Purdue Pharma plans last-ditch effort for consensual settlement

Cat Corey

10 July 2024•3 min read

It was an unhappy reunion yesterday, 9 July, in the Southern District of New York bankruptcy court when Purdue Pharma and its myriad of creditors met for the first time following the Supreme Court decision on 27 June that vacated the company’s confirmed plan.

The hearing was scheduled after the company requested a status conference to discuss next steps and a possible path forward for the company. In the days leading up to the hearing, the company requested an extension of the preliminary injunction prohibiting lawsuits against non-debtor entities, including the Sackler family, and also requested the appointment of co-mediators to assist in formulating a new plan, while the official committee of unsecured creditors filed a motion requesting standing to pursue estate causes of action against the Sackler family and related entities. The committee estimates those potential causes of action to be worth approximately $11.5bn in cash and property held by the Sackler family.

The mediation, which Judge Sean Lane approved at the hearing, will be overseen by Judge Shelley Chapman (ret.) and Eric Green as joint mediators. It will last for 60 days, and will be focused on what possible modifications can be made to the vacated plan to make it viable and consistent with the Supreme Court’s decision.

Judge Lane also approved the extension of the preliminary injunction, over the objection of a pro se litigant, for that 60-day period to allow for all parties to focus singularly on the mediation and the task at hand.

The parties revealed that they had been in preliminary discussions regarding a “what if” conversation for the possibility that the Supreme Court decision would not go their way. Those discussions picked up in earnest following the decision, and paved the way for the next 60 days when the parties will “seriously explore at a very high speed” whether a new global settlement can be reached, according to Marshall Huebner from Davis Polk, counsel for Purdue.

The goal, according to Huebner, is to get a deal in those 60 days, race to get it documented, a disclosure statement on file and a plan confirmed and consummated. Should the mediation be unsuccessful, however, the official committee will most likely be handed the reins via a litigation trust in a confirmed plan, to pursue estate causes of action against the Sacklers.

In fact, the official committee has already teed up that fight. Whether it be a carrot or a stick to the Sackler family, the committee filed its standing motion, an action supported by the debtors and an ad hoc group of governmental entities, with an almost 200 page draft complaint attached, laying out over 20 possible causes of action against the Sackler family and related entities. Further action on the standing motion is paused until the outcome of mediation is known.

Arik Preis of Akin Gump, counsel for the official committee, spoke in support of the meditation process, but also spoke to the possible Sackler litigation noting that it has been 1,759 days since Purdue entered Chapter 11, and the family that many people blame for the opioid crisis, and the family that “became very wealthy” from the opioid crisis is “richer than they were 1,759 days ago.”

Next steps for all involved is a sprint of a mediation to reach a settlement that follows the Supreme Court decision. If not, litigation, both by the official committee, as well as private litigation actions against the Sackler family, will be able to commence when the injunction is lifted in mid-September.

Our customers receive breaking news ahead of the crowd. To learn more about news on the 9fin platform, request a free trial below.