End Nears for Purdue’s Opioid Woes With Justice Department Deal

Purdue Pharma is poised to wrap up all liability for its role in the opioid crisis in a matter of weeks after its $8.3 billion settlement with the Justice Department cleared the way to resolve outstanding bankruptcy claims.

Purdue’s settlement with the DOJ was the critical domino that needed to fall before roughly 3,000 cities and counties that are claimants in the bankruptcy could get their slice of the pie, said Harry Nelson, co-founder of Nelson Hardiman, a Los Angeles-based health-care law firm.

“I would be surprised if we don’t have a Purdue resolution before Thanksgiving,” he said.

“I have trouble believing Purdue would have entered into this settlement without some degree of confidence that this would be step one in announcing a global resolution,” Nelson said.

That means Purdue can focus on resolving the bankruptcy claims that didn’t come with potential criminal charges attached. While the DOJ settlement puts a global resolution within reach, it could also minimize the leverage the other claimants could have when trying to extract anything beyond the proposed $10 billion, Nelson said.

“It is unclear whether or not the DOJ’s actions will affect the amount of additional monies the Sackler family have committed to paying toward the estate,” said Scott Bickford, a principal at Martzell Bickford & Centola, who represents thousands of infants born dependent on opioids.

Fiscal Limitations

Purdue and the Sackler family have long maintained that a roughly $10 billion settlement proposal was the limit for what could be extracted from the company to resolve claims brought by cities and counties, as well as American Indian tribes, hospitals, and individuals harmed by the opioid crisis.

While the DOJ announced that it would get $8.3 billion out of the company, the vast majority of that will go toward the original $10 billion settlement proposal, with funds targeted at local and state governments to alleviate the opioid crisis.

As a result, the DOJ settlement is good news for other bankruptcy claimants because they said a final deal was impossible until the liability with DOJ was resolved.

“This clears the way for a Purdue bankruptcy plan to be finalized and to be put forward for a vote of creditors,” said Hunter Shkolnik, a partner with Napoli Shkolnik, who is representing hundreds of local governments in the bankruptcy proceedings.

“There isn’t more money because there isn’t more money in Purdue” beyond the $10 billion on the table, he added.

Unusual Move

Monies recovered from a DOJ settlement are rarely rerouted for other purposes or to other claimants in a bankruptcy or complainants in a lawsuit.

The unusual move means the DOJ didn’t take an $8.3 billion bite out of the final settlement going to cities, counties, tribes, hospitals, and individuals.

A “positive sign,” the agency’s action “shows that the federal government is willing to allow most of the funds that it would have been able to assert a claim to flow into the abatement,” said Kevin Maclay, a lawyer with Caplin & Drysdale who represents more than 1,300 local government entities in the bankruptcy.

DOJ officials didn’t respond to a request for comment.

One potential downside is that parties within the bankruptcy have sought to learn more about any roles the individual members of the Sackler family played in the opioid crisis while at Purdue—and now it’s unclear if any of that information will ever come to light.

“The effect of the settlement may stymie that ongoing discovery,” Bickford said.

The case is In Re Purdue Pharma LP, Bankr. S.D.N.Y., No. 19-23649, settlement 10/21/20.