Purdue Pharma bankruptcy judge approves reviewer but condemns Sackler-related attacks

A pharmacist holds a bottle of OxyContin made by Purdue Pharma at a pharmacy in Provo, Utah. REUTERS / George Frey

  • Examiner to probe the independence of the Purdue special committee
  • The judge castigates the “unfounded” allegations of irregularity
  • Purdue’s March to Exit Bankruptcy Continues

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(Reuters) – The judge overseeing the bankruptcy of Purdue Pharma LP has said he will appoint an examiner to investigate the independence of a special committee that negotiated a deal with members of the Sackler family who own the maker of OxyContin, but only after denouncing what it says is misleading accusations of impropriety surrounding the deal.

U.S. bankruptcy judge Robert Drain in White Plains, New York spent about an hour delivering an oral ruling on an examiner’s request in a virtual hearing Wednesday in the Purdue bankruptcy, which aims to resolve thousands of cases. lawsuits accusing the company of fueling the opioid crisis through deceptive marketing. Despite the conclusion that there is no evidence to suggest that the Purdue Board of Directors Special Committee was influenced in any way by members of the Sackler family when negotiating a deal that constitutes the basis of the company’s exit plan from bankruptcy, the judge said he feared misleading press reports. influenced his decision to bring in an examiner anyway.

“I am afraid that if I do not appoint an examiner, the next press release will be ‘Court refuses to appoint examiner to show that the process was fair” but without adding “because there was no evidence”, ” Drain said. “So I tend to appoint a reviewer to look into an issue: whether the council (Purdue), and more specifically the special committee, in ordering that the Chapter 11 plan before me be filed and continued, was acting independently and not under the direction or influence of the Sacklers.

Purdue declined to comment on the decision. In court, the company’s attorney, Marshall Huebner of Davis Polk & Wardwell, was outraged at the suggestion that the deal had not been negotiated fairly. Representatives for members of the Sackler family who own the business did not immediately respond to a request for comment.

the examiner request came from Peter Jackson, the founder of an advocacy group for parents whose children have died from opioid abuse. Jackson asked the judge to appoint a reviewer to determine whether Purdue was still under the influence of the Sacklers when he negotiated the settlement that protects them from future opioid-related litigation – suggesting the deal was not negotiated fairly. The Sacklers agreed to contribute $ 4.275 billion to the settlement.

Drain spent much of Wednesday’s hearing denouncing the claim and accusing Jonathan Lipson, a professor at Temple University Beasley School of Law, who presented it to the judge, of making baseless allegations of irregularity in the process which led to the agreement. The judge also appeared to take personal offense at what he saw as his own integrity being called into question by the motion.

Lipson said he was not trying to insult the judge, who throughout the hearing cut and yelled at the professor and accused him of slandering members of the special committee. Drain also accused Lipson of intentionally drafting the Examiner’s petition in a way that would encourage misleading media coverage suggesting that the Sacklers, who have not been criminally charged, are getting away with crimes – a matter which does not fall within the jurisdiction of the bankruptcy court.

“It’s a different subject, as a law professor should understand,” Drain said.

However, he ultimately said he would allow an examiner to investigate the independence of the special committee with a budget of $ 200,000. The bankruptcy watchdog branch of the US Department of Justice, the US Trustee’s Office, will select the examiner.

The judge said he didn’t expect the examiner’s investigation to interfere with Purdue’s ongoing restructuring process.

Lipson said in an interview with Reuters after the hearing that he was pleasantly surprised by the judge’s final ruling.

“It was obviously less than we expected but drastically more than I expected. So I am grateful that he finally agreed with Mr. Jackson,” Lipson said.

The motion came as Purdue continues to mediate in an attempt to provide more support for its proposed reorganization plan, which includes a settlement that directs funds toward opioid reduction programs.

The case is In re Purdue Pharma LP, US Bankruptcy Court, Southern District of New York, No. 19-bk-23649.

For Purdue: Marshall Huebner, Benjamin Kaminetzky, Timothy Graulich, Eli Vonnegut and James McClammy of Davis Polk & Wardwell

For Peter Jackson: Jonathan Lipson of Temple University Beasley School of Law

Read more:

Lawmakers Debate Bill to Amend Bankruptcy Laws Protecting Purdue Owners

Purdue Pharma Prepares Voting Process For Proposed Restructuring Agreement

Purdue Pharma to Use Public Trusts and Sackler’s Money to Settle Opioid Litigation

Reporting by Maria Chutchian

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