I chose the report from Forbes, because of this bit of weirdness on the
byline, "John Hyatt is a NYC-based Forbes staff writer covering billionaires."
Whiskey Tango Foxtrot? They have a dedicated billionaires beat?
But as you may have heard, the Supreme Court
struck down the provision of the Purdue Pharma bankruptcy that indemnified
the members of the Sackler family, which pretty much puts a stake through the heart of the deal.
Their ruling was rather straightforward, that there was nothing in the
bankruptcy code that allows the process to protect non-parties to the
bankruptcy.
That's true. This action is pretty much a construct of the
mega-bankruptcy courts in as a part of their attempts to attract litigants
from large companies. (They do so, because it adds to their prestige)
On Thursday, the Supreme Court overturned the multi-billion-dollar
settlement agreement that Purdue Pharma’s bankruptcy estate had struck
between the Sackler family, the firm’s billionaire former owners, who agreed
to pay $6 billion to opioid victims in exchange for full immunity from any
future civil lawsuits.
“In this case, the Sacklers have not filed
for bankruptcy or placed all their assets on the table for distribution to
creditors, yet they seek what essentially amounts to a discharge. No
provision of the [bankruptcy] code authorizes that kind of relief,” wrote
Justice Neil Gorsuch for the five-to-four majority.
The decision
will have far-reaching implications for future bankruptcy cases by
prohibiting the application of non-debtor releases, which are often used in
mass-tort bankruptcy cases to release non-debtors (in this case, the
Sacklers) from future immunity. Edward Morrison, a bankruptcy professor at
Columbia Law School, called the decision “a tragedy for the bankruptcy
system and litigation more generally.”
This is no tragedy, this is a triumph. People like professor Morrison are
simply invested in a system where the well heeled can avoid the consequences of
their actions, while the "Little Fish" get hooked and gutted.
He supports, to quote (the composer, not the political theorist) Frank
Wilhoit, "There must be in-groups whom the law protects but does not bind,
alongside out-groups whom the law binds but does not protect."
His reasoning deeply corrupt.
It may also be a tragedy for Sacklers. By eliminating non-consensual
third-party releases, as they are known in bankruptcy lingo, the court
decision increases the likelihood the Sacklers will remain bogged down in
opioid-related litigation for years to come. It could also cost the Sacklers
dearly: Several bankruptcy attorneys with whom Forbes spoke said they
believe the Sacklers will have to increase their $6 billion offer if they
want to secure unanimous approval on a new deal from Purdue Pharma’s over
100,000 opioid victim claimants.
John Hyatt calls this a, "Tragedy".
It's no tragedy, it's the imposition of consequences on people who are wealthy and powerful enough that they thought that they were above the law.
I can see how Forbes, "Staff writer covering billionaires," might consider this to be a tragedy though, he's clearly gone native.
“The floor is now $6 billion. It seems to me that the number will go up,” says Daniel Gielchinsky, a restructuring attorney and partner at DGIM Law. “If they want to avoid decades of costly and distracting litigation… they’re going to put more money on the table to gain those consensual releases.”
The Sacklers have plenty more cash. Bankruptcy filings showed that they withdrew approximately $11 billion from Purdue Pharma between 2007 and 2018 ($4.6 billion of which was used to pay taxes), prior to the company filing for Chapter 11 bankruptcy in 2019. Earlier this year, Forbes estimated that the Sackler family held at least $11.2 billion in cash and liquid securities (after accounting for estimated taxes and investment returns). As of February, Forbes estimated the Sackler family’s collective net worth to be $5.2 billion, treating the pending $6 billion payment as a liability.
“What happened is the Sacklers wanted the benefits of getting all these lawsuits stopped against them, but they didn’t want to kick in enough money to make it a viable, consensual release,” says Nancy Rapoport, a bankruptcy attorney and professor at University of Nevada-Las Vegas. “The court pointed out the $11 billion in profit, plus all the other money they've been making. In other words, put up some significant money given the harm you've caused.”
Oh the humanity. The Sacklers are not going to get off on the cheap.
Many of the family, who were directing their program of aggressive sales and fraudulent claims should be going to jail.
