States to seek direct appeal of Purdue Pharma plan to 2nd Circuit

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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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(Reuters) - A handful of states and the federal government’s bankruptcy watchdog are seeking to take their appeal of a bankruptcy court’s approval of Purdue Pharma LP’s reorganization plan and settlement of widespread opioid litigation straight to the 2nd U.S. Circuit Court of Appeals.

During a virtual status conference before U.S. Bankruptcy Judge Robert Drain in White Plains, New York on Thursday, lawyers for the states of Washington, Maryland, Oregon, California, Connecticut and the District of Columbia said they want to expedite their challenge by skipping over a federal district court that would typically hear a bankruptcy appeal.

Purdue attorney Marshall Huebner of Davis Polk & Wardwell said during the status conference that he believes they may get a ruling on the merits on Drain's decision faster if they go to the federal district court first, but agreed that the appeals process should move quickly.

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Purdue filed for bankruptcy in September 2019 to resolve thousands of lawsuits accusing it and the Sackler family members who owned the OxyContin maker of fueling the U.S. opioid crisis through deceptive marketing of its products.

The company secured approval on Sept. 1 of its plan and settlement, which include controversial legal protections for the Sacklers.

The states and the U.S. Trustee, among others, filed their appeals earlier this month. The challenges will likely focus on the Sackler releases of future opioid litigation, which nine states and the U.S. Trustee opposed. The overall settlement, however, had the support of about 40 states, as well as municipalities, Native American tribes and hospitals, among others.

Drain – who announced this week his plan to retire in 2022 – said during Thursday’s status conference that he agrees with the appellants that his ruling should be subject to a “meaningful review” by another court.

“I’m encouraged the parties are moving expeditiously on this because there’s no reason it shouldn’t be reviewed on the appellate level,” he said.

However, the judge also said he is sensitive to concerns of creditors that want to implement the plan and get distributions underway as soon as possible.

When the U.S. Trustee filed its appeal on Sept. 15, it also asked Drain to pause the implementation of his plan confirmation order pending the appeal. Drain will consider the motion on Oct. 14 or Nov. 9, depending on the outcome of talks about briefing and evidence that may be submitted on the issue.

Huebner said the parties will have plenty of notice before the plan is put into effect and that the process could take months.

The judge said when he approved the plan that he wished it provided more for claimants but did not want to reject it and jeopardize the benefits it does offer. The plan includes a settlement trust worth more than $10 billion that will distribute funds to opioid abatement programs.

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

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

Read more:

New York bankruptcy judge who oversaw Purdue Pharma case to retire

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

Judge will approve Purdue Pharma bankruptcy plan that shields Sacklers

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