Purdue Pharma restructuring plan effectively blocked … for now – bankruptcy / bankruptcy / restructuring


United States: Purdue Pharma restructuring plan effectively blocked … for now

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On May 7, 2021, we issued a customer warning regarding the Perdue Pharma case and the possibility that the bankruptcy case could include the release of individual non-debtors of the Sackler family. At that time, a plan containing terms that would effectively extend automatic residence protection was upheld by Judge Robert D. Drain, who was leading the bankruptcy process in the Southern District of New York.

As promised, we will publish an updated notification here. To read the original warning, click here.

After Judge Drain approved the plan, the trustee of the United States, eight states, the District of Columbia and approximately 2,000 people immediately appealed to the federal district court.

The applicants alleged that Judge Drain had no authority to circumvent the ability of any state to prosecute the Sacklers under their own consumer protection laws.

The fact that the proposed restructuring plan contained a settlement period that freed the individual company owners – members of the billionaire Sackler family – from individual liability in civil opioid cases was controversial. As a rule, third parties are not exempt from any liability.

It also raised the fact that the plan enabled the Sacklers to effectively obtain the bankruptcy funds without filing their own bankruptcy proceedings, as well as the fact that the settlement portion of the plan deprives victims of the opioid crisis of their right to due process against civil action to initiate the Sacklers.

With this in mind, Judge Colleen McMahon of the US District Court for the Southern District of New York issued a ruling on December 16, 2021 that effectively blocks the part of a restructuring plan approved by bankruptcy judge Drain in September.

Purdue and attorney for other parties advocating approval of the plan go on to argue that bankruptcy law, as well as the precedent from the Second Circuit Judge Drain, authorized the Sacklers to grant such discharge.

Judge McMahon’s opinion is widely praised. However, anyone monitoring the action should know that the final decision on this issue is still pending. As expected, Purdue immediately said it would appeal the decision.

In addition, the December 16 advisory opinion appears to be calling on the United States Court of Appeals to consider the ability of corporate debtor owners to obtain protection from liability without having to file for bankruptcy in person.

We will keep you informed of developments in this very interesting case.

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

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