Willkie Farr & Gallagher LLP
01/24/2025 | News release | Distributed by Public on 01/24/2025 08:45
Willkie Mediates Proposed $6.5 Billion Settlement in Purdue Pharma Chapter 11 Cases
Willkie Mediates Proposed $6.5 Billion Settlement in Purdue Pharma Chapter 11 Cases
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January 24, 2025
Hon. Shelley C. Chapman (Ret.), senior counsel in Willkie's Restructuring Department and Chair of the Alternative Dispute Resolution practice, has successfully mediated a proposed $6.5 billion settlement that would resolve thousands of opioid cases against Purdue Pharma and its owners, the Sackler family, while compensating victims and funding opioid addiction treatment programs nationwide.
Purdue Pharma filed for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York in September 2019. In 2022, Purdue proposed a plan of reorganization pursuant to which Sackler family members, who had already left the company's board of directors, would give up ownership of the company and contribute $5.5 billion to fund a plan of reorganization to pay creditors, including opioid victims and states, in exchange for civil immunity from past, present, and future lawsuits. The settlement, mediated by Judge Chapman, had nearly universal support from the parties in the case. Although the bankruptcy court confirmed the company's proposed plan of reorganization in 2022, confirmation of the plan was appealed by the United States Trustee, an arm of the Department of Justice, who objected to the Sackler family members receiving non-consensual third-party releases in the chapter 11 cases. After over two years of appeals, on June 27, 2024, the United States Supreme Court overturned the settlement and remanded the matter to the bankruptcy court.
In July 2024, the bankruptcy court re-appointed Judge Chapman to serve as mediator, together with Professor Eric Green. On January 20, 2024, after six months of intense negotiations, the Co-Mediators filed a report with the bankruptcy court announcing a monumental breakthrough - all groups of Sackler family members had agreed to a settlement, which has been memorialized in a 50-page detailed term sheet reflecting proposed agreements on all issues between and among the Sackler family members, the Debtors, and key constituents in the Debtors' cases - the Ad Hoc Committee, the Creditors' Committee, the State AG Committee consisting of 15 attorneys general, the MSGE Group, and the PEC. The Co-Mediators also reported that mediation negotiations had resulted in proposed settlements with a large number of private-side claimants, including the Ad Hoc Group of Individual Victims, the NAS Committee, the Ad Hoc Group of Hospitals, the Third-Party Payor Group, and the Emergency Room Physicians/Ratepayer Mediation Participants. Pursuant to this settlement, the Sackler family members have agreed to pay up to $6.5 billion - $1 billion more than under the previous settlement - in exchange for receiving releases which comply with the Supreme Court's 2024 decision.
The proposed settlement reconciles the interests of the claimant constituents and creates a blueprint for the delivery of billions of dollars to those affected by the opioid crisis, while also setting forth the structure of the post-emergence Purdue-successor entity, paving the way for completion of the chapter 11 bankruptcy cases.
Hon. Shelley C. Chapman (Ret.) continues to serve as co-mediator, with assistance from counsel Jamie Eisen, in order to assist the parties with work on definitive documentation in the matter.
Purdue Pharma filed for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York in September 2019. In 2022, Purdue proposed a plan of reorganization pursuant to which Sackler family members, who had already left the company's board of directors, would give up ownership of the company and contribute $5.5 billion to fund a plan of reorganization to pay creditors, including opioid victims and states, in exchange for civil immunity from past, present, and future lawsuits. The settlement, mediated by Judge Chapman, had nearly universal support from the parties in the case. Although the bankruptcy court confirmed the company's proposed plan of reorganization in 2022, confirmation of the plan was appealed by the United States Trustee, an arm of the Department of Justice, who objected to the Sackler family members receiving non-consensual third-party releases in the chapter 11 cases. After over two years of appeals, on June 27, 2024, the United States Supreme Court overturned the settlement and remanded the matter to the bankruptcy court.
In July 2024, the bankruptcy court re-appointed Judge Chapman to serve as mediator, together with Professor Eric Green. On January 20, 2024, after six months of intense negotiations, the Co-Mediators filed a report with the bankruptcy court announcing a monumental breakthrough - all groups of Sackler family members had agreed to a settlement, which has been memorialized in a 50-page detailed term sheet reflecting proposed agreements on all issues between and among the Sackler family members, the Debtors, and key constituents in the Debtors' cases - the Ad Hoc Committee, the Creditors' Committee, the State AG Committee consisting of 15 attorneys general, the MSGE Group, and the PEC. The Co-Mediators also reported that mediation negotiations had resulted in proposed settlements with a large number of private-side claimants, including the Ad Hoc Group of Individual Victims, the NAS Committee, the Ad Hoc Group of Hospitals, the Third-Party Payor Group, and the Emergency Room Physicians/Ratepayer Mediation Participants. Pursuant to this settlement, the Sackler family members have agreed to pay up to $6.5 billion - $1 billion more than under the previous settlement - in exchange for receiving releases which comply with the Supreme Court's 2024 decision.
The proposed settlement reconciles the interests of the claimant constituents and creates a blueprint for the delivery of billions of dollars to those affected by the opioid crisis, while also setting forth the structure of the post-emergence Purdue-successor entity, paving the way for completion of the chapter 11 bankruptcy cases.
Hon. Shelley C. Chapman (Ret.) continues to serve as co-mediator, with assistance from counsel Jamie Eisen, in order to assist the parties with work on definitive documentation in the matter.
Hon. Shelley C. Chapman (Ret.) Senior Counsel Restructuring
New York [email protected] +1 212 728 8267