How will Purdue Pharma's bankruptcy affect pending litigation?
Purdue Pharma’s recent bankruptcy filing will effectively halt more than 2,000 lawsuits filed against the company, and could mark the beginning of a “potentially endless process,” experts told FOX Business.
Arguably most known for making billions in the sale of the highly addictive prescription opioid OxyContin, Purdue Pharma filed for Chapter 11 bankruptcy in White Plains, New York on Sunday.
The filing was part of a tentative settlement between the pharmaceutical company and dozens of state and federal agencies that have filed suit against them.
In a statement released after the bankruptcy was announced, Steve Miller, the chairman of Purdue’s board of directors, said: “This unique framework for a comprehensive resolution will dedicate all of the assets and resources of Purdue for the benefit of the American public.”
But what happens to the more than 2,000 lawsuits that are still pending against the Stamford, Connecticut-based company, and what does this mean for the first-of-its-kind federal trial scheduled to begin next month, for which Purdue Pharma was named as a defendant?
“The Oct. 21 trial in Cleveland, Ohio, will have to go forward without them,” said New York-based lawyer Paul Hanly, who is one of three lead attorneys on the federal litigation.
The remaining drug companies – a mix of opioid retailers, distributors and manufacturers, among others – “ought to be preparing for trial because we feel confident that the trial to go forward,” Hanly told FOX Business.
“One of the main claims in the Cleveland trial is that the defendants created and then perpetuated a public nuisance – in other words, they created a circumstance where the public at large has been harmed from the opioid epidemic.”
The other key issue, Hanly said, is whether the companies committed acts of racketeering while doing business.
Although the trial in Cleveland will likely be going forward without Purdue, “we will be working hard in the bankruptcy proceedings to try to get some sort of a deal for Purdue and [billionaire founding family] the Sacklers,” Hanly said.
“It is a potentially endless process and some of these bankruptcies – I think Purdue possibly could fall under this category – are so complex that they take more than a decade to finish,” Hanley said. “At the end of which, the debtor, Purdue’s cash, is all spent.”
Hanly noted that communities nationwide “are suffering so badly, a deal in bankruptcy where perhaps the funds could start to flow out in a year is far better.”
For the time being, however, any and all litigation – likely barring, in this case, October’s federal trial – has been effectively brought to a halt.
“For this company, any of the lawsuits now are on hold,” bankruptcy attorney Jenee Ciccarelli explained. “What will then happen is that the plaintiffs in those suits will have to go to the bankruptcy court and apply for relief from the automatic stay to pursue the case in the court that they’re in.”
For those companies that have already been granted settlements, the designated funds will be added to the bankruptcy filing to be part of the fund reorganization process, she explained.
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Ciccarelli, who is based in New York, called the bankruptcy filing “a real smart move.”
Still, “this is, in fact, a nationwide epidemic,” she said, noting: “It won’t save them from any future suits after bankruptcy is over, but for now, it absolutely protects them.”
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