Judge Clears Purdue Pharma’s Restructuring Plan for Vote by Thousands of Claimants

“It’s not unprecedented, but it’s highly controversial” for a bankrupt company’s owners to be released from future litigation as part of a settlement, said Adam J. Levitin, a law professor specializing in bankruptcy at Georgetown University Law Center. “It’s not even clear that the bankruptcy court has the jurisdiction to do this,” as the Sacklers are not parties to the bankruptcy themselves.

Judge Drain has long urged the negotiators to work quickly, because no money can flow to the claimants until the bankruptcy case is concluded.

According to the plan, the reconstituted, as-yet unnamed company would fund about a half-dozen trusts, including separate ones for tribes, adults and children. Proceeds from the sales of the nonprofit’s overdose-reversing medications as well as from moderate quantities of OxyContin would continue to be pumped into these trusts.

But more than 100,000 individual claimants, including relatives of people who died from prescription overdoses, would receive relatively paltry compensation, ranging roughly from $3,000 to $48,000 apiece — before lawyers’ fees and costs are deducted.

Indeed, more than a half-billion dollars overall will go toward fees and costs accrued by plaintiffs’ public and private lawyers.

The oversight of the new trusts will also be expensive. The trust distribution is incredibly complex, said Lindsey Simon, an assistant professor at the University of Georgia School of Law, who has closely followed the case. “From my perspective, the biggest question is how much money will get eaten up in the administration of all those trusts,” she said.

Scott Bickford, a lawyer who represents individuals, families and babies who showed symptoms of withdrawal from drugs they were exposed to in utero, noted that the current proposal did dedicate $60 million for programs to assist these children.