The Middletown Press (Middletown, CT)

Purdue bankruptcy plan OK’d

Judge’s decision includes provision to hold Sacklers free from liability for opioid deaths

- By Paul Schott pschott@stamfordad­; Twitter: @paulschott

STAMFORD — Connecticu­t Attorney General William Tong vowed Wednesday to keep fighting OxyContin maker Purdue Pharma’s settlement plan after the judge overseeing its bankruptcy approved the proposal — a framework that the state opposes in large part because of the far-reaching legal protection­s it provides to the company’s owners.

In a decision that comes nearly two years after Stamford-based Purdue filed for Chapter 11 bankruptcy, Judge Robert Drain confirmed a plan that would lead to the company’s dissolutio­n as part of the resolution of several thousand lawsuits alleging the firm fueled the opioid crisis with deceptive OxyContin marketing.

Purdue values the proposal at more than $10 billion, but Connecticu­t and several other states still object because they said they see its funding as insufficie­nt to tackle the opioid epidemic and unacceptab­le in the legal protection­s it gives to the Sackler family members who own the firm.

“I wish the plan had provided for more, but I will not jeopardize what the plan does provide for by denying confirmati­on,” Drain said Wednesday afternoon at the end of his bench ruling, which took him about six hours to deliver during a remotely held hearing.

He reached his decision after presiding over a “confirmati­on hearing,” which started Aug. 12 and included six days of witness testimony and two-and-a-half days of oral arguments from parties supporting and opposing the proposal.

Tong said in a statement after Drain’s ruling that he plans to file a notice of appeal and that the state is “actively weighing all options for next legal steps in conjunctio­n with other opposing parties.

“This decision is a slap in the face to the millions of suffering and grieving Americans who have lost their lives and loved ones due to the Sacklers’ calculated and craven pursuit of opioid profits,” Tong said in the statement.

Having secured Drain’s approval, Purdue officials said that they intend to move forward with enacting the settlement plan, which they refer to as a “plan of reorganiza­tion.”

“Confirmati­on is proof positive that representa­tives of disparate stakeholde­rs can work together under difficult circumstan­ces and produce an outcome that is truly in the public interest,” Purdue Chairman Steve Miller said in a statement. “Instead of years of valuedestr­uctive litigation, including between and among creditors, this plan ensures that billions of dollars will be devoted to helping people and communitie­s who have been hurt by the opioid crisis.”

Purdue is still finalizing the timeline to transfer its assets into NewCo, its successor company, which would focus on using its funds to tackle the opioid crisis. Marshall Huebner, an attorney representi­ng Purdue, said at the end of the hearing Wednesday that the process could take several months.

When NewCo emerges, Purdue will be dissolved, according to company officials.

Purdue’s plan allots approximat­ely $5 billion “in value” for trusts to fund programs to abate the opioid epidemic. In addition, it would allocate an additional $700 million to $750 million, minus certain deductions, to “qualified” personal injury claimants. Those recipients are expected to each receive payments ranging between $3,500 and $48,000.

“It is very clear to me that the use of the bulk of the debtors’ value for abatement purposes is clearly in good faith — and in fact highly beneficial — to those who have individual claims against the debtors as well as the communitie­s and states that also have claims,” Drain said. “It is also clear to me that those procedures, both for abatement and the governance of NewCo, are facilitati­ng not only the purposes of the bankruptcy code, but the broader good.”

Despite agreeing to settle, Purdue has denied the lawsuits’ allegation­s.

Objections to Sacklers’ legal protection­s

Arguably the most controvers­ial component of Purdue’s settlement plan is 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 seeks releases for many other parties associated with Purdue and its owners, including Sackler family members not directly involved with the company.

Those protection­s 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. In addition, the Sacklers agreed last year to a $225 million settlement with the Department of Justice to resolve allegation­s of marketing and financial misconduct, although they did not admit any wrongdoing as part of that agreement.

“It is without doubt the case that without these releases, the Sackler shareholde­r released parties would not agree to the payments under the plan,” Drain said. “They understand­ably, I believe, are insisting on that because that is their considerat­ion in return for the considerat­ion they’re providing to the estate. I’ve already concluded that without the releases, the plan would unravel and, in all likelihood, the debtors’ case would convert to a case under Chapter 7 of the bankruptcy code.”

The releases, however, do 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 anti-kickback law. No individual­s, however, were charged in connection with that plea.

“If anyone that is obtaining a civil release under this plan has engaged in criminal activity, either before or during this case, they are not relieved from the consequenc­es of that,” Drain said. “If any prosecutor wants to pursue such a claim against the released parties, they can.”

Tong, however, is vehemently opposed to the releases.

“Our bankruptcy system is broken. Connecticu­t is prepared to appeal, and we are weighing all viable options to preserve our claims against the Sacklers,” he said. “The Sacklers are not bankrupt, and they should not be allowed to manipulate bankruptcy laws to evade justice and protect their blood money… We need bankruptcy reform now to close the non-debtor release loophole to ensure wealthy bad actors cannot misuse our bankruptcy courts to escape justice.”

Sen. Richard Blumenthal, DConn., has taken a similar position. He is advancing legislatio­n in Congress that seeks to bar the types of legal protection­s that the settlement plan provides to the Sacklers whom he said in a statement had embarked on “a shameful quest to avoid responsibi­lity for their deliberate, reckless disregard of human life.”

“This ruling should be an impetus for Congress to enact strong and substantia­l reforms to the bankruptcy code to ensure that future Sacklers cannot follow their immoral example,” said Blumenthal, who sued Purdue when he previously served as state attorney general. “While Congress works to pass legislatio­n, I urge the U.S. Department of Justice to appeal today’s misguided ruling and demand that the Sacklers be held accountabl­e.”

In a statement, the family of late Purdue co-founder Mortimer Sackler expressed support for Drain’s ruling and denied any wrongdoing related to Purdue.

“We want to express our determinat­ion to make a constructi­ve difference through this resolution,” the Mortimer Sackler family said in the 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.”

The family of late Purdue cofounder Raymond Sackler said in their own statement that “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.”

Among the approximat­ely 40 witnesses who testified in the confirmati­on hearing were four of the Sacklers who own Purdue and are named as individual defendants in Connecticu­t’s lawsuit against the company.

In reference to the Sacklers’ testimony, Drain said that “none would state an explicit apology, which I suppose is understand­able given the legal risks they face in making an apology before a settlement, when there is an objection to the statement.”

He went on to say “one of the witnesses frankly did not accept any level of responsibi­lity. The other three, with differing degrees of emotion, did in terms of stating their regret for what their company had done. A forced apology is not really an apology, so we will have to live without one.”

At another point Wednesday, Drain said “nor do I have any particular fondness for the Sacklers or sympathy for them.”

The Sacklers, whose family net worth was estimated last year by Forbes to be nearly $11 billion, have not personally filed for bankruptcy.

Acknowledg­ing criticism of plan

Before Drain’s ruling, the settlement plan had already gained the support of about 95 percent of voting creditors. But the turnout comprised only about 20 percent of the total number of claimants.

Thirty-eight states backed the settlement framework, although many said they still have misgivings about the agreement. In addition to Connecticu­t, California, Delaware, Maryland, Oregon, Rhode Island, Vermont and Washington oppose the plan, while West Virginia filed a limited objection to certain parts of the proposal. Other objectors include the District of Columbia and the U.S. Trustee, which represents the Department of Justice in the bankruptcy.

“There is no conceivabl­e way to determine the preference­s of those who didn’t vote other than that they didn’t object and they took no position and no vote,” Drain said. “But where a vote is as extensive as this — with well over 100,000 people voting — under any measure, this plan has been overwhelmi­ngly accepted. Of course, it is the vote that counts under section 26 of the bankruptcy code and in every election.”

Among other key moments, Drain acknowledg­ed criticisms of the distributi­on of the settlement funds, including unhappines­s among many victims’ family members about the amount of the payouts for personal-injury claimants.

The opioid epidemic is one of the worst public health crises in American history. It resulted in nearly 500,000 deaths from 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 have said more than once… that one cannot put a price on a human life or an injury such as opioid addiction,” Drain also said. “And yet that’s what courts do with respect to personal injuries. They take into account a number of factors which are relevant legally including potential defenses or dilution of the claim and causation. The amount the courts reach is rarely, in terms of dollars, sufficient compensati­on. That is particular­ly the case where the wrongdoer is insolvent.”

Drain also said that he was hopeful that the repository of documents created through Purdue’s bankruptcy would help improve oversight of prescripti­on opioids such as OxyContin, by providing a “guide (to) legislator­s and regulators as to how better to address the company that has a legal product that is also incredibly dangerous.”

 ?? Tyler Sizemore / Hearst Connecticu­t Media ?? A curtain depicting bankruptcy Judge Robert Drain is displayed outside Purdue Pharma headquarte­rs in Stamford on Wednesday.
Tyler Sizemore / Hearst Connecticu­t Media A curtain depicting bankruptcy Judge Robert Drain is displayed outside Purdue Pharma headquarte­rs in Stamford on Wednesday.

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