Purdue Pharma Squares Off With DOJ Over $6 Billion OxyContin Deal
Purdue Pharma Squares Off With DOJ Over $6 Billion OxyContin Deal
(Bloomberg) -- A $6 billion deal hung in the balance Friday as OxyContin maker Purdue Pharma LP and its wealthy owners squared off against the U.S. Justice Department over the firm’s opioid lawsuit settlement.
The sides met in a New York courtroom to argue over a plan to funnel billions of dollars to opioid crisis abatement efforts and settle trillions of dollars of legal claims against the drugmaker. Purdue Pharma won approval of the deal in bankruptcy court last year, but an appeals judge later threw out the accord in a shock decision. Now, a panel of higher-ranking judges is reviewing the case in the last step before a Supreme Court appeal.
At issue is the deal’s controversial cornerstone: protection for Purdue’s owners, members of the billionaire Sackler family, from opioid lawsuits. The family members have agreed to relinquish their ownership of Purdue and pay as much as $6 billion to those suing over their role in the crisis in exchange for immunity from related civil suits.
A panel of judges on Friday grilled lawyers in favor of the deal about its legal basis, wading deep into the weeds on bankruptcy rules and prior acts of Congress. Proponents cast the settlement as one that’s firmly rooted in established law and will save lives by funding opioid abatement programs.
“This is all about maximizing value to creditors by bringing in money from the Sacklers after years of litigation and negotiation,” Marshall Huebner, Purdue’s lead bankruptcy lawyer, said in the hearing. “We are bringing in billions and billions of dollars to save lives.”
Almost everyone who cast a vote on the plan in bankruptcy court -- including state attorneys general who for more than two years railed against the settlement -- now support the deal. But the U.S. Trustee, an arm of the Justice Department that polices bankruptcy court, maintains that the whole arrangement falls on the wrong side of a murky divide in insolvency law.
The fight revolves around whether bankruptcy courts have the power to protect the Sacklers from future opioid lawsuits when the family members haven’t gone bankrupt themselves. The proposed protections may wrongly prevent people from suing Purdue’s owners in the future, the U.S. Trustee argues.
In the hearing Friday, a lawyer for Justice Department said the settlement is inconsistent with the bankruptcy code -- the rules that govern insolvency in the U.S. -- and Congress has not made clear whether the kinds of protections that would be given to the Sacklers can be granted by a bankruptcy judge.
“The U.S. Trustee fully recognizes the pain and suffering that the opioid crisis has caused,” Michael Shih, a lawyer for the Justice Department, said in the hearing. He agreed that Purdue’s plan “could provide a lot of things that are very good,” but said that “doesn’t bear on the legal question” at issue.
If the settlement collapses, the drugmaker will likely liquidate and years of wasteful and potentially fruitless litigation would follow, lawyers for Purdue have warned. Purdue filed for bankruptcy in 2019 amid a crush of opioid lawsuits.
The bankruptcy case is Purdue Pharma LP, 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains)
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