Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud
Speaker 1: and on Bloomberg dot com slash podcasts. Perdue Pharma and
Speaker 1: its owners, the billionaire Sackler family, made billions of dollars
Speaker 1: from selling the prescription painkiller oxy content, and they faced
Speaker 1: twenty six hundred lawsuits claiming they fueled the US opioid
Speaker 1: epidemic by illegally pushing sales of the addictive drug. So
Speaker 1: Perdud bankruptcy plan has been mired in controversy since the
Speaker 1: day it was filed. State attorneys general across the country
Speaker 1: are divided over Perdud proposed settlement. Twenty four states have
Speaker 1: taken specific aim at produced request to have the bankruptcy
Speaker 1: court freeze those twenty hundred cases, shielding the company and
Speaker 1: the Sackler family personally, even though the Sacklers have not
Speaker 1: filed for bankruptcy. This week, Arizona became the first state
Speaker 1: to switch sides, coming out against Perdue in the Sackler
Speaker 1: family's attempt to get out from under litigation over their
Speaker 1: role in the opioid crisis. Joining me is a leading
Speaker 1: authority on bankruptcy law, Jay Westbrook, a professor at the
Speaker 1: University of Texas Law School. So companies filing for bankruptcy
Speaker 1: are usually given an automatic stay of litigation against them,
Speaker 1: But twenty states are opposing the court putting a hold
Speaker 1: on more than twenty cases pending against Perdue. What's their
Speaker 1: legal basis for doing so? Well? In general, an automatic
Speaker 1: stay is automatic. That is, it goes into effect and
Speaker 1: it stops all litigation in other courts because it's important
Speaker 1: to get everybody in one place, either to resolve the
Speaker 1: litigation and the disputes among the parties or to to
Speaker 1: settle it. Very often, so that's why the automatic stay
Speaker 1: is there and why it's likely to stay there for
Speaker 1: a while, at least temporarily. On the other hand, the states,
Speaker 1: of course, are saying that you've got this settlement going forward,
Speaker 1: and they don't think anything should happen in the case
Speaker 1: when their hands are tied and they can't do anything
Speaker 1: in court. So I suspect the bankruptcy judge is going
Speaker 1: to find a way to make sure that nothing changes
Speaker 1: except under the direction of the bankruptcy court in an
Speaker 1: orderly way. Now, Arizona was the first state to switch sides.
Speaker 1: They joined with the states opposing Perdue on this motion.
Speaker 1: If Arizona switch asides in the whole bankruptcy proceeding, might
Speaker 1: that throw a ranch into Prdue getting a settlement, because
Speaker 1: now you'll have more states opposing the settlement than supporting it. Yes,
Speaker 1: I think it might very well throw a ranch into it.
Speaker 1: On the other hand, in the long run, though, those
Speaker 1: who are opposed to the settlement may actually benefit by
Speaker 1: the enormous power of the bankruptcy court to consolidate all
Speaker 1: of this into one matter. The bankruptcy court has this
Speaker 1: eight power to issue injunctions and tell everybody, now shut up,
Speaker 1: sit down, and let's handle this in an orderly way
Speaker 1: all around. So I'm not sure that this won't turn
Speaker 1: out to be a good way to resolve the case
Speaker 1: without any court having the issue special injunctions for now,
Speaker 1: give the parties a chance to talk to each other,
Speaker 1: which is what the automatic state does, and see where
Speaker 1: it goes from there. I definitely think the switching of
Speaker 1: Arizona will have a big effect against the current settlement.
Speaker 1: Jay is this bankruptcy different from others though, because you
Speaker 1: have the States claiming that Purdue and Sackler had a
Speaker 1: role in fueling the opioid crisis, and also that produce
Speaker 1: steered up to thirteen billion dollars in profits to the
Speaker 1: Sackler family. So is the judge going to feel any
Speaker 1: public pressure? Oh? Absolutely, but public pressure in these huge
Speaker 1: what amounts to a mass tort case? That is, it's
Speaker 1: sort of like the Delcon shield or the silicon breast
Speaker 1: implants and these other things that are called mass tort
Speaker 1: cases because they involve many, many thousands of victims, in
Speaker 1: this case, perhaps the largest in history the number of
Speaker 1: people involved, although they Askedbestos cases were right up there
Speaker 1: as well in terms of hundreds of thousands of people
Speaker 1: who were affected, and any number of state and local
Speaker 1: governments were affected. So the problem with asbestos may be
Speaker 1: the closest analogy, at least in size, to this case.
Speaker 1: This case is unique, as you say, in some important ways,
Speaker 1: but it falls into this category of a large number
Speaker 1: of people being hurt and an attempt to use the
Speaker 1: bankruptcy process in one of two ways. That is, some
Speaker 1: people will say, what's being used to try to let
Speaker 1: the Sacklers and others squirm out from under their responsibility,
Speaker 1: and others will say, no, that's not true. We're just
Speaker 1: getting everybody together in one place in order to resolve this.
Speaker 1: How unusual would it be for the judge to shield
Speaker 1: the Sackler family from litigation when they're not filing for
Speaker 1: bankrupts See here it's perdue, that's filing. Well, that raises
Speaker 1: a very very controversial area of bankruptcy law called third
Speaker 1: party releases. Again, I can go back to the asbestos cases.
Speaker 1: In the asbestos cases, the insurance companies, of course, we're
Speaker 1: not in bankruptcy, and what they said was, look, we'll
Speaker 1: put a whole bunch of money into the settlement with
Speaker 1: the asbestos victims in exchange for our not having any
Speaker 1: other liability, in the words, are being relieved of all
Speaker 1: additional liabilities above what we're going to promise to put
Speaker 1: to put in to deal with the asbestos victims. And
Speaker 1: that's sort of the model, and there are a number
Speaker 1: of others since then. That's sort of the model that
Speaker 1: I think the Sackler family has in mind. That we
Speaker 1: can pay a lot, I think a billion dollars or
Speaker 1: something like that, and then we'll be done. That'll it'll
Speaker 1: be finished at that point, And of course a lot
Speaker 1: of other people are not happy at that resolution and
Speaker 1: are going to be fighting at tooth and nail in
Speaker 1: the bankruptcy court. The Wall Street Journal reported that a
Speaker 1: few other drugmakers who are facing litigation over the opioid
Speaker 1: crisis are trying are exploring a way of settling their
Speaker 1: cases by participating in produced bankruptcy. Would that be allowed? Well,
Speaker 1: I mean, that's right in the heart of this controversy.
Speaker 1: We were talking about to what extent can you discharge
Speaker 1: liability without exposing yourself to the bankruptcy laws? And that's
Speaker 1: a very unsettled question right now. The different courts of appeals,
Speaker 1: federal courts of appeals are divided on that question. Can
Speaker 1: you do it at all? And if so, under what
Speaker 1: circumstances is it proper? So there are a lot of
Speaker 1: very unresolved questions there, and this could be the poster
Speaker 1: child case for resolving some of those questions, quite possibly
Speaker 1: in the Supreme Court. What's the timing like on this?
Speaker 1: You know, they say that action has to be taken
Speaker 1: right away, and you have the opioid epidemic, you have
Speaker 1: two states, that settled well, I can say in a
Speaker 1: number of bankruptcies in recent years. P G and E
Speaker 1: in California has another good example. The dators have taken
Speaker 1: the position, that is, the who filed the bankruptcy have
Speaker 1: taken the position that, oh, it's all got to be
Speaker 1: done in a hurry, you know, for this reason or
Speaker 1: that reason. It's all a big rush. And to some
Speaker 1: extent that's an advantage to them, because they have their
Speaker 1: their plans all lined up and they know what they
Speaker 1: want to do. And the other people with a steak,
Speaker 1: like the victims of fire victims in Peach and E,
Speaker 1: and the various state parties in this one, and the
Speaker 1: various people obviously who have suffered from addiction and its consequences,
Speaker 1: all of those people are sort of disorganized and trying
Speaker 1: to get organized. So speed is an advantage to the debtors,
Speaker 1: and the courts ultimately have to say to themselves, all right,
Speaker 1: on the one hand, there is a good reason for speed,
Speaker 1: which is often true in bankruptcy. But on the other hand,
Speaker 1: we don't want to go so fast that we let
Speaker 1: things get blown by the court that otherwise would have
Speaker 1: been caught. So there's going to be a very tough
Speaker 1: balancing act going on for the bankruptcy court in this case,
Speaker 1: the district court out there would have the possibility of
Speaker 1: taking the case away from the bankruptcy court and was
Speaker 1: volving it in the federal district court in the same district.
Speaker 1: So that's another possibility. I don't know that that's going
Speaker 1: to happen, but it's another possibility. Thanks for being on
Speaker 1: Bloomberg Law. J that's j Westbrook, a professor at the
Speaker 1: University of Texas Law School. Thanks for listening to the
Speaker 1: Bloomberg Law podcast. You can subscribe and listen to the
Speaker 1: show on Apple Podcasts, SoundCloud, and on Bloomberg dot com
Speaker 1: slash podcast. I'm June Brasso. This is Bloomberg Ye.