State not backing down on Purdue Pharma
With an appeal, Connecticut would be seeking an overturn of Drain’s decision. Such an outcome could lead the state to resume the pursuit of its claims outlined in the complaint it filed in December 2018 against the company and a group of individual defend
STAMFORD — Bankruptcy judge Robert Drain delivered a six-hour explanation of his ruling to approve OxyContin-maker Purdue Pharma’s settlement plan. But it was not enough to persuade Connecticut Attorney General William Tong to accept the deal.
Connecticut is set to appeal Drain’s confirmation of Stamford-based Purdue’s plan, which would settle several thousand lawsuits alleging the firm fueled the opioid crisis with deceptive OxyContin marketing and ultimately dissolve the company.
An appeal would hinge on an argument that Drain cannot compel the state to accept Purdue’s settlement terms, which also include sweeping legal protections for the Sackler family members who own the firm — a framework that has also been criticized by many opioid victims’ relatives and grassroots activists.
“This is an outrage,” Tong said in an interview. “I don’t think that Judge Drain addressed one of our central concerns — the fact that he does not have the power and authority to force Connecticut to give up its claims and release the Sacklers.”
During his bench ruling
Wednesday, Drain acknowledged that he had concerns about Purdue’s plan and that he had expected that the bankruptcy negotiations would have yielded a “higher settlement.” But he said he could not reject the proposal, which originated when Purdue filed for Chapter 11 bankruptcy in September 2019.
“I do not have the ability to impose what I would like on the parties. A judge is not given that power,” Drain said. “I can only turn down the request for approval of it. Given this record, I’m not prepared to do that — as much as I would like to impose a higher recovery.”
The family of late Purdue co-founder Mortimer Sackler expressed support for Drain’s ruling and denied any wrongdoing related to the company.
“We want to express our determination to make a constructive difference through this resolution,” the Mortimer Sackler family said in a statement. “While we dispute the allegations that have been made about our family, we have embraced this path in order to help combat a serious and complex public health crisis. We hope that the resolution will signal the beginning of a far
reaching effort to deliver assistance where it is most needed.”
In their own statement, the family of late Purdue co-founder Raymond Sackler said, “This resolution is an important step toward providing substantial resources for people and communities in need, and it is our hope these funds will help achieve that goal.”
With an appeal, Connecticut would be seeking an overturn of Drain’s decision. Such an outcome could lead the state to resume the pursuit of its claims outlined in the complaint it filed in December 2018 against the company and a group of individual defendants, including eight of the Sacklers.
An appellate court would likely take into account Drain’s approval and the negotiations that produced the settlement, as well as the approximately 95 percent of voting creditors who supported it, according to Robert Bird, a professor of business law at the University of Connecticut.
“An appeal would not be frivolous, and it would be legitimate,” Bird said. “There is a chance that the attorney general could convince an appellate court. But is it an overwhelming chance — probably not.”
Washington state and the District of Columbia have already filed notices of appeal. California, Delaware, Maryland, Oregon, Rhode Island and Vermont also oppose the plan. West Virginia filed a limited objection.
The U.S. Trustee, which has represented the Department of Justice in the bankruptcy, “intends to file a formal motion for a stay, pending appeal,” an attorney for the U.S. Trustee told Drain in a hearing Wednesday, minutes after Drain announced that he would approve the plan.
Opposition to Sacklers’ legal protections
Tong’s opposition focuses in large part on a stipulation for the Sacklers who own the company to be released from the pending lawsuits, as well as potential opioid-related claims. The plan also provides releases for many other parties, including Sackler family members not directly involved in the company.
“States retain our police powers, our law enforcement authority. That’s what I do every day. I exercise the state of Connecticut’s law enforcement authority,” Tong said. “No federal judge can tell me that I can’t assert my claims against criminals and wrongdoers.”
The liability shields are a condition of the Sacklers’ offer to contribute $4.325 billion in cash to the settlement and also allow $175 million held in Sackler family charities to help tackle the opioid crisis.
Tong said the Sacklers’ contribution is too low. He declined to specify an amount for them to pay, but he said it should be “significantly more” than $4.325 billion and a “just, fair amount that recognizes their responsibility.” The Sacklers’ family net worth was estimated last year by Forbes to be nearly $11 billion.
Despite the furor over the releases, their scope would not be unlimited. For one, they would not prohibit potential criminal prosecution. Last November, Purdue as a company pleaded guilty to three criminal charges of conspiring to defraud the government and violate antikickback law. No individuals, however, were charged in connection with that plea.
Concurrent with Purdue’s settlement with the Department of Justice, the Sacklers involved in Purdue agreed last year to a separate $225 million settlement with DOJ to resolve allegations of marketing and financial misconduct. They did not admit any wrongdoing as part of that agreement.
Tong said Connecticut’s opposition to the new plan is also motivated by a desire for stronger punishment against the Sacklers that would deter malfeasance at other companies.
“Future bad actors, somebody else not named Sackler, who sell a legal product that is dangerous and who make money off people’s suffering — we have to send a message to those people that they’re not going to get away with it,” Tong said.
While he is unwilling to accept Purdue’s settlement offer, Tong agreed to allow Connecticut to sign on in July to a national settlement with the country’s three largest pharmaceutical distributors and drugmaker Johnson & Johnson. The deal is expected to deliver about $300 million to Connecticut for programs to tackle the opioid epidemic.
Unhappiness among victims’ relatives, activists
Many who filed personal-injury claims through Purdue’s bankruptcy were also dismayed by Drain’s ruling.
“We do not approve of this settlement plan. We don’t think the Sacklers are giving their fair share toward the plan,” Alexis Pleus, of Binghamton, N.Y., told Hearst Connecticut Media. “The second largest part of our complaint are the releases that are being given. Everyone should be concerned about the broad, sweeping releases.”
Pleus filed a claim related to the death of her oldest son, Jeff, from a heroin overdose in 2014. She said it was preceded by his addiction to OxyContin, which he was prescribed 10 years earlier after he was injured playing football as a high school junior. After her son’s death, Pleus founded the nonprofit Truth Pharm, which focuses on reducing the harms caused by substance use.
Fernando Luis Alvarez, an advocate for opioid victims who has organized in the past few years several protests against Purdue, said he would support Connecticut’s appeal. In a demonstration against
Drain’s ruling, Alvarez led Wednesday the installation of an oversize curtain, with Drain’s likeness and a tag line calling him “the devil’s judge,” outside Purdue’s downtown Stamford headquarters.
“The most dangerous part of this settlement is that it paves the way for corporations to put future generations of Americans at risk, as they will continue to be the victims of these epidemics — ones that are created over greed,” Alvarez said.
Norwalk resident Dede Yoder said she was unhappy with how victims’ families have been treated during Purdue’s bankruptcy. But she also had misgivings about an appeal.
Yoder filed a claim related to the death in 2017 of her 21-year-old son, Chris, from an overdose of fentanyl and carfentanil. Several years earlier, he had been prescribed OxyContin after knee surgery, and Yoder believes the exposure to OxyContin contributed to his later addiction to heroin.
“An appeal would only prolong the settlement process and possibly not give anything to the victims,” Yoder said. “With the small amounts that we’re getting (likely between $3,500 to $48,000 for eligible personal-injury claims), it could go from that to nothing.”
Meanwhile, Purdue officials said that they intend to move forward with enacting the settlement plan. The company is finalizing the timeline to transfer its assets into NewCo, a successor “public-benefit company,” which would focus on tackling the opioid crisis. The new firm’s operations would include the development and distribution of “millions of doses” of opioid-addiction treatment and overdose-reversal medicines.
When NewCo emerges, Purdue would be dissolved.
In the meantime, the nation is still grappling with one of the worst public health crises in its history. There were nearly 500,000 deaths from opioid overdoses in the U.S. between 1999 and 2019, according to the Centers for Disease Control and Prevention. Last year, opioids were involved in 1,273 deaths in Connecticut — up 13 percent from 2019, according to the state Office of the Chief Medical Examiner.
“I just feel that with both the bankruptcy settlement and the appeal, both of those have forgotten what this is all about,” Yoder said. “This all started because hundreds of thousands of people started dying and becoming addicted to opioids.”