The billionaire owners of OxyContin maker
If they are successful, it threatens to reduce the bargaining power of alleged victims of corporate abuse for years to come. The outcome could also benefit,
In New York, U.S. Bankruptcy Judge
The two cases could tip bankruptcy rules in favor of companies and away from people trying to sue,
“They are trying to get the benefits of bankruptcy on the cheap,” he said.
Companies have been using bankruptcy courts to consolidate their liabilities since the 1980s, applying the restructuring process to wipe out tens of thousands of lawsuits for less than the cost of litigating the claims individually in court. The recent cases threaten to set a precedent that other company owners could use as a legal hammer against victims during negotiations.
“The company is going to say, ‘Here is the offer we’re going to give you. If you don’t play nice we are going to use the bankruptcy process to, at the very least, drag this on for years.’ Now we all know how that will go. It’s going to mean lower recoveries for tort victims,” Levitin said.
Purdue is asking a federal court to approve a landmark settlement that would hand all of its assets -- along with more than $4 billion from the Sacklers -- to cities, states and counties fighting the U.S. opioid crisis. To get the family on board, the court must agree to permanently insulate the owners from opioid lawsuits.
In a written
Even after Purdue narrowed the legal releases sought by the Sacklers this week, the U.S. Trustee, a federal watchdog for corporate bankruptcies, continued to oppose the legal immunity,
Representatives for members of the Sackler family either declined to comment or didn’t reply to requests for comment. The family has previously denied wrongdoing.
In asbestos cases, a strategy popped up a few years ago that came to be known as the Texas Two-Step. In step one, Georgia-Pacific, which is owned by
In one entity, Georgia-Pacific kept its most valuable assets, including its operating businesses. The other part was saddled with 64,000 asbestos claims and assets worth about $177 million, and then put into bankruptcy, according to
The restructuring left the new, smaller company, Bestwall LLC, “a hollow shell, with no employees, no operations, no ongoing business,” creditors who have attacked the maneuver said in a
Georgia-Pacific disputed the idea that its strategy would make it harder for asbestos victims to hold corporations accountable. The company has agreed to make up any shortfall if Bestwall is unable to pay alleged asbestos victims, Georgia-Pacific representative Greg Guest said in an email. Also, Bestwall has proposed paying $1 billion into a trust for victims, he said.
“Bestwall filed for bankruptcy to fairly and permanently resolve current and future asbestos claims,” Guest said. “Bestwall has been working and will continue to work with representatives of current and future claimants – who are appointed by the court – to reach agreement on a global resolution that will pay legitimate asbestos claims in full.”
The case is months away from resolution as lawyers for asbestos victims and the company battle over arcane points of law.
Meanwhile, asbestos victims who blame the talc in baby powder made by J&J were so concerned about the Texas Two-Step that they preemptively asked a federal judge to
J&J shouldn’t be blocked from using any legal strategy it believes will benefit it, company attorney Theodore E. Tsekerides said during a court hearing on Tuesday. Victim lawyers are wrongly assuming J&J will somehow hurt them with whatever tactics it chooses to employ in the future.
“They are prejudging their fight,” Tsekerides told a judge in Wilmington, Delaware on Tuesday. “They are saying whatever we do is harm.”
U.S. Bankruptcy Judge
“Johnson & Johnson hasn’t really denied that this is a possibility,” Silverstein said in court. “There has been no denying that a Texas Two-Step…is within the realm of possibility.”
The company has won more than a half a dozen such cases at trial outside of bankruptcy court in recent years, but it’s also lost some, including a
When David Sackler took the stand in Purdue’s bankruptcy trial last week, he testified that his family could only free itself of all its legal woes related to the OxyContin maker if they get sweeping immunity as part of the case.
“I don’t know of any other forum that would allow this kind of global solution,” he said in court.
Indeed, the linchpin of trying to win relief from future lawsuits in bankruptcy often comes down to so-called third-party releases, which raises the stakes for precedent-setting cases that risk tilting the scales against victims.
These releases carry the ability to force a settlement onto holdouts. Once 75% of creditors who participate in a vote agree to back a deal, everyone else can be dragged along if the judge greenlights it. Outside of bankruptcy, there’s no way to force someone to settle a case if they demand to go to trial.
“It’s the only forum that can compel future demand holders to accept the payments,” said former bankruptcy judge
(Adds Georgia-Pacific promise to pay asbestos victims in 15th paragraph.)
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