Purdue Pharma Law Firm Builds ‘Ethical Wall’ to Shield Ex-Judge

Skadden, after hiring the judge who approved a $6 billion opioid settlement for its client Purdue Pharma LP, will bar him from matters involving the OxyContin maker and block him from company fees.

There’s an “ethical wall” between Purdue and retired Judge Robert Drain, Skadden, Arps, Slate, Meagher & Flom said in a filing last week at the Southern District of New York Bankruptcy Court. Skadden made the filing a day after it said Drain will join its corporate restructuring group in New York as of counsel.

Drain in March 2022, three months before he retired, approved an opioid settlement conditioned on Purdue Pharma prevailing in an ongoing appeal of its bankruptcy plan. The plan was controversial because it gave broad protections to Purdue owners—members of the Sackler family—from future opioid suits.

“Judge Drain was motivated by good intentions—he was trying to do what he thought was the right thing,” said Jonathan Lipson, a Temple University law professor who once represented a personal injury claimant in the proceedings. “He may not fully appreciate” how his move to a Purdue law firm makes his decisions in the case look, Lipson said.

Federal judges leaving the bench and going to private practice, including to firms that once appeared before them, is a fact of life in the legal industry. Drain’s former colleague in the Southern District of New York, Shelley Chapman, last year joined Willkie Farr & Gallagher. Former Delaware bankruptcy judge Kevin Carey joined Hogan Lovells in 2019.

Under the New York rules of professional conduct, Drain is barred from working on any matter that he heard as a jurist. The rule also notes that judges cannot negotiate for employment at a firm arguing before him, indicating that talks between Drain and Skadden would have had to commence following his retirement.

While Drain’s move to a firm involved in the Purdue case violates no ethics rules, it shows how narrow the ethics restrictions are, said Kathleen Clark, a professor at Washington University School of Law in St. Louis

“It’s not a great look, even though the rules allow it,” Clark said. “Of all the law firms, Drain goes and works for one of the firms in one of the most controversial recent cases he’s been involved in.”

Drain’s example is unique from other judges that have joined law firms because Skadden came under scrutiny itself during the case, Lipson said. Skadden and two other law firms in 2021 agreed to give up $1 million in legal fees to resolve claims from the US Trustee that they failed to properly disclose an information-sharing agreement between Purdue, the Sacklers, and their respective lawyers.

“The thing that’s a problem, certainly an optical problem here, is that Skadden had its own problems in the case,” Lipson said.

Skadden said in a statement that the firm “complied with all applicable rules that enable retired judges to work at law firms.”

The firm added, “Judge Drain will not have any involvement in, or be apportioned any fees relating to, Purdue matters.”

The US Trustee’s Office, which oversees bankruptcy administration at the Justice Department, declined to comment. Drain could not be reached for comment.

‘What Courts Do’

Purdue filed for Chapter 11 in Drain’s court in 2019 in an effort to resolve thousands of lawsuits claiming its OxyContin painkiller drug helped fuel an opioid epidemic in the US.

More than 500,000 Americans died from opioid overdoses between 1999 and 2020, according to the Centers for Disease Control and Prevention. Purdue has faced claims of playing down or ignoring the addictive qualities of its drugs through aggressive marketing campaigns.

Drain, after nearly two years of motions in the bankruptcy proceeding, approved a settlement that would have members of the Sackler family pay out $4.3 billion to states, cities and victims affected by the opioid crisis.

“One cannot put a price on a human life or an injury such as opioid addiction,” Drain said during his initial ruling on the Purdue Pharma settlement. “And yet, that’s what courts do with respect to personal injuries.”

Under terms of the deal, Purdue would be overseen by a public board and the Sackler family would receive immunity from civil liability for their alleged role in the crisis. The Sacklers have long denied any wrongdoing.

A handful of states initially objected to the ruling, arguing the shield granted to the Sacklers was illegal. But they later dropped their opposition after the $6 billion agreement was reached in March 2022. Drain approved the deal shortly after it was announced.

The US Trustee, however, has continued to object to the civil liability releases for the Sacklers.

The Second Circuit is currently weighing the agreement, after a New York district judge said the bankruptcy court was not allowed to grant the third-party releases it issued.

Go-To Bankruptcy Judge

Drain retired last June after about two decades on the Southern District of New York bench.

A former Paul Weiss partner, he gained a reputation as a preeminent expert in bankruptcy law and a favorable judge to debtors. As the only jurist in White Plains specializing in bankruptcy, his courthouse in the outer suburbs of New York City became a sought-out venue for large and sophisticated company reorganizations.

His move to Skadden presents no ethical concerns, said Robert Keach, co-chair of Bernstein Shur’s restructuring group.

“When he was on the bench, Robert Drain was arguably the finest jurist in America,” Keach said. “He’s someone who thinks deeply from the perspective of how things are and how they appear. He won’t get within 100 miles of Purdue or whatever is left of it, and given that, I’m not troubled by the optics.”

It is not clear what role Drain will serve in Skadden’s restructuring practice, which is led by New York partner Paul Leake.

Drain’s experience in one of the “busiest bankruptcy jurisdictions will be of tremendous value to our clients,” Leake said in a statement.

Skadden has represented Purdue since 2010, primarily handling matters that touch Justice Department investigations and litigation matters, according to court documents.

During the bankruptcy proceedings, Skadden has served as special counsel to Purdue alongside lead debtor’s counsel from Davis Polk & Wardwell.

Skadden partner Van C. Durrer told Drain’s former court in an April 14 filing that the “ethical wall” the firm is establishing between Drain and Purdue prevents any adverse interest for the firm in the Purdue proceedings. Skadden is also establishing “screening procedures” for Drain before he joins the firm, Durrer said.