Opinion: Purdue Pharma chair on ‘tragic’ settlement decision

Purdue Pharma’s longtime offices in Stamford, Conn.

Purdue Pharma’s longtime offices in Stamford, Conn.

Douglas Healey / AP

The U.S. District Court’s decision vacating the settlement reached in Purdue’s bankruptcy proceedings threatens not only to upend U.S. bankruptcy law but also to significantly delay —and possibly prevent entirely — billions of dollars from being used to address the opioid crisis. It is a regrettable and tragic outcome that could have been, and hopefully still can be, avoided.

We know how we got here. Before Purdue’s plan of reorganization was even confirmed by the bankruptcy court, it was being decried as a miscarriage of justice by a small number of “holdout” attorneys general and commentators in the media. After confirmation, an even smaller group of Purdue’s creditors — less than one one-hundredth of 1 percent of the company’s stakeholders — appealed and have for now succeeded in halting implementation of the plan.

Unmentioned by plan’s critics is that the settlement garnered the support of more than 95 percent of Purdue’s 120,000 voting creditors, including 43 states, and every single one of the organized creditor groups involved in the cases, including the personal injury victims whose lives have been so terribly impacted by the opioid crisis. How is the vilification of the settlement so at odds with the overwhelming support it enjoys from the affected entities and people who have been driving the litigation against Purdue and Sacklers for years, and who negotiated and voted overwhelming in favor of the plan?

The answer is straightforward. The supermajority of creditors and victims who negotiated and support the plan understand that what really matters now is helping to save lives, especially as the United States is experiencing the highest levels of drug overdose deaths ever recorded. They believe the billions of dollars in the settlement that will go to fund opioid abatement programs will make a material difference.

The creditors also understand the importance of so-called “non-debtor releases,” which now sit squarely as the central legal issue in the case. To them, the settlement is not an “abuse of the bankruptcy system,” it is an example of how the system can bring about positive outcomes that are otherwise impossible.

The releases in our case were negotiated and agreed to by our creditors — including dozens of state attorneys general — after years of investigation, litigation and mediation. These creditors, who have no love lost for the Sacklers and have been among the family’s fiercest opponents, have utilized the releases to secure $4.5 billion in settlement payments. In addition to extracting these billions of dollars, the settlement also wrests control of Purdue from the Sacklers (which itself is worth billions), forces them out of the opioid business worldwide and requires them to turn over their private papers to a public document repository.

For more than 30 years, these types of third-party releases — which pertain to civil, not criminal, liability — have played a critical function in resolving mass tort bankruptcies and maximizing outcomes for victims and creditors. Many courts and independent panels of leading scholars and judges (including the National Bankruptcy Review Commission in the 1990s and the American Bankruptcy Institute in the 2010s) have repeatedly concluded that third-party releases are an essential tool in our legal system. We believe that the district court incorrectly held that bankruptcy courts lack the authority to approve them — not only in the Purdue case, but ever.

For more than two years, Purdue and its creditors have remained firmly committed to ensuring that the full value of the company and the billions of dollars paid by the Sacklers will be used exclusively to address the opioid crisis and to pay those who have been injured. Now the settlement is in jeopardy. Its loss will saddle hundreds of thousands of victims with years of delay and wasteful and expensive litigation where any ultimate recovery could be zero.

Just as the few remaining objectors had their opportunity to appeal from the bankruptcy court, the federal district court stated emphatically that another level of appeal is needed here, given the importance of the issues. But even if we and our supporting creditors prevail, the added delay in the process is keeping vital resources from reaching the communities and individuals desperately in need. Meanwhile, hundreds of millions of settlement dollars that could have been dedicated to opioid abatement efforts might instead go to lawyers and bankruptcy professionals.

Data recently released by the Centers for Disease Control and Prevention show that more than 200 Americans are dying every day from drug overdoses. Given this unfathomable human cost, we remain hopeful that all the parties in the Purdue bankruptcy will take this moment to pause and to swiftly commit to a resolution that addresses the ongoing opioid crisis.

Steve Miller is chairman of the board of Purdue Pharma, headquartered in Stamford.