(Bloomberg) -- Lawyers for Purdue Pharma LP, seeking to soothe concerns of a bankruptcy judge, narrowed the legal protections for the Sackler family included in the drugmaker’s proposed settlement of trillions of dollars in opioid claims.
The pharmaceutical company updated bankruptcy plan documents to shrink, and more clearly define, the legal insulation from future lawsuits that would be granted to certain members of the Sackler family, entities they’ve given money to and advisers to the company, a lawyer for Purdue said in court on Monday.
For example, the documents now make clear that Purdue’s owners won’t be released from legal claims unrelated to opioids. The U.S. Trustee still objected to the revised bankruptcy plan, highlighting an ongoing concern about the “extraordinarily broad” non-consensual, third-party releases being given to the Sackler family.
“I am not commenting on the merits of the changes or whether it’s enough, although I appreciate the work done to narrow the release,” U.S. Bankruptcy Judge Robert Drain said at the hearing which was held virtually. He later said that lawyers should try to narrow the releases further in the coming days.
Purdue is attempting to persuade Drain to approve the settlement, which the company says would dedicate more than $10 billion to abating the opioid crisis. While most of Purdue’s creditors -- primarily parties suing the company over its role in the opioid crisis -- support the plan, about 10 U.S. states are trying to block it.
The multiweek bankruptcy court trial entered the oral argument phase on Monday after four members of the Sackler family testified about their roles at Purdue and in the opioid crisis.
Lawyers for the company on Monday argued that their plan, while not ideal, is the best way to resolve the thousands of lawsuits that sent Purdue into bankruptcy two years ago and also dedicate money to fighting the opioid crisis.
“This plan is most assuredly not perfect,” Marshall Huebner told the judge. But the alternatives -- a “maelstrom of years of litigation” and a “fire tornado” of fighting among creditors -- are far worse, he argued.
Over the last two years, Purdue has built support for the settlement as members of the Sackler family agreed to kick in more than $1 billion of additional cash, among other things. Dissenters have dwindled, but still crucially include U.S. states like Connecticut, Washington and Maryland, along with the U.S. Trustee, an arm of the Justice Department that oversees the bankruptcy system.
Those seeking to derail the plan have honed in on the releases that Purdue’s owners and related entities would receive under the plan. The third-party releases are legally controversial in part because they would strip anyone, including governments, of the ability to sue members of the Sackler family over the opioid crisis.
“The plan is breathtaking, your honor,” said Paul K. Schwartzberg of the U.S. Trustee’s office. He argued the plan defies the U.S. constitution as well as bankruptcy rules, allowing Purdue’s owners to abuse the Chapter 11 system. “This plan is indeed extraordinary, and it is extraordinary for all the wrong reasons.”
Lawyers for the dissenting states argued that they, as sovereign governments, can’t be forced to release their claims against members of the Sackler family. They suggested allowing states to opt out of the bankruptcy plan, an idea that Purdue has said would cause the entire deal to unravel.
Arguments from objectors, which stretched for more than four hours on Monday, became tense at times, with Drain occasionally cutting off lawyers and challenging their interpretation of court testimony. But he indicated that he doesn’t think their claims against Purdue’s owners are baseless.
“I want to be clear: I think there is substantial risk that the Sacklers, or some of them, would be liable for huge amounts of money -- no question,” Drain said. “The question is where you draw the line, given the risks on the other side of, not just the merits, but maybe more importantly the effect on who gets what from them.”
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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