Purdue Pharma law firms relinquishing $1M in fees to settle concerns about disclosures

The Department of Justice (DOJ) has ordered three law firms for Purdue Pharma to relinquish $1 million in fees earned in the drugmakers’ opioid epidemic-related bankruptcy cases due to concerns about the firms’ disclosures to the court.

The DOJ’s U.S. Trustee Program (USTP) announced on Thursday the settlement with the three law firms: Skadden, Arps, Slate, Meagher & Flom LLP; Wilmer Cutler Pickering Hale and Dorr LLP; and Dechert LLP. 

The agreement still requires approval from the Bankruptcy Court for the Southern District of New York.  

The firms also agreed to update their previous disclosures as part of the settlement so the court and other parties in the case “can make a determination as to their sufficiency,” according to a DOJ release. 

The USTP alleges that the three firms did not “adequately disclose” a joint defense and common interest agreement between Purdue Pharma and members of the Sackler family who own the company. That agreement “created obligations” for the firms pertaining to the defense against hundreds of lawsuits related to its drug OxyContin.

“During the course of the bankruptcy cases, Purdue invoked the Agreement to avoid turning over documents to the official committee of unsecured creditors as it conducted its review of the debtors’ conduct,” the DOJ asserts. 

USTP Director Cliff White described the disclosure “violations” as “particularly concerning because a central question in these cases has been the independence of Purdue from the Sackler families.”

In the settlement, the USTP concluded that there was no evidence that the lack of disclosure “was intentional or that there was an effort by any of the Firms to mislead.”

“Where there has been a failure to disclose a connection in an application, even where due to inadvertence, the Bankruptcy Court has the discretion to remedy such a disclosure including, among other things, by requiring all or part of the fees earned by counsel to be disgorged,” the USTP said in its position.

Purdue Pharma issued a statement in response to the settlement, saying it was “pleased that the United States Trustee and law firms have agreed to settle their dispute.”

“We remain focused on achieving a global settlement that would deliver more than $10 billion in value, including 100% of Purdue’s assets and millions of doses of opioid addiction treatment and overdose reversal medicines, to claimants and communities across the country affected by the opioid crisis,” it continued. 

The law firms did not provide comment on the settlement.

The firms’ position outlined in the settlement agreement states that the three firms “acknowledge the importance of having robust systems to identify and consider connections to ensure compliance.”

“The Firms did not consider disclosing the Common Interest Agreement as a ‘connection’ at the time of their applications and did not attempt to hide the existence of the Common Interest Agreement, which was expressly referenced in invoices filed with the Bankruptcy Court,” the settlement said.  

“Although the Firms do not believe that the Common Interest Agreement is a ‘connection’ that was required to be disclosed under Rule 2014, they have agreed to resolve the matter in the interest of expediency,” it added. 

Last month, Purdue Pharma proposed a $10 billion restructuring plan to exit bankruptcy and transfer its assets to a company designed to fight the opioid crisis.

Under that proposal, members of the Sackler family would have to pay almost $4.3 billion over a decade and would have “no involvement” in the new company.

Updated: May 1 at 8:20 a.m.