 25-0920). Since joining these settlements in 2021, the City has received $541,624.46 in settlement funds and expended $61,604.59 to date. Of those funds, the City has expended $15,177.70 on the purchase of Naloxone utilized by Public Safety Officers, $43,006.89 to the Sunnyvale Elementary School District for providing intervention and prevention resources, and $3,420 for narcotic pick up and disposal utilized by the Department of Public Safety. The balance of the settlements is accounted for in a project to be allocated to programs to combat the opioid crisis in Sunnyvale. It is anticipated that the funds received from the current proposed settlement would be used similarly.
The settlement administrator has proposed a settlement formula where Sunnyvale will receive 0.0057857139% of the $97,625,000, or $5,648. Because this settlement does not include any amount allocated to the state of California, the settlement funds will be distributed only and directly to entities that opt in by signing the Combined Subdivision Participation and Release Form by May 4, 2026 (Attachment 1). The funds must be spent on eligible abatement activities and expenditures. The City must also follow financial reporting requirements regarding the expenditure of settlement funds.
EXISTING POLICY
Charter Section 908(b): The City Attorney shall have the power and be required to represent and appear for the City, its Council, boards and commissions, in any or all legal actions or proceedings in which they or any of them are concerned or are a party.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a) as it is a fiscal action that has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
DISCUSSION
As a non-litigating entity, Sunnyvale may opt in to participate in the Six Remnant Defendants nationwide settlement. Signing the Combined Subdivision Participation and Release Form will bind Sunnyvale into the terms of the Agreement. It will also release the companies from a separate, future lawsuit brought by Sunnyvale, however it is not recommended that Sunnyvale pursue its own lawsuit.
Additionally, any funds received pursuant to this settlement are subject to financial reporting and would be limited to expenditures involving pre-approved opioid remediation uses. Such uses include the purchase of naloxone to reverse opioid overdoses, opioid treatment, recovery services, treatment for neonatal syndrome, treatment for opioid use disorder, and education of law enforcement and first responders regarding fentanyl and other drugs. Based on the limitations of uses of the settlement funds, the City may subsequently elect to send its share to Santa Clara County to use on the City’s behalf, or elect to spend the funds itself.
Unlike the previous settlements brought before City Council, the current settlement agreement does not include States Attorneys General or any proposed payments to states.
The City must register for the settlement and opt in to the settlement by signing the Combined Participation Form and Release by May 4, 2026. The City has received a copy of the Combined Subdivision Participation and Release Form (Attachment 1).
FISCAL IMPACT
Funds received from opioid settlements are accounted for in the General Fund under Project 836740 - Opioid Settlement Funds. Payment of settlement funds is set to begin in 2026. As a participating entity, Sunnyvale will receive one lump payment from the settlement. Based on the settlement administrator’s allocation plan, Sunnyvale’s share is $5,648.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the City Hall reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
RECOMMENDATION
Recommendation
Authorize the City Attorney to execute the Participation Agreement to opt in to the Proposed National Opioid Settlement, in substantially the same form as in Attachment 1 to the report, as a Non-Litigating Entity involving six remnant defendants (Associated Pharmacies, JM Smith Corporation, Louisiana Wholesale Drug Company, Morris and Dickson Co., North Carolina Mutual Wholesale Drug Company; and United Natural Foods, including its subsidiaries).
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
___ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
_X_ Contract under $50,000 or non-fiscal
___ Contract between public agencies
___ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: Anais Martinez Aquino, Senior Assistant City Attorney
Reviewed by: Rebecca L. Moon, City Attorney
Reviewed by: Matthew Paulin, Director of Finance
Reviewed by: Connie Verceles, Deputy City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Combined Subdivision Participation and Release Form