Sacklers Balk at Chapter 11 Deal Without Litigation Injunction Extension

by | Apr 2, 2021

In a statement to the bankruptcy court on March 23, the family of Raymond Sackler advised that unless the injunction shielding the Sackler family from litigation was extended, they would withdraw their proposed $4.275 billion cash contribution to the settlement fund intended to address the ongoing opioid crisis. In response to that statement during a virtual hearing held on March 24, Judge Robert Drain of the US Bankruptcy Court for the Southern District of New York extended the injunction another 28 days – until April 21 – giving Purdue Pharma additional time to finalize the pending Chapter 11 plan.

The injunction was put in place in November 2019 and protects non-debtor parties, including members of the Sackler family from litigation; it has already been extended a number of times during the pendency of the Chapter 11 proceedings.

On March 16, Purdue Pharma filed its Chapter 11 plan of reorganization; the plan provides for the Sacklers to give up all ownership in the company as well as contribute almost $4.3 billion to a trust designed to address opioid-related claims and the family’s role in the opioid epidemic that has resulted in the deaths of over 450,000 Americans. Instead of the family, the company would be owned by the abatement trust and run for the public benefit.

A number of groups opposed the extension of the injunction –  a coalition of “non-consenting” state attorneys general representing California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and Wisconsin, a group called the “ad hoc committee on accountability” and a group of Tennessee local government plaintiffs; these groups argued that additional disclosures from the Sackler family with regard to their assets might result in a greater settlement contribution from them, especially in light of comments from a Sackler attorney that the family is worth “multiples” of the current settlement amount.  Judge Drain contested this argument commenting  “I continue to be baffled by the argument that [state attorneys general] are somehow lacking in information when it appears to me that more information has been provided with respect to this plan than I have ever seen. To say that your constituents have been left in the dark seems to me to be simply a lie.”

Purdue points out that the current plan will total over $10 billion and the resulting trusts will distribute money to states and local governments for abatement programs in addition to administering payments to private entities and individuals with opioid-related lawsuits against Purdue.  Contributions from the Sackler family will be paid out over nine years.

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