The New York Times - 12.09.2019

A16 N THE NEW YORK TIMES NATIONALTHURSDAY, SEPTEMBER 12, 2019

The judge, Dan A. Polster, re-
cently issued tough pretrial rul-
ings against groups of defendants
in that case — drug manufactur-
ers in addition to Purdue, as well
as drug distributors and chain re-
tailers. Although other manufac-
turers have already settled in that
case, as well as in an earlier state
opioid trial in Oklahoma, the Pur-
due agreement is the first so-
called “global” arrangement. Ne-
gotiated by a team of five lawyers
representing plaintiffs in nearly
2,300 lawsuits in federal court, as
well as by lawyers for the states,
the resolution would end most of
the cases against Purdue.
In addition to the plaintiffs in
the federal litigation, which in-
clude city and county govern-
ments and hospitals, some 23
states and a handful of territories
are said to favor the deal.
Lawyers supporting the pro-
posed settlement said that they
prefer to have an agreement with
Purdue rather than face the un-
certainty of drawn-out litigation
with no guarantee of a better out-
come.
Paul Geller, a plaintiffs’ lawyer
working to resolve the federal
cases, said: “Nobody walks away
from a tough negotiation feeling
like a winner. But one thing was
certain during difficult, pro-
tracted negotiations — a bank-
ruptcy filing by Purdue was inev-
itable.”
Lawyers for states that favor
the agreement in principle said it
had symbolic implications. Ashley
Moody, the state attorney general
of Florida, which was particularly
hard-hit by opioids, called the deal
“historic” and said, “Sadly, this

agreement cannot bring back those who have lost their lives to opioid abuse, but it will help Flor- ida gain access to more lifesaving resources and bolster our efforts to end this deadly epidemic.” Herbert Slatery, the Tennessee attorney general, said the plan “would secure billions of dollars nationwide to go toward addressing the devastating effects of the opioid epidemic and will result in the Sackler family divesting themselves of their business in- terests in the pharmaceutical industry forever.” And a spokesman for Ken Pax- ton, the Texas attorney general, said that "we are proud to partici- pate in the nation’s most significant step in addressing this deadly crisis.” But because the deal falls short of what some state attorneys general were seeking, many have said that they will continue to pursue the Sacklers. In recent weeks, perhaps in anticipation of legal fortresses built by the Sacklers to guard their fortune, which Forbes estimated to be about $13 billion, more states, including Virginia, New Mexico and Delaware, filed cases against members of the family. States have used an array of legal tactics, hoping to win an even bigger payout from the Sacklers and to force them out of the pharmaceutical business alto- gether. A critical sticking point has been the timing of the family’s sale of its global pharmaceutical business, Mundipharma, and the contribution the family would make from the proceeds. Some attorneys general, including those from Massachusetts, New York, New Jersey, Pennsylvania and Connecticut, who have not signed

on to the settlement, had been pressing the family to sell Mundipharma immediately and to discontinue manufacturing drugs for international markets. In addition, the attorneys general said, they wanted the Sacklers to commit an additional $1.5 billion up front. The family rejected those terms. The attorneys general for several states vowed to push on. Leti- tia James, New York’s attorney general, called the deal “an insult, plain and simple.” Gurbir S. Gre- wal, New Jersey’s attorney general, said, “If Purdue cannot pay for the harm it inflicted, the Sack- lers will.” And Josh Stein, Penn- sylvania’s attorney general, who also did not support the deal, said his office was now preparing to sue the Sacklers. Maura Healey, the Massachu- setts attorney general, who was the first to sue members of the

Sackler family, said in a state- ment, “It’s critical that all the facts come out about what this company and its executives and direc- tors did, that they apologize for the harm they caused, and that no one profits from breaking the law.” William Tong, Connecticut’s attorney general, said in a state- ment “I cannot predict whether Purdue will seek bankruptcy, but all I can say is we are ready to aggressively pursue this case wher- ever it goes — whether it is in the Connecticut courts or through bankruptcy.” Often when a company goes into Chapter 11 bankruptcy, all litigation against it is stayed. The de- construction and evolution of Pur- due would be overseen by a bankruptcy judge and, eventually, trustees appointed to assemble a new, transparent board, which would not include any of the Sack- lers. Still unclear is what the distri-

bution of any Purdue and Sackler money would look like for individual parties that have signed on to the deal, as well as for the federal government, which has been in- vestigating the company. Hospi- tals, insurers and a group representing infants born exposed to opioids have also brought lawsuits. Another significant question to be resolved is where, legally and practically, the settlement would leave the Sacklers. Whether they would be legally insulated by the settlement is in dispute. One question is whether the Sacklers’ payouts in the settlement would bind them into Pur- due’s bankruptcy proceeding and therefore halt the lawsuits against them as well as the company. Pur- due is expected to file for bankruptcy in New York, which has oc- casionally looked favorably upon such conditions. Many of the two dozen states

that have named individual Sack- lers as defendants have said that the family has been intentionally taking billions of dollars out of the company since 2007, when Pur- due and its executives paid a $ million fine to resolve federal civil and criminal charges related to the “misbranding” of OxyContin. Legally speaking, this is known as “fraudulent conveyance,” and it could be a claim for the states to pursue in bankruptcy court. Some states have been aggressively hunting for where the Sacklers have deposited their money, particularly the New York attorney general’s office, which recently issued 33 subpoenas, including to offshore holding companies. The Sacklers, however, have long said that whatever funds they withdrew from Purdue were appropriate dividends from a company they owned and di- rected.

DREW ANGERER/GETTY IMAGES

Purdue Pharma, based in

Stamford, Conn., would be

dissolved under a tentative

deal. The Sackler family, in-

cluding Richard Sackler, the

former chairman and presi-

dent, would pay $3 billion.

KENTUCKY ATTORNEY GENERAL’S OFFICE

Sacklers Poised to Settle

Thousands of Opioid Cases

From Page A

California lawmakers approved
a statewide rent cap on Wednes-
day covering millions of tenants,
the biggest step yet in a surge of
initiatives to address an afford-
able-housing crunch nationwide.
The bill limits annual rent in-
creases to 5 percent after inflation
and offers new barriers to evic-
tion, providing a bit of housing se-
curity in a state with the nation’s
highest housing prices and a
swelling homeless population.
Gov. Gavin Newsom, a Demo-
crat who has made tenant protec-
tion a priority in his first year in
office, led negotiations to
strengthen the legislation. He has
said he would sign the bill, ap-
proved as part of a flurry of activi-
ty in the final week of the legisla-
tive session.
The measure, affecting an esti-
mated eight million residents of
rental homes and apartments,
was heavily pushed by tenants’
groups. In an indication of how
dire housing problems have be-
come, it also garnered the support
of the California Business Round-
table, representing leading em-
ployers, and was unopposed by
the state’s biggest landlords’
group.
That dynamic reflected a mo-
mentous political swing. For a
quarter-century, California law
has sharply curbed the ability of
localities to impose rent control.
Now, the state itself has taken that
step.
“The housing crisis is reaching
every corner of America, where
you’re seeing high home prices,
high rents, evictions and home-
lessness that we’re all struggling
to grapple with,” said Assembly-
man David Chiu, a San Francisco
Democrat who was the bill’s au-
thor. “Protecting tenants is a criti-
cal and obvious component of any
strategy to address this.”
A greater share of households
nationwide are renting than at
any point in a half-century. But
only four states — California,
Maryland, New Jersey and New
York — have localities with some
type of rent control, along with the
District of Columbia. A coalition of
tenants’ organizations, propelled
by rising housing costs and fears
of displacement, is trying to
change that.
In February, Oregon lawmak-
ers became the first to pass state-
wide rent control, limiting in-
creases to 7 percent annually plus
inflation. New York, with Demo-
crats newly in control of the State
Legislature, strengthened rent
regulations governing almost one
million apartments in New York
City.
Moves to expand rent control
through ballot initiatives or legis-
lation have arisen since 2017 in
about a dozen states, including
Washington, Colorado and Neva-
da, according to the National Mul-
tifamily Housing Council, an
apartment-industry trade group.
Measures were recently intro-
duced in Massachusetts and Flor-
ida to allow rent regulation in cit-
ies with a housing crunch — like
Boston, Miami and Orlando.
Nationally, about a quarter of
tenants pay more than half their
income in rent, according to the

Joint Center for Housing Studies at Harvard University. And Cali- fornia’s challenges are particularly acute. After an adjustment for housing costs, it has the highest state poverty rate, 18.2 percent, about five percentage points above the national average, according to a Census Bureau report published Tuesday. Homelessness has come to dominate the state’s political con- versation and prompted voters to approve several multibillion-dol- lar programs to build shelters and subsidized housing with services for people coming off the streets. Despite those efforts, San Fran- cisco’s homeless population has grown by 17 percent since 2017, while the count in Los Angeles has increased by 16 percent since

Over all, the state accounts
for about half of the country’s un-
sheltered homeless population of
roughly 200,000.
That bleak picture — combined
with three-hour commutes, cries

for teacher housing and the sight of police officers sleeping in cars — is prompting legislators and or- ganizers to propose ever more far- reaching steps. State Senator Scott Wiener, a San Francisco Democrat, offered a bill that would essentially over- ride local zoning to allow multiple- unit housing around transit stops and in suburbs where single-family homes are considered sacro- sanct. The bill was shelved in its final committee hearing this year, but Mr. Wiener has vowed to keep pushing the idea. Economists from both the left and the right have a well-estab- lished aversion to rent control, ar- guing that such policies ignore the message of rising prices, which is to build more housing. Studies in San Francisco and elsewhere show that price caps often prompt landlords to abandon the rental business by converting their units to owner-occupied homes. And since rent controls typically have

no income threshold, they have been faulted for benefiting high- income tenants. “Rent control is definitely having a moment across the country,” said Jim Lapides, a vice president at the National Multifamily Hous- ing Council, which opposes such restrictions. “But we’re seeing folks turn to really shortsighted policy that will end up making the very problem worse.” But many of the same studies show that rent-control policies have been effective at shielding tenants from evictions and sud- den rent increases, particularly the lower-income and older tenants who are at a high risk of be- coming homeless. Also, many of the newer policies — which supporters prefer to call rent caps —

are considerably less stringent than those in effect in places like New York and San Francisco for decades. “Caps on rent increases, like the one proposed in California or the one recently passed in Oregon, are part of a new generation of rent-regulation policies that are trying to thread the needle by of- fering some form of protection against egregious rent hikes for vulnerable renters without stymieing much-needed new housing construction,” said Eliza- beth Kneebone, research director at the Terner Center for Housing Innovation at the University of California. Mr. Chiu’s bill is technically an anti-gouging provision, with a 10- year limit, modeled on the typical-

ly short-term price caps instituted after disasters like floods and fires. It exempts dwellings less than 15 years old, to avoid discour- aging construction, as well as most single-family homes. But it covers tenants of corporations like Invitation Homes, which built nationwide rental portfolios en- compassing tens of thousands of properties that had been lost to foreclosure after the housing bust a decade ago. According to the online real-es- tate marketplace Zillow, only about 7 percent of the California properties listed last year saw rent increases larger than allowed under the bill. But there could be a big effect in rapidly gentrifying neighborhoods like Boyle Heights in Los Angeles, where typical rents on apartments not covered by the city’s rent regulations have jumped more than 40 percent since 2016. By limiting the steepest and most abrupt rent increases, the bill is also likely to reduce the in- centive for hedge funds and other investors to buy buildings where they see a prospective payoff in replacing working-class occu- pants with tenants paying higher rents. Sandra Zamora, a 27-year-old preschool teacher, lives in a one- bedroom apartment in Menlo Park, Calif., a short drive from Facebook’s expanding headquar- ters. A year ago, Ms. Zamora’s building got a new owner, and the rent jumped to $1,900 from $1,100, a rise of over 70 percent. Most of her neighbors left. Ms. Zamora stayed, adding a roommate to the 600-square-foot space and taking a weekend job as a barista. “Having an $800 increase at once was really shocking,” she said. “It just keeps me thinking every month: ‘O.K., when is it going to happen? How much am I going to get increased the next month?’ It’s just a constant worry.” Even as more states begin to ex- periment with rent control, it has long existed in places like New York City, which intervened to address a housing shortage post- World War II, and San Francisco, where it was adopted in 1979. Today it is common in many towns across New Jersey and in several cities in California, including Berkeley and Oakland, although the form differs by juris- diction. Regulated apartments in New York City are mostly subject to rent caps even after a change in tenants, for example, while rent control in the Bay Area has no such provision. In New York City, where almost half of the rental stock is regulated, a board determines the maximum rent increases each year; this year it approved a 1. percent cap on one-year leases, considerably lower than the limits passed in Oregon and California. Cea Weaver, campaign coordi- nator of Housing Justice for All, a coalition of New York tenants that pushed for new rent laws, wel- comed the outcome in California. “Any victory helps to build a groundswell,” she said. “There is a younger generation of people who see themselves as permanent renters, and they’re demanding that our public policy catches up to that economic reality.”

California Passes Statewide Rent Control in Effort to Ease Housing Crisis

By CONOR DOUGHERTY and LUIS FERRÉ-SADURNÍ

San Francisco has had rent control for decades, but it has not been spared from a housing squeeze and rising homelessness.

JIM WILSON/THE NEW YORK TIMES

Rent control supporters in Sacramento last year. After adjusting

for housing costs, California has the highest state poverty rate.

RICH PEDRONCELLI/ASSOCIATED PRESS

Which States Do or Don’t Have Rent Control

California has just followed Oregon in enacting statewide rent control. In many states, such limits exist or are permitted on a local level; other places require state approval.

Source: National Multifamily Housing Council THE NEW YORK TIMES

(pending)

Calif.

Ore.

Ark.

Ill. Kan.

Miss. Tex.

Ala.

Iowa

La.

Minn.

Mo.

Ariz.

Colo.

Ind.

Mich.

N.C. Okla. Tenn.

Wis.

Alaska

N.D. Vt.

Ga.

W. Va.

Idaho S.D.

N.M.

Wash.

Pa.

Fla.

Utah

Ky.

N.H.

S.C.

Nev.

Conn.

Mass.

N.Y.

Neb. Ohio Md. N.J.

Mont.

Va.

Wyo.

Me.

Hawaii

Del.

No rent control; state assent needed

No rent control, but local option

Rent control in some places Statewide