Judge OKs Purdue plan to pay fees

STAMFORD — The judge overseeing Purdue Pharma’s bankruptcy approved Tuesday a company plan to reimburse millions of dollars in professionalservices fees for states that back its proposed settlement of the lawsuits against the firm, according to Reuters.

Covering the fees for four law firms, a financial adviser and two economic consultants working for the states and local governments that have agreed to a settlement would help structure and resolve the Chapter 11 case, Purdue told Judge Robert Drain at the hearing, Reuters reported. Drain conditioned that plan on the parties agreeing to a quick release of “emergency funds” to respond to the opioid crisis, a move that responded to Purdue’s proposal last month of an approximately $200 million allocation for that purpose.

Purdue declined to comment Tuesday on Drain’s ruling, but the company and affiliated firms outlined their argument in a motion filed in federal bankruptcy court in New York. They would cover the fees of an Ad Hoc Committee that represents 23 states.

Such arrangements are “commonplace” in company restructuring efforts in Chapter 11 bankruptcies, according to Purdue’s lawyers.

“Each of the professionals is indispensable to the Ad Hoc Committee’s efforts to conduct due diligence, analyze substantial amounts of information and engage in negotiations with the debtors and other stakeholders regarding the settlement,” Purdue wrote in the motion. “Further, each of the professionals has experience with large and complex restructurings and bringing mass tort related bankruptcy proceedings to a confirmed plan and successful resolution.”

Purdue has declined to comment on how much it would be willing to pay in total for the plaintiffs.

In total, about 2,700 local governments and states have sued the company for allegedly fueling the opioid crisis with deceptive OxyContin marketing. Purdue denies the allegations.

While they are still at odds with Purdue over settlement terms, Connecticut and 23 other nonconsenting states submitted a motion supporting the reimbursement plan.

“Having the estate pay the reasonable fees of professionals (particularly financial professionals) to advise the states should enhance public confidence in the fairness and propriety of any outcome,” they wrote in their motion. “The specifics of what fees are reasonable in this context should be subject to ongoing oversight by the court.”

At the same time, a number of plaintiffs groups have objected to the reimbursement. Those fees and expenses could run into the tens of millions of dollars, according to Edward Neiger, an attorney for more than 1,000 “individual victims” of Purdue.

“Not only do the individual victims comprise the majority by number of creditors in these cases, but (they) have arguably suffered the largest amount of damage at the hands of the debtors,” Neiger wrote in a motion opposing the plan. “Accordingly, this court should not permit the debtors to pay the fees and expenses of numerous counsel and other professionals to the Ad Hoc Committee … until the debtors make the individual victims whole.”

Drain did not rule Tuesday on Purdue and affiliate Rhodes Associates’ plan to pay out more than $40 million in employee bonuses to keep their businesses running. The matter will be reviewed again at a Dec. 4 hearing.

Purdue officials have said the payouts would comply with bankruptcy code and continue longstanding compensation programs. They also argued that the payments are needed to prevent mass departures at a company that has downsized its headcount by about 65 percent since 2017.

Connecticut and the other nonconsenting states have opposed the plan. Connecticut Attorney General William Tong has asserted that Purdue has given “next to no information” about whom the bonuses would benefit and not explained why the payments should be allowed under bankruptcy code.