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Purdue Pharma judge to rule on bid to halt opioid deal Wednesday

Purdue Pharma judge to rule on bid to halt opioid deal Wednesday

  • Summary of the following items:
  • Purdue said it won't implement key components of plan in coming month because of financial constraints.
  • Multiple appeals strategies complicate court processes.

A New York judge has indicated that she will rule on Wednesday whether to halt the implementation of Purdue Pharma's reorganization plan, which would dissolve the drugmaker and protect the Sackler family members who own it from future opioid litigation.

During a Tuesday hearing, opponents of the Purdue plan said it shouldn't be allowed to go into effect while appeals of U.S. Bankruptcy Judge Robert Drain's September ruling on the deal are proceeding.

The U.S. Trustee, which acts as the U-S Department of Justice's bankruptcy watchdog, and some states have asked Drain and McMahon separately to temporarily halt the September ruling. The U.S. Trustee and those states argue that the settlement violates bankruptcy law by preventing opioid victims from suing the Sacklers who did not file for bankruptcy in the future over their role in Purdues OxyContin sales.

The move would see the firm dissolve and assets transferred to a trust dedicated to combating the opioid epidemic. In exchange for the legal protections, The Sacklers contributed $4.5 billion to the settlement.

McMahon said in a written order on Sunday that she would likely accept requests to halt the plan on Tuesday, but that in the end she will wait until Wednesday to make if she wins.

Davis Polk & Wardwell Purdue Pharma lawyers urged McMahon not to revoke the plans implementation. Purdue, in connection with a plea agreement it entered with the Justice Department last year, said there was no possibility of it going into effect before 'a New Jersey court sentences PurDue'. The plan is contingent on a sentencing, which hasn't yet been decided.

Purdues lawyers insisted that the firm will not take any actions between now and Dec. 8, the earliest date the plan may go into effect under terms of the deal and plea agreement, which cant be changed later. McMahon appeared concerned that if she does not pause the plan now and significant transactions are made, the appeals may end up being equitably mooted or rendered irrelevant because unwinding the transactions would be too complicated.

The judge noted throughout Tuesdays hearing that Purdue's case presents distinct circumstances that are different from other Chapter 11 appeals that were eventually deemed equitably moot.

Lawyers for Purdue have argued repeatedly that delaying the plan will result in delays in compensating opioid victims who are entitled to compensation under the agreement.

Complicating the situation is the fact that the United States Trustee has also asked Drain to issue an order preventing the implementation of the plan. A hearing on that is scheduled for Nov. 9, although it's unclear if McMahon issues a stay.

Additionally, the U.S. Trustee and several states are attempting to bring their appeals directly to the 2nd Circuit Court of Appeals in the United States, skipping over the federal district court level that usually hears bankruptcy appeal proceedings. A hearing on that request will take place on Thursday before Drain.

McMahon would no longer handle the process if the appeal was sent directly to the 2nd Circuit.

Purdue filed for bankruptcy in September 2019 to settle thousands of lawsuits accusing it and its Sackler family members of fueling the U.S. opioid epidemic through deceptive marketing of its products.

In re Purdue Pharma LP, U.S. District Court, Southern District of New York, No. 21-07966.

Marshall Huebner, Benjamin Kaminetzky, Timothy Graulich, Eli Vonnegut, and James McClammy of Davis Polk & Wardwell, as well as Paul Breene, Ann Kramer, Anthony Crawford, Jeremy Crawford and Lisa Szymanski of Reed Smith are also on the list.

Linda Riffkin, Assistant U.S. Trustee, Associate General Counsel Matt Sutko, and DOJ trial attorneys Beth Levene (Sumi Sakata, Paul Schwartzberg, Benjamin Higgins, Timothy Schwantzberg) and Paul Schreiberberg are the U-S Trust and Benjamin Hicks is the DOF trial attorney.

Read more:

Purdue Pharma appeals court is likely to revoke agreement approval while appeal is pending.

Purdue Pharma appeals court orders lawyers to stop 'deluge of letters'

Purdue Pharma's offer to the 2nd Circuit is the first attempt by the United States to bring a direct appeal to 2th Circuit over PurDue' s marketing strategy.

Maria Chutchian is a native of Maria's native country, China.

Maria Chutchian writes about corporate bankruptcy and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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