Proponents of the controversial plan to reorganize OxyContin maker Purdue Pharma LP proclaim that victims will recover up to $750 million to compensate for devastating harms.
The bankruptcy plan remains in appellate limbo due to a request by the Department of Justice to stay its implementation. Many supporters point to “overwhelming” encouragement, including from personal injury creditors.
Though proponents may have laudable goals, there are many problems with Purdue Pharma’s plan of reorganization. Most criticism has focused on the so-called release of the company’s insiders, the powerful and secretive Sacklers and company executives, who caused the company to engage in two sets of confessed federal drug marketing crimes as they sought to “turbocharge” the market for their lethal opioids.
As I’ve argued, the deals in Purdue Pharma all but assure that the Sacklers will get to keep about $6 billion that appears to be proceeds of felonies. Unlike ordinary debtors, the Sacklers—who aren’t in bankruptcy—can keep this while getting the functional equivalent of a bankruptcy discharge for debt that shouldn’t be dischargeable. And they wouldn’t have to answer for the allegations against them in court.
Less attention has been paid to survivors and how difficult it will be to get a share of the plan’s $750 million if implemented. But that plan creates a bureaucracy of harm that will be difficult for personal injury creditors to navigate—and success will have a very low payout.
The bureaucracy starts with the significant paperwork personal injury creditors must provide. Purdue Pharma already required these claimants to file their claims back in July 2020. As written, the Bankruptcy Code provides that should be sufficient. Claims are presumed allowed in the stated amounts unless there’s an objection—for example, on grounds that the creditor doesn’t have a lawful claim.
Not so in Purdue, whose plan adds a second, more onerous hurdle for personal injury creditors. If you did file a claim back in 2020, you must proceed to the next level. And you must file a second form that requires significant detail about the use of Purdue’s opioids supplemented by prescription, medical and insurance records.
Many who suffered from Purdue Pharma’s fraudulent drug marketing have no such records or can’t get them now—because they’re incarcerated or homeless, the records have been destroyed, or they’re filing on behalf of a deceased relative with incomplete archives.
Many who suffered due to opioid use may never have had a prescription, because they got the drug through non-medical channels—euphemistically known as diversion.
Even though Purdue pleaded guilty to federal crimes that contributed to massive diversion—a “blizzard of prescriptions,” Richard Sackler said—they, too, are out of luck.
If you can provide the paperwork, you have a choice: Take an “easy payment” of $3,500 or prepare for an administrator to review and potentially challenge the claim. If they disagree with your claim, there’s a very limited right to challenge the determination, but you can’t go to court.
True, you can opt out of this process. But the awards are still capped, making it virtually certain that no lawyer would take such a case on contingency. And the plan forbids forming a class, which could spread legal costs. The controversial releases assure that the Sacklers and other insiders can never be named as defendants.
For those who make it to the finish line, the maximum award for any individual appears to be about $48,000. This is a gross number, because all personal injury creditors must contribute to the costs of administering the trust and to fees for the lawyers who represented the ad hoc committee of personal injury claimants in the case—on top of anything they owe to their own lawyers.
These ad hoc lawyers, however, are apparently not available to help those they purportedly represent with the claims process. The net effect is that recoveries under the plan would barely begin to cover the costs of treatment or a funeral, leaving many survivors on the “edge of poverty,” where Purdue’s products may have put them in the first place.
Proponents may argue that Purdue’s plan is still better than any alternatives. Without it, there would be more litigation and less certain payoffs. In any case, the trust distribution procedures here mimic those in other mass tort bankruptcies and can enable more people to recover than the much-maligned tort system.
There are many responses, but the most basic is that insiders in this case have long proclaimed that it’s a “unicorn.” If so, it will be because of what I characterize as the “social” nature of the debt, its moral gravity, and public implications.
Purdue’s plan could have provided counseling and support resources to help individuals navigate the Kafkaesque bureaucracy it would create. The Sacklers could have contributed all or most of the $10.5 billion they drained from the company. Merely doubling the personal injury pot, adding another $750 million, would take a little over 10% of the roughly $6 billion the Sacklers get to keep.
Finally, and for many most importantly, there’s no account of the non-economic consequences of Purdue’s misconduct. Many survivors simply wanted to have their day in court to determine who actually was responsible for the company’s “devastating” harm. Purdue’s plan—the controversial releases and the fine print of its claims process—practically assure that personal injury survivors, or the bereft families of the deceased, will never have that day.
For all the good the Purdue Pharma plan may do, we should be very modest about what it would accomplish for those who have suffered the most.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Jonathan Lipson is Harold E. Kohn Professor of Law at Temple University-Beasley School of Law. His research and teaching include bankruptcy and related business law matters.
Lipson represented on a pro bono basis a personal injury claimant in Purdue Pharma, Peter Jackson, whose daughter, Emily, died after ingesting a single OxyContin.
Write for Us: Author Guidelines