The entire story from Law360 about Justice Jackson’s views during oral arguments to SCOTUS.
As Purdue Pharma LP and its creditors pushed the U.S. Supreme Court on Monday to bless liability releases granted to members of the Sackler family who own it, a skeptical Justice Ketanji Brown Jackson said it was the owners themselves who created the necessity in the first place by withdrawing billions of dollars from the business before its bankruptcy.
During oral arguments on the permissibility of nondebtor, third-party releases in bankruptcy, Justice Jackson took issue with Purdue’s position that the liability shield, which was granted in exchange for $6 billion in contributions from the Sacklers to the estate, was necessary to implement a settlement with opioid victims and confirm the company’s Chapter 11 plan.
Her specific concern related to the Sacklers’ offshoring of more than $10 billion of assets from Purdue in the years before it filed for Chapter 11, and then seeking a release of liability without themselves filing for bankruptcy and avoiding the need to lay their assets “on the table.”
“[My] understanding is not only are they not doing that, but most of the assets we’re talking about were originally in the company, and they actually took the assets from the company, which started the set of circumstances in which the company now doesn’t have enough money to pay the creditors,” Justice Jackson said.
Her point boiled down to the theory that the Sacklers are buying releases from Purdue with Purdue’s own money. She asked Purdue’s counsel why this situation would be allowed to occur even if the court doesn’t outright bar third-party releases.
Gregory G. Garre of Latham & Watkins LLP, representing Purdue, said nearly half the money transferred to the Sacklers in recent years went to cover tax liability, and that of the remaining 60%, the $6 billion being contributed to the plan amounts to 97% of the funds.
He also said the location and structure of trusts that hold most of the assets would present difficulties in trying to recover funds for the benefit of creditors.
“If this settlement doesn’t go forward then these victims would likely, even if they prevailed on their claims, present serious issues about being able to collect on them at the end of the day,” Garre argued.
But Justice Jackson didn’t buy that argument, saying the difficulty in collecting was a result of the Sacklers’ own actions in taking the money overseas.
“It’s not like by operation of law it’s necessary to [grant these releases],” she countered. “It is necessary to do this because the Sacklers have taken the money and are not willing to give it back unless they get this condition.”
Among the criteria necessary for non-consensual, third-party releases to be approved is a showing that they are necessary to the restructuring. Justice Amy Coney Barrett chimed in with support for Justice Jackson’s point, saying that the percentages of assets used to pay taxes and then to pay for the release contribution are important figures in the argument, but that the money still came from the company.
Purdue filed for bankruptcy in September 2019 to handle its liability for the opioid crisis arising from its sale and marketing of the powerful painkiller OxyContin. Its Chapter 11 plan was confirmed two years later and included releases for the Sacklers, which the bankruptcy court found were necessary to implement the restructuring. The Sacklers contributed $4.325 billion under the original plan. When a New York federal judge overturned the plan, finding the releases to be impermissible, the Sacklers increased their contributions to up to $6 billion.
On further appeal, the Second Circuit reversed the district court ruling, and the Office of the U.S. Trustee sought review by the high court.
Purdue is represented by Gregory G. Garre, Charles S. Dameron and Eric J. Konopka of Latham & Watkins LLP and Marshall S. Huebner, Benjamin S. Kaminetzky, Marc J. Tobak and Garrett L. Cardillo of Davis Polk & Wardwell LLP.
The official committee of unsecured creditors is represented by Mitchell P. Hurley, Arik Y. Preis, Sara L. Brauner, Pratik A. Shah, Z.W. Julius Chen and Lide E. Paterno of Akin Gump Strauss Hauer & Feld LLP.
Petitioner U.S. Trustee William K. Harrington is represented by Elizabeth B. Prelogar, Brian M. Boynton, Curtis E. Gannon, Masha G. Hansford, Michael S. Raab, Michael Shih, Sean R. Janda, Lawrence H. Fogelman, Peter Aronoff and Benjamin H. Torrance of the U.S. Department of Justice and Ramona D. Elliott, Nan Roberts Eitel, P. Matthew Sutko, Beth A. Levene and Sumi K. Sakata of the Executive Office of the U.S. Trustee.
The case is William K. Harrington v. Purdue Pharma LP et al., case number 23-124, in the Supreme Court of the United States.
Read more at: https://www.law360.com/personal-injury-medical-malpractice/articles/1773229?nl_pk=029cff45-637f-44e3-babf-75563f8e0bfd&utm_source=newsletter&utm_medium=email&utm_campaign=personal-injury-medical-malpractice&utm_content=2023-12-05&read_main=1&nlsidx=0&nlaidx=2?copied=1