DOJ appeals Purdue Pharma bankruptcy deal, aims to pause approval order

4 minute read

A pharmacist holds a bottle OxyContin made by Purdue Pharma, at a pharmacy in Provo, Utah, U.S., May 9, 2019. REUTERS/George Frey

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  • DOJ says there is likelihood order will be reversed
  • Purdue says appeals will harm recovery efforts

(Reuters) - The U.S. Department of Justice has lodged its appeal of Purdue Pharma’s bankruptcy plan and multibillion dollar opioid litigation settlement and is asking a judge to halt the implementation of his order approving the deal.

The DOJ’s bankruptcy watchdog, the U.S. Trustee, filed its appeal on Wednesday night in the U.S. Bankruptcy Court for the Southern District of New York. The states of Washington and Maryland, as well as Washington, D.C., have also appealed U.S. Bankruptcy Judge Robert Drain’s Sept. 1 ruling. Like the U.S. Trustee, all have vigorously opposed the plan's legal protections for the Sackler family members that owned the OxyContin maker.

Under the deal, which Purdue says is worth more than $10 billion, the Sackler family members will no longer control the company. Purdue will now steer profits toward opioid abatement efforts. The Sacklers agreed to contribute approximately $4.5 billion to the deal in exchange for releases of opioid-related civil litigation against them.

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The deal paves the way for Purdue to wrap up its bankruptcy, which was filed two years ago to resolve thousands of lawsuits accusing it of fueling the U.S. opioid crisis through deceptive marketing of its products. Though the settlement had widespread support among U.S. states, municipalities, hospitals and personal injury claimants, there were still opponents who argued that the Sackler releases were improper or that the family, which by some estimates is worth $11 billion, should have contributed more.

More than 500,000 people have died from opioid overdoses since 1999, according to the Centers for Disease Control and Prevention.

U.S. Trustee William Harrington asked in his motion to pause the implementation of the deal while the appeals process moves forward and argued that the releases violate the due process and bankruptcy clauses of the U.S. Constitution by depriving opioid victims the right to sue the Sacklers, who have not filed for bankruptcy, and other related, non-bankrupt entities.

The trustee said there is a high likelihood that an appeals court will reverse what he describes as the “extinguishment of the rights of so many non-debtors against so many other non-debtors without their knowing and informed consent, adequate notice, or an opportunity to be heard.”

Purdue, which is represented by Davis Polk & Wardwell in the bankruptcy, said in a statement on Thursday that the appeals will harm the states and victims by eroding their recoveries.

“With a plan of this magnitude, we understand the objectors’ views are deeply held. However we, along with 95% of Purdue’s creditors, including 43 states and territories, continue to believe the plan is the best option for people and communities suffering from the opioid crisis,” the company said.

The Sackler releases do not cover potential criminal liability. The Sacklers have not been criminally charged and have denied wrongdoing in connection with the distribution of OxyContin.

In his ruling, Drain said he wished the plan provided more but did not want to jeopardize the agreements that had already been achieved.

The case is In re Purdue Pharma LP, U.S. Bankruptcy Court, Southern District of New York, No. 19-bk-23649.

The D.C. appeal is In re Purdue Pharma LP, U.S. District Court, Southern District of New York, No. 21-7585.

The Washington state appeal is In re Purdue Pharma LP, U.S. District Court, Southern District of New York, No. 21-7532.

For Purdue: Marshall Huebner, Benjamin Kaminetzky, Timothy Graulich, Eli Vonnegut and James McClammy of Davis Polk & Wardwell; and Paul Breene, Ann Kramer, Anthony Crawford and Lisa Szymanski of Reed Smith

For the U.S. Trustee: Assistant U.S. Trustee Linda Riffkin, Associate General Counsel Matt Sutko and DOJ trial attorneys Beth Levene, Sumi Sakata, Paul Schwartzberg and Benjamin Higgins

For Maryland: Assistant Attorney General Brian Edmunds

For the state of Washington and the District of Columbia: Matthew Gold of Kleinberg Kaplan Wolff & Cohen

Read more:

U.S. judge grants Purdue Pharma’s $7 mln exec bonus plan, faces blunt criticism

Judge will approve Purdue Pharma bankruptcy plan that shields Sacklers

Purdue Pharma bankruptcy trial begins with opponents eyeing Sackler shields

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Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.