WEBVTT - Purdue, Sacklers Facing Fight Over Evading Lawsuits 0:00:03.520 --> 0:00:07.040 Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 0:00:07.120 --> 0:00:09.680 day we bring you insight and analysis into the most 0:00:09.720 --> 0:00:12.200 important legal news of the day. You can find more 0:00:12.240 --> 0:00:16.160 episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud 0:00:16.280 --> 0:00:20.200 and on Bloomberg dot com slash podcasts. Perdue Pharma and 0:00:20.239 --> 0:00:24.000 its owners, the billionaire Sackler family, made billions of dollars 0:00:24.040 --> 0:00:28.120 from selling the prescription painkiller oxy content, and they faced 0:00:28.200 --> 0:00:32.280 twenty six hundred lawsuits claiming they fueled the US opioid 0:00:32.360 --> 0:00:36.279 epidemic by illegally pushing sales of the addictive drug. So 0:00:36.400 --> 0:00:39.960 Perdud bankruptcy plan has been mired in controversy since the 0:00:40.040 --> 0:00:43.360 day it was filed. State attorneys general across the country 0:00:43.360 --> 0:00:47.519 are divided over Perdud proposed settlement. Twenty four states have 0:00:47.680 --> 0:00:50.960 taken specific aim at produced request to have the bankruptcy 0:00:51.000 --> 0:00:55.040 court freeze those twenty hundred cases, shielding the company and 0:00:55.120 --> 0:00:58.480 the Sackler family personally, even though the Sacklers have not 0:00:58.560 --> 0:01:02.400 filed for bankruptcy. This week, Arizona became the first state 0:01:02.480 --> 0:01:05.760 to switch sides, coming out against Perdue in the Sackler 0:01:05.840 --> 0:01:09.080 family's attempt to get out from under litigation over their 0:01:09.160 --> 0:01:12.040 role in the opioid crisis. Joining me is a leading 0:01:12.080 --> 0:01:15.200 authority on bankruptcy law, Jay Westbrook, a professor at the 0:01:15.280 --> 0:01:19.640 University of Texas Law School. So companies filing for bankruptcy 0:01:19.680 --> 0:01:22.920 are usually given an automatic stay of litigation against them, 0:01:22.920 --> 0:01:26.800 But twenty states are opposing the court putting a hold 0:01:26.959 --> 0:01:31.800 on more than twenty cases pending against Perdue. What's their 0:01:31.880 --> 0:01:36.560 legal basis for doing so? Well? In general, an automatic 0:01:36.600 --> 0:01:39.360 stay is automatic. That is, it goes into effect and 0:01:39.400 --> 0:01:43.280 it stops all litigation in other courts because it's important 0:01:43.280 --> 0:01:46.720 to get everybody in one place, either to resolve the 0:01:46.800 --> 0:01:50.080 litigation and the disputes among the parties or to to 0:01:50.120 --> 0:01:53.400 settle it. Very often, so that's why the automatic stay 0:01:53.480 --> 0:01:56.400 is there and why it's likely to stay there for 0:01:56.480 --> 0:01:59.680 a while, at least temporarily. On the other hand, the states, 0:01:59.720 --> 0:02:03.880 of course, are saying that you've got this settlement going forward, 0:02:04.240 --> 0:02:06.720 and they don't think anything should happen in the case 0:02:07.480 --> 0:02:10.240 when their hands are tied and they can't do anything 0:02:10.360 --> 0:02:13.800 in court. So I suspect the bankruptcy judge is going 0:02:13.840 --> 0:02:15.920 to find a way to make sure that nothing changes 0:02:16.200 --> 0:02:19.240 except under the direction of the bankruptcy court in an 0:02:19.320 --> 0:02:24.080 orderly way. Now, Arizona was the first state to switch sides. 0:02:24.240 --> 0:02:28.320 They joined with the states opposing Perdue on this motion. 0:02:28.880 --> 0:02:32.600 If Arizona switch asides in the whole bankruptcy proceeding, might 0:02:32.680 --> 0:02:37.360 that throw a ranch into Prdue getting a settlement, because 0:02:37.560 --> 0:02:43.239 now you'll have more states opposing the settlement than supporting it. Yes, 0:02:43.360 --> 0:02:46.040 I think it might very well throw a ranch into it. 0:02:46.480 --> 0:02:48.959 On the other hand, in the long run, though, those 0:02:49.000 --> 0:02:52.400 who are opposed to the settlement may actually benefit by 0:02:52.400 --> 0:02:56.040 the enormous power of the bankruptcy court to consolidate all 0:02:56.080 --> 0:02:59.480 of this into one matter. The bankruptcy court has this 0:03:00.040 --> 0:03:03.600 eight power to issue injunctions and tell everybody, now shut up, 0:03:03.680 --> 0:03:06.680 sit down, and let's handle this in an orderly way 0:03:06.760 --> 0:03:09.760 all around. So I'm not sure that this won't turn 0:03:09.800 --> 0:03:12.960 out to be a good way to resolve the case 0:03:13.080 --> 0:03:16.760 without any court having the issue special injunctions for now, 0:03:17.320 --> 0:03:19.280 give the parties a chance to talk to each other, 0:03:19.320 --> 0:03:22.000 which is what the automatic state does, and see where 0:03:22.000 --> 0:03:24.840 it goes from there. I definitely think the switching of 0:03:24.880 --> 0:03:28.959 Arizona will have a big effect against the current settlement. 0:03:29.200 --> 0:03:32.320 Jay is this bankruptcy different from others though, because you 0:03:32.440 --> 0:03:35.880 have the States claiming that Purdue and Sackler had a 0:03:36.000 --> 0:03:40.080 role in fueling the opioid crisis, and also that produce 0:03:40.240 --> 0:03:43.200 steered up to thirteen billion dollars in profits to the 0:03:43.240 --> 0:03:47.120 Sackler family. So is the judge going to feel any 0:03:47.320 --> 0:03:51.640 public pressure? Oh? Absolutely, but public pressure in these huge 0:03:52.240 --> 0:03:55.040 what amounts to a mass tort case? That is, it's 0:03:55.040 --> 0:03:58.400 sort of like the Delcon shield or the silicon breast 0:03:58.400 --> 0:04:01.240 implants and these other things that are called mass tort 0:04:01.320 --> 0:04:05.080 cases because they involve many, many thousands of victims, in 0:04:05.120 --> 0:04:08.240 this case, perhaps the largest in history the number of 0:04:08.280 --> 0:04:11.800 people involved, although they Askedbestos cases were right up there 0:04:11.840 --> 0:04:14.120 as well in terms of hundreds of thousands of people 0:04:14.280 --> 0:04:17.159 who were affected, and any number of state and local 0:04:17.200 --> 0:04:21.120 governments were affected. So the problem with asbestos may be 0:04:21.200 --> 0:04:25.760 the closest analogy, at least in size, to this case. 0:04:26.200 --> 0:04:29.400 This case is unique, as you say, in some important ways, 0:04:29.440 --> 0:04:32.040 but it falls into this category of a large number 0:04:32.080 --> 0:04:34.520 of people being hurt and an attempt to use the 0:04:34.520 --> 0:04:38.280 bankruptcy process in one of two ways. That is, some 0:04:38.279 --> 0:04:40.280 people will say, what's being used to try to let 0:04:40.640 --> 0:04:44.159 the Sacklers and others squirm out from under their responsibility, 0:04:44.480 --> 0:04:46.960 and others will say, no, that's not true. We're just 0:04:47.040 --> 0:04:50.480 getting everybody together in one place in order to resolve this. 0:04:51.320 --> 0:04:55.400 How unusual would it be for the judge to shield 0:04:55.400 --> 0:04:59.479 the Sackler family from litigation when they're not filing for 0:04:59.520 --> 0:05:03.080 bankrupts See here it's perdue, that's filing. Well, that raises 0:05:03.200 --> 0:05:06.640 a very very controversial area of bankruptcy law called third 0:05:06.760 --> 0:05:10.520 party releases. Again, I can go back to the asbestos cases. 0:05:10.560 --> 0:05:14.320 In the asbestos cases, the insurance companies, of course, we're 0:05:14.360 --> 0:05:17.200 not in bankruptcy, and what they said was, look, we'll 0:05:17.200 --> 0:05:19.520 put a whole bunch of money into the settlement with 0:05:19.600 --> 0:05:23.160 the asbestos victims in exchange for our not having any 0:05:23.160 --> 0:05:25.400 other liability, in the words, are being relieved of all 0:05:25.440 --> 0:05:28.520 additional liabilities above what we're going to promise to put 0:05:28.600 --> 0:05:31.760 to put in to deal with the asbestos victims. And 0:05:31.839 --> 0:05:33.839 that's sort of the model, and there are a number 0:05:33.839 --> 0:05:36.479 of others since then. That's sort of the model that 0:05:36.520 --> 0:05:39.560 I think the Sackler family has in mind. That we 0:05:39.600 --> 0:05:42.160 can pay a lot, I think a billion dollars or 0:05:42.240 --> 0:05:44.800 something like that, and then we'll be done. That'll it'll 0:05:44.839 --> 0:05:46.720 be finished at that point, And of course a lot 0:05:46.800 --> 0:05:49.960 of other people are not happy at that resolution and 0:05:50.080 --> 0:05:51.600 are going to be fighting at tooth and nail in 0:05:51.640 --> 0:05:55.320 the bankruptcy court. The Wall Street Journal reported that a 0:05:55.400 --> 0:05:59.040 few other drugmakers who are facing litigation over the opioid 0:05:59.080 --> 0:06:03.640 crisis are trying are exploring a way of settling their 0:06:03.720 --> 0:06:10.320 cases by participating in produced bankruptcy. Would that be allowed? Well, 0:06:10.360 --> 0:06:12.320 I mean, that's right in the heart of this controversy. 0:06:12.360 --> 0:06:14.920 We were talking about to what extent can you discharge 0:06:15.000 --> 0:06:19.600 liability without exposing yourself to the bankruptcy laws? And that's 0:06:19.600 --> 0:06:23.240 a very unsettled question right now. The different courts of appeals, 0:06:23.240 --> 0:06:26.840 federal courts of appeals are divided on that question. Can 0:06:26.880 --> 0:06:28.599 you do it at all? And if so, under what 0:06:28.760 --> 0:06:31.680 circumstances is it proper? So there are a lot of 0:06:31.760 --> 0:06:35.400 very unresolved questions there, and this could be the poster 0:06:35.560 --> 0:06:39.560 child case for resolving some of those questions, quite possibly 0:06:39.560 --> 0:06:42.480 in the Supreme Court. What's the timing like on this? 0:06:42.920 --> 0:06:44.799 You know, they say that action has to be taken 0:06:44.880 --> 0:06:47.760 right away, and you have the opioid epidemic, you have 0:06:47.839 --> 0:06:51.400 two states, that settled well, I can say in a 0:06:51.520 --> 0:06:54.360 number of bankruptcies in recent years. P G and E 0:06:54.480 --> 0:06:58.520 in California has another good example. The dators have taken 0:06:58.560 --> 0:07:01.640 the position, that is, the who filed the bankruptcy have 0:07:01.839 --> 0:07:04.200 taken the position that, oh, it's all got to be 0:07:04.279 --> 0:07:06.040 done in a hurry, you know, for this reason or 0:07:06.080 --> 0:07:08.640 that reason. It's all a big rush. And to some 0:07:08.800 --> 0:07:11.480 extent that's an advantage to them, because they have their 0:07:11.560 --> 0:07:13.680 their plans all lined up and they know what they 0:07:13.680 --> 0:07:16.559 want to do. And the other people with a steak, 0:07:16.640 --> 0:07:18.880 like the victims of fire victims in Peach and E, 0:07:19.560 --> 0:07:23.559 and the various state parties in this one, and the 0:07:23.640 --> 0:07:27.520 various people obviously who have suffered from addiction and its consequences, 0:07:27.840 --> 0:07:30.160 all of those people are sort of disorganized and trying 0:07:30.200 --> 0:07:33.320 to get organized. So speed is an advantage to the debtors, 0:07:33.520 --> 0:07:36.960 and the courts ultimately have to say to themselves, all right, 0:07:37.000 --> 0:07:39.200 on the one hand, there is a good reason for speed, 0:07:39.240 --> 0:07:42.320 which is often true in bankruptcy. But on the other hand, 0:07:42.600 --> 0:07:44.720 we don't want to go so fast that we let 0:07:44.760 --> 0:07:47.760 things get blown by the court that otherwise would have 0:07:47.840 --> 0:07:50.920 been caught. So there's going to be a very tough 0:07:51.000 --> 0:07:54.280 balancing act going on for the bankruptcy court in this case, 0:07:54.520 --> 0:07:57.600 the district court out there would have the possibility of 0:07:57.640 --> 0:07:59.920 taking the case away from the bankruptcy court and was 0:08:00.040 --> 0:08:02.680 volving it in the federal district court in the same district. 0:08:03.000 --> 0:08:05.240 So that's another possibility. I don't know that that's going 0:08:05.320 --> 0:08:07.760 to happen, but it's another possibility. Thanks for being on 0:08:07.800 --> 0:08:10.760 Bloomberg Law. J that's j Westbrook, a professor at the 0:08:10.840 --> 0:08:15.000 University of Texas Law School. Thanks for listening to the 0:08:15.000 --> 0:08:18.400 Bloomberg Law podcast. You can subscribe and listen to the 0:08:18.400 --> 0:08:22.320 show on Apple Podcasts, SoundCloud, and on Bloomberg dot com 0:08:22.400 --> 0:08:29.080 slash podcast. I'm June Brasso. This is Bloomberg Ye.