1 00:00:03,520 --> 00:00:07,040 Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 2 00:00:07,120 --> 00:00:09,680 Speaker 1: day we bring you insight and analysis into the most 3 00:00:09,720 --> 00:00:12,200 Speaker 1: important legal news of the day. You can find more 4 00:00:12,240 --> 00:00:16,160 Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud 5 00:00:16,280 --> 00:00:20,200 Speaker 1: and on Bloomberg dot com slash podcasts. Perdue Pharma and 6 00:00:20,239 --> 00:00:24,000 Speaker 1: its owners, the billionaire Sackler family, made billions of dollars 7 00:00:24,040 --> 00:00:28,120 Speaker 1: from selling the prescription painkiller oxy content, and they faced 8 00:00:28,200 --> 00:00:32,280 Speaker 1: twenty six hundred lawsuits claiming they fueled the US opioid 9 00:00:32,360 --> 00:00:36,279 Speaker 1: epidemic by illegally pushing sales of the addictive drug. So 10 00:00:36,400 --> 00:00:39,960 Speaker 1: Perdud bankruptcy plan has been mired in controversy since the 11 00:00:40,040 --> 00:00:43,360 Speaker 1: day it was filed. State attorneys general across the country 12 00:00:43,360 --> 00:00:47,519 Speaker 1: are divided over Perdud proposed settlement. Twenty four states have 13 00:00:47,680 --> 00:00:50,960 Speaker 1: taken specific aim at produced request to have the bankruptcy 14 00:00:51,000 --> 00:00:55,040 Speaker 1: court freeze those twenty hundred cases, shielding the company and 15 00:00:55,120 --> 00:00:58,480 Speaker 1: the Sackler family personally, even though the Sacklers have not 16 00:00:58,560 --> 00:01:02,400 Speaker 1: filed for bankruptcy. This week, Arizona became the first state 17 00:01:02,480 --> 00:01:05,760 Speaker 1: to switch sides, coming out against Perdue in the Sackler 18 00:01:05,840 --> 00:01:09,080 Speaker 1: family's attempt to get out from under litigation over their 19 00:01:09,160 --> 00:01:12,040 Speaker 1: role in the opioid crisis. Joining me is a leading 20 00:01:12,080 --> 00:01:15,200 Speaker 1: authority on bankruptcy law, Jay Westbrook, a professor at the 21 00:01:15,280 --> 00:01:19,640 Speaker 1: University of Texas Law School. So companies filing for bankruptcy 22 00:01:19,680 --> 00:01:22,920 Speaker 1: are usually given an automatic stay of litigation against them, 23 00:01:22,920 --> 00:01:26,800 Speaker 1: But twenty states are opposing the court putting a hold 24 00:01:26,959 --> 00:01:31,800 Speaker 1: on more than twenty cases pending against Perdue. What's their 25 00:01:31,880 --> 00:01:36,560 Speaker 1: legal basis for doing so? Well? In general, an automatic 26 00:01:36,600 --> 00:01:39,360 Speaker 1: stay is automatic. That is, it goes into effect and 27 00:01:39,400 --> 00:01:43,280 Speaker 1: it stops all litigation in other courts because it's important 28 00:01:43,280 --> 00:01:46,720 Speaker 1: to get everybody in one place, either to resolve the 29 00:01:46,800 --> 00:01:50,080 Speaker 1: litigation and the disputes among the parties or to to 30 00:01:50,120 --> 00:01:53,400 Speaker 1: settle it. Very often, so that's why the automatic stay 31 00:01:53,480 --> 00:01:56,400 Speaker 1: is there and why it's likely to stay there for 32 00:01:56,480 --> 00:01:59,680 Speaker 1: a while, at least temporarily. On the other hand, the states, 33 00:01:59,720 --> 00:02:03,880 Speaker 1: of course, are saying that you've got this settlement going forward, 34 00:02:04,240 --> 00:02:06,720 Speaker 1: and they don't think anything should happen in the case 35 00:02:07,480 --> 00:02:10,240 Speaker 1: when their hands are tied and they can't do anything 36 00:02:10,360 --> 00:02:13,800 Speaker 1: in court. So I suspect the bankruptcy judge is going 37 00:02:13,840 --> 00:02:15,920 Speaker 1: to find a way to make sure that nothing changes 38 00:02:16,200 --> 00:02:19,240 Speaker 1: except under the direction of the bankruptcy court in an 39 00:02:19,320 --> 00:02:24,080 Speaker 1: orderly way. Now, Arizona was the first state to switch sides. 40 00:02:24,240 --> 00:02:28,320 Speaker 1: They joined with the states opposing Perdue on this motion. 41 00:02:28,880 --> 00:02:32,600 Speaker 1: If Arizona switch asides in the whole bankruptcy proceeding, might 42 00:02:32,680 --> 00:02:37,360 Speaker 1: that throw a ranch into Prdue getting a settlement, because 43 00:02:37,560 --> 00:02:43,239 Speaker 1: now you'll have more states opposing the settlement than supporting it. Yes, 44 00:02:43,360 --> 00:02:46,040 Speaker 1: I think it might very well throw a ranch into it. 45 00:02:46,480 --> 00:02:48,959 Speaker 1: On the other hand, in the long run, though, those 46 00:02:49,000 --> 00:02:52,400 Speaker 1: who are opposed to the settlement may actually benefit by 47 00:02:52,400 --> 00:02:56,040 Speaker 1: the enormous power of the bankruptcy court to consolidate all 48 00:02:56,080 --> 00:02:59,480 Speaker 1: of this into one matter. The bankruptcy court has this 49 00:03:00,040 --> 00:03:03,600 Speaker 1: eight power to issue injunctions and tell everybody, now shut up, 50 00:03:03,680 --> 00:03:06,680 Speaker 1: sit down, and let's handle this in an orderly way 51 00:03:06,760 --> 00:03:09,760 Speaker 1: all around. So I'm not sure that this won't turn 52 00:03:09,800 --> 00:03:12,960 Speaker 1: out to be a good way to resolve the case 53 00:03:13,080 --> 00:03:16,760 Speaker 1: without any court having the issue special injunctions for now, 54 00:03:17,320 --> 00:03:19,280 Speaker 1: give the parties a chance to talk to each other, 55 00:03:19,320 --> 00:03:22,000 Speaker 1: which is what the automatic state does, and see where 56 00:03:22,000 --> 00:03:24,840 Speaker 1: it goes from there. I definitely think the switching of 57 00:03:24,880 --> 00:03:28,959 Speaker 1: Arizona will have a big effect against the current settlement. 58 00:03:29,200 --> 00:03:32,320 Speaker 1: Jay is this bankruptcy different from others though, because you 59 00:03:32,440 --> 00:03:35,880 Speaker 1: have the States claiming that Purdue and Sackler had a 60 00:03:36,000 --> 00:03:40,080 Speaker 1: role in fueling the opioid crisis, and also that produce 61 00:03:40,240 --> 00:03:43,200 Speaker 1: steered up to thirteen billion dollars in profits to the 62 00:03:43,240 --> 00:03:47,120 Speaker 1: Sackler family. So is the judge going to feel any 63 00:03:47,320 --> 00:03:51,640 Speaker 1: public pressure? Oh? Absolutely, but public pressure in these huge 64 00:03:52,240 --> 00:03:55,040 Speaker 1: what amounts to a mass tort case? That is, it's 65 00:03:55,040 --> 00:03:58,400 Speaker 1: sort of like the Delcon shield or the silicon breast 66 00:03:58,400 --> 00:04:01,240 Speaker 1: implants and these other things that are called mass tort 67 00:04:01,320 --> 00:04:05,080 Speaker 1: cases because they involve many, many thousands of victims, in 68 00:04:05,120 --> 00:04:08,240 Speaker 1: this case, perhaps the largest in history the number of 69 00:04:08,280 --> 00:04:11,800 Speaker 1: people involved, although they Askedbestos cases were right up there 70 00:04:11,840 --> 00:04:14,120 Speaker 1: as well in terms of hundreds of thousands of people 71 00:04:14,280 --> 00:04:17,159 Speaker 1: who were affected, and any number of state and local 72 00:04:17,200 --> 00:04:21,120 Speaker 1: governments were affected. So the problem with asbestos may be 73 00:04:21,200 --> 00:04:25,760 Speaker 1: the closest analogy, at least in size, to this case. 74 00:04:26,200 --> 00:04:29,400 Speaker 1: This case is unique, as you say, in some important ways, 75 00:04:29,440 --> 00:04:32,040 Speaker 1: but it falls into this category of a large number 76 00:04:32,080 --> 00:04:34,520 Speaker 1: of people being hurt and an attempt to use the 77 00:04:34,520 --> 00:04:38,280 Speaker 1: bankruptcy process in one of two ways. That is, some 78 00:04:38,279 --> 00:04:40,280 Speaker 1: people will say, what's being used to try to let 79 00:04:40,640 --> 00:04:44,159 Speaker 1: the Sacklers and others squirm out from under their responsibility, 80 00:04:44,480 --> 00:04:46,960 Speaker 1: and others will say, no, that's not true. We're just 81 00:04:47,040 --> 00:04:50,480 Speaker 1: getting everybody together in one place in order to resolve this. 82 00:04:51,320 --> 00:04:55,400 Speaker 1: How unusual would it be for the judge to shield 83 00:04:55,400 --> 00:04:59,479 Speaker 1: the Sackler family from litigation when they're not filing for 84 00:04:59,520 --> 00:05:03,080 Speaker 1: bankrupts See here it's perdue, that's filing. Well, that raises 85 00:05:03,200 --> 00:05:06,640 Speaker 1: a very very controversial area of bankruptcy law called third 86 00:05:06,760 --> 00:05:10,520 Speaker 1: party releases. Again, I can go back to the asbestos cases. 87 00:05:10,560 --> 00:05:14,320 Speaker 1: In the asbestos cases, the insurance companies, of course, we're 88 00:05:14,360 --> 00:05:17,200 Speaker 1: not in bankruptcy, and what they said was, look, we'll 89 00:05:17,200 --> 00:05:19,520 Speaker 1: put a whole bunch of money into the settlement with 90 00:05:19,600 --> 00:05:23,160 Speaker 1: the asbestos victims in exchange for our not having any 91 00:05:23,160 --> 00:05:25,400 Speaker 1: other liability, in the words, are being relieved of all 92 00:05:25,440 --> 00:05:28,520 Speaker 1: additional liabilities above what we're going to promise to put 93 00:05:28,600 --> 00:05:31,760 Speaker 1: to put in to deal with the asbestos victims. And 94 00:05:31,839 --> 00:05:33,839 Speaker 1: that's sort of the model, and there are a number 95 00:05:33,839 --> 00:05:36,479 Speaker 1: of others since then. That's sort of the model that 96 00:05:36,520 --> 00:05:39,560 Speaker 1: I think the Sackler family has in mind. That we 97 00:05:39,600 --> 00:05:42,160 Speaker 1: can pay a lot, I think a billion dollars or 98 00:05:42,240 --> 00:05:44,800 Speaker 1: something like that, and then we'll be done. That'll it'll 99 00:05:44,839 --> 00:05:46,720 Speaker 1: be finished at that point, And of course a lot 100 00:05:46,800 --> 00:05:49,960 Speaker 1: of other people are not happy at that resolution and 101 00:05:50,080 --> 00:05:51,600 Speaker 1: are going to be fighting at tooth and nail in 102 00:05:51,640 --> 00:05:55,320 Speaker 1: the bankruptcy court. The Wall Street Journal reported that a 103 00:05:55,400 --> 00:05:59,040 Speaker 1: few other drugmakers who are facing litigation over the opioid 104 00:05:59,080 --> 00:06:03,640 Speaker 1: crisis are trying are exploring a way of settling their 105 00:06:03,720 --> 00:06:10,320 Speaker 1: cases by participating in produced bankruptcy. Would that be allowed? Well, 106 00:06:10,360 --> 00:06:12,320 Speaker 1: I mean, that's right in the heart of this controversy. 107 00:06:12,360 --> 00:06:14,920 Speaker 1: We were talking about to what extent can you discharge 108 00:06:15,000 --> 00:06:19,600 Speaker 1: liability without exposing yourself to the bankruptcy laws? And that's 109 00:06:19,600 --> 00:06:23,240 Speaker 1: a very unsettled question right now. The different courts of appeals, 110 00:06:23,240 --> 00:06:26,840 Speaker 1: federal courts of appeals are divided on that question. Can 111 00:06:26,880 --> 00:06:28,599 Speaker 1: you do it at all? And if so, under what 112 00:06:28,760 --> 00:06:31,680 Speaker 1: circumstances is it proper? So there are a lot of 113 00:06:31,760 --> 00:06:35,400 Speaker 1: very unresolved questions there, and this could be the poster 114 00:06:35,560 --> 00:06:39,560 Speaker 1: child case for resolving some of those questions, quite possibly 115 00:06:39,560 --> 00:06:42,480 Speaker 1: in the Supreme Court. What's the timing like on this? 116 00:06:42,920 --> 00:06:44,799 Speaker 1: You know, they say that action has to be taken 117 00:06:44,880 --> 00:06:47,760 Speaker 1: right away, and you have the opioid epidemic, you have 118 00:06:47,839 --> 00:06:51,400 Speaker 1: two states, that settled well, I can say in a 119 00:06:51,520 --> 00:06:54,360 Speaker 1: number of bankruptcies in recent years. P G and E 120 00:06:54,480 --> 00:06:58,520 Speaker 1: in California has another good example. The dators have taken 121 00:06:58,560 --> 00:07:01,640 Speaker 1: the position, that is, the who filed the bankruptcy have 122 00:07:01,839 --> 00:07:04,200 Speaker 1: taken the position that, oh, it's all got to be 123 00:07:04,279 --> 00:07:06,040 Speaker 1: done in a hurry, you know, for this reason or 124 00:07:06,080 --> 00:07:08,640 Speaker 1: that reason. It's all a big rush. And to some 125 00:07:08,800 --> 00:07:11,480 Speaker 1: extent that's an advantage to them, because they have their 126 00:07:11,560 --> 00:07:13,680 Speaker 1: their plans all lined up and they know what they 127 00:07:13,680 --> 00:07:16,559 Speaker 1: want to do. And the other people with a steak, 128 00:07:16,640 --> 00:07:18,880 Speaker 1: like the victims of fire victims in Peach and E, 129 00:07:19,560 --> 00:07:23,559 Speaker 1: and the various state parties in this one, and the 130 00:07:23,640 --> 00:07:27,520 Speaker 1: various people obviously who have suffered from addiction and its consequences, 131 00:07:27,840 --> 00:07:30,160 Speaker 1: all of those people are sort of disorganized and trying 132 00:07:30,200 --> 00:07:33,320 Speaker 1: to get organized. So speed is an advantage to the debtors, 133 00:07:33,520 --> 00:07:36,960 Speaker 1: and the courts ultimately have to say to themselves, all right, 134 00:07:37,000 --> 00:07:39,200 Speaker 1: on the one hand, there is a good reason for speed, 135 00:07:39,240 --> 00:07:42,320 Speaker 1: which is often true in bankruptcy. But on the other hand, 136 00:07:42,600 --> 00:07:44,720 Speaker 1: we don't want to go so fast that we let 137 00:07:44,760 --> 00:07:47,760 Speaker 1: things get blown by the court that otherwise would have 138 00:07:47,840 --> 00:07:50,920 Speaker 1: been caught. So there's going to be a very tough 139 00:07:51,000 --> 00:07:54,280 Speaker 1: balancing act going on for the bankruptcy court in this case, 140 00:07:54,520 --> 00:07:57,600 Speaker 1: the district court out there would have the possibility of 141 00:07:57,640 --> 00:07:59,920 Speaker 1: taking the case away from the bankruptcy court and was 142 00:08:00,040 --> 00:08:02,680 Speaker 1: volving it in the federal district court in the same district. 143 00:08:03,000 --> 00:08:05,240 Speaker 1: So that's another possibility. I don't know that that's going 144 00:08:05,320 --> 00:08:07,760 Speaker 1: to happen, but it's another possibility. Thanks for being on 145 00:08:07,800 --> 00:08:10,760 Speaker 1: Bloomberg Law. J that's j Westbrook, a professor at the 146 00:08:10,840 --> 00:08:15,000 Speaker 1: University of Texas Law School. Thanks for listening to the 147 00:08:15,000 --> 00:08:18,400 Speaker 1: Bloomberg Law podcast. You can subscribe and listen to the 148 00:08:18,400 --> 00:08:22,320 Speaker 1: show on Apple Podcasts, SoundCloud, and on Bloomberg dot com 149 00:08:22,400 --> 00:08:29,080 Speaker 1: slash podcast. I'm June Brasso. This is Bloomberg Ye.