Elias M. Yazbeck is an associate attorney in the Houston office of McGinnis Lochridge, LLP. Mr. Yazbeck...
Michael Wombacher is an associate attorney at McDermott Will & Emery in Dallas, Texas. Michael focuses his...
In 1999, Rocky Dhir did the unthinkable: he became a lawyer. In 2021, he did the unforgivable:...
Published: | November 7, 2024 |
Podcast: | State Bar of Texas Podcast |
Category: | Access to Justice , Career , Constitutional Issues |
Rocky Dhir:
Hi, and welcome to the State Bar of Texas podcast. We’ve all heard not all heroes wear capes, and it turns out not all drug dealers work in back alleys. Sometimes the really bad dealers work under the guise of legitimacy, prescriptions fulfilled in pharmacies, bills paid by insurance, the whole nine yards, and in some cases, big time drug dealing can be a family affair. You might remember the name Sackler, the Sackler family, they owned and controlled Purdue Pharma, the makers of the now ill reputed Oxycontin. Oxycontin was a pain reliever, but it contained opioids and if you thought religion is the opiate of the masses, well then wait until you try actual opioids. Unfortunately, millions of people were duped into using Oxycontin and its opioids by an affiliate of Purdue Pharma, and those patients got hooked and addicted lawsuits followed the Sackler family saw the writing on the wall and began with drawing billions with a B from Purdue over the course of a decade, leaving the company with very little by wish to settle any claims against it.
Purdue filed bankruptcy and this is where the case gets complicated and interesting. We all hate spoilers, so I won’t give away the ending, but I will tell you that the story culminated in a ruling by the US Supreme Court issued on June 27th, 2024. That has big implications both within and without the bankruptcy world. The case also leaves open some big questions moving forward. Now, quick disclaimer, because we’re lawyers, we love disclaimers. There are members of the Sackler family who had nothing to do with this case other than inheriting a name. So if you meet a Sackler at Sack and save or wherever, please don’t jump to conclusions. But to help us unravel the story behind the Purdue Pharma case and the implications of the decision, I called in some big guns from the bankruptcy world, Elias Yazbeck practices business bankruptcy and commercial litigation at McGinnis Lockridge in their Houston office. He’s also active in the state bar bankruptcy section and the Houston Bar Association. Michael Wombacher represents debtors, secured and unsecured creditors and various interested parties in corporate restructuring and insolvency matters in the Dallas office of McDermott, will and Emery. These guys have a story to tell and we really need to listen, so let’s sit back, relax and let them take it away. Elias and Michael, welcome to the podcast.
Elias M. Yazbeck:
Hey Rocky, it’s good to be here. Thanks, likewise.
Rocky Dhir:
Let’s start with the backstory. Alright, so the case is not just called Purdue Pharma, right? There’s a whole list of parties. So let’s maybe start with the backstory and what transpired with this case and what role the Sackler family played. So somebody fill in the details.
Elias M. Yazbeck:
I can talk a little bit about the details. It actually goes back to 1952 and three of the Sackler brothers kind of bought into Purdue Pharma, which was actually already existed. They essentially purchased the company and then under their leadership they developed and marketed Oxycontin and as you mentioned that later kind of played a substantial role and one of the most significant public health crisises in the United States history. So that, as you can imagine, led to a lot of lawsuits both against the company as well as eventually the officers and directors of the company, which included a lot of members of the Sackler family
Rocky Dhir:
And as I understand it, the whole issue here was that they mislabeled or that Purdue Pharma, I guess under the leadership of the Sacklers, they didn’t warn people about the addictive nature of the opioids in Oxycontin. Was that effectively the allegation?
Elias M. Yazbeck:
There were a lot of allegations, so I mean there were a lot of different lawsuits and they alleged a lot of different causes of action, but part of it was that there was some misrepresentation going on when they aggressively marketed the drug that they were kind of going with with the tidbit that because it’s a controlled release drug, it wasn’t as addictive. That later got corrected, but there were a lot of different kinds of allegations. Obviously a lot of people got hurt and as you can imagine, there were a lot of different ways to sue somebody. So there were a lot of different kinds of causes of action against both the company and Sackler family members anyway, so eventually the company, like you mentioned in your opening money started getting funneled out to the Sackler family and so the company had less money to defend itself against these lawsuits. In 2019, they filed for chapter 11 bankruptcy in New York
Rocky Dhir:
And for those of us that are unfamiliar, what is chapter 11 versus 13 versus seven? What does chapter 11 mean when you’re filing under that provision of the bankruptcy code?
Elias M. Yazbeck:
I think just generally when you’re in bankruptcy, there’s the objective is sort to achieve it. I think with the chapter 11 bankruptcy, it’s a business bankruptcy and the business is trying to achieve a discharge or restructuring of their debts via putting all their assets on the table, disclosing a lot of financial information and then working within the context of the bankruptcy code to get a plan confirmed. Chapter seven, the other major concept of bankruptcy is instead of a reorganization is a liquidation, which is what chapter seven is. So instead of a plan that needs to be confirmed right from the get-go, it’s like we’re selling everything and we’re going to pay back our creditors by liquidating the estate. That I think is a very basic way to explain it. Michael May be able to add to that a little.
Rocky Dhir:
Well then there’s also chapter 13 that I’ve heard of as well.
Michael Wombacher:
Yes, chapter 13 is like a consumer, kind of like many chapter 11 where you commit to spend your disposable income to your creditors and come out the other side usually about five years. But one thing as well is that under a chapter 11 you can actually do chapter 11 plans of liquidation as well. Those are an option under chapter 11.
Rocky Dhir:
And what was Purdue Pharma then planning on doing? I guess they weren’t going to liquidate, they just wanted to reorganization and
Michael Wombacher:
Yeah, usually the default chapter 11 that’s originally contemplated was a reorganization that the goal is that there’s going to be a company existing after all of this. You go in, you figure out all of your issues with your credit, maybe your equity, your secured lenders, and you come out the other side with a healthier, most likely leaner business that is more ready to kind of face the future.
Rocky Dhir:
Purdue Pharma then files under chapter 11 saying, we’ve got all these lawsuits, not sure we can pay them off. So we need to figure out how we’re going to structure our, it’s not so much structuring their assets, but it’s structuring their cashflow to figure out how they’re going to pay everybody. Is that what they’re doing at this point
Elias M. Yazbeck:
Essentially? And where the wrinkle comes in, which led to the Supreme Court to Supreme Court case, is that the plan that was confirmed for repaying creditors essentially provided that in exchange for a contribution, a cash contribution from outside of the estate, from the Sackler family, which is a separate entity from the company, in exchange for an influx of that cash to be paid out to the company’s creditors, the bankruptcy court would grant the Sacklers a release from the lawsuits against them. So you have a company that’s filing for bankruptcy, but then you have the bankruptcy court presiding over that bankruptcy releasing a third party from liability against them by these claims that are being brought in exchange for money. And it was also non-consensual, so there were claimants who had filed lawsuits that were going to have their claims released, but without their consent
Rocky Dhir:
On the surface, that may not be a bad thing. If the Sacklers have taken out money and then they say, we’re going to put all the money back into the company to pay off the debts, then that’s, was it the same amount that they took out that they were now going to put back in or were they actually going to make some money off of this transaction?
Elias M. Yazbeck:
Well, I think that without getting too far in the numbers, I think that it’s safe to say that they were putting in less than they had gotten out over the course of their ownership. And I think that the Supreme Court talks about how they’re putting less up on the table than a debtor who actually files for bankruptcy and in some ways getting more out of it.
Rocky Dhir:
I wish I could use my powers for evil instead of good, but I’m not smart enough to do that. But these guys clearly thought this through. Alright, so they’re seeking a discharge even though they’re not a party to the bankruptcy. So what happens now at the bankruptcy court level?
Elias M. Yazbeck:
Well, I’ll say this, there is a difference between a discharge and a release. Interestingly, the Supreme Court kind of touches on that and talks about how in some ways what they’re getting is even more expansive than a discharge because they’re getting certain claims discharged that have to do with fraud or willful misconduct, which in bankruptcy are not necessarily dischargeable. They use the term word games when kind of discussing discharge versus release, but just wanted to mention that they’re not getting a discharge. But in a lot of ways the Supreme Court says what they’re getting is essentially a discharge, and so there is this connection between the power of the court to release them of their claims and the power of the court to issue a discharge. The release power sort of arises from the discharge power is kind of how they put it, but there is a difference Technically
Rocky Dhir:
The bankruptcy court says we’re going to release the Sacklers, some of the money that they took out, they’re putting it back in, we’re going to give them a release and this is non-consensual, so obviously this makes its way to the Supreme Court. So what happens next?
Elias M. Yazbeck:
So the bankruptcy court confirms the plan and it confirms the plan based on received votes, which is, again, there’s a lot of aspects to this case, but they confirm the plan, they say that we’ve received 120,000 votes and overwhelmingly confirmed in support of this plan, so we’re going to confirm it. And that includes overriding these non-consenting claimants. It gets then appealed to the district court which says, Hey, you can’t do this. This is not allowed. It gets then appealed again, and this is kind of a unique thing about bankruptcy courts is that the bankruptcy court’s ruling gets appealed to the district court in this case and then to the circuit, second Circuit, which is the circuit that presides over New York, the District of New York. So it goes up then to the second Circuit and then from there the second circuit agrees with the bankruptcy court, disagrees with the district court confirms the plan again, and then it goes to the Supreme Court.
Rocky Dhir:
Got it. What were the specific provisions, if you guys remember, of the bankruptcy code that were at issue in this case? I guess there was talk about what you can and cannot do in this Purdue Pharma case. And by the way, for those wondering if you’re going to look it up and read it as we talk, it’s Harrington versus Purdue Pharma. It was in June of 2024, so
Elias M. Yazbeck:
Argued December four in 2023 and then decided June 27th.
Rocky Dhir:
Alright, so it’s still a very recent case. What was the language of the bankruptcy code that was really at play, the bankruptcy court, district court and second circuit levels that they were all arguing about?
Elias M. Yazbeck:
By the time I got to the second circuit, and this is something sort of interesting about the second circuit’s opinion is it sort of starts off talking about how people are talking about the policy of bankruptcy and what is the nature of bankruptcy and all these kind of deep philosophical questions, but I don’t think we really need to address that here. What we need to just address is does the code allow for these kind of non-consensual third party releases and if so, how? And everything kind of sort of zeroes in on the portion of Title 11. And so the bankruptcy code is title 11 of the US code section 1123 b6, which kind of talks about what kind of provisions can be included in a plan reorganization. Plan 1123 B six specifically says a plan may include any other appropriate provision, not inconsistent with the applicable provisions of this title, title 11.
So it’s sort of like a catchall and then they sort of paired it. Imagine it’s like another jewel in the infinity gauntlet, if you’ve seen the Avengers, they sort of pair it with this other jewel, which is section 1 0 5 A and 1 0 5 A says the court may issue any order it’s process or judgment that is necessary or appropriate to carry out the provisions of the bankruptcy code. So both very open, both very broad and essentially they say, okay, well 1123 talking about what can be in the plan says any other appropriate not inconsistent provision. And if we pair that with the equitable power that 1 0 5 gives to kind of issue anything necessary to carry out the provisions of this code, that’s the provision. So 1123 kind of fits in with 1 0 5 and that gives us sort of residual authority that gives the bankruptcy court residual authority. That’s kind of the term to do this, but Supreme Court disagrees.
Rocky Dhir:
Alright, so before we get to the Supreme Court, we’re going to talk about that next. We’re going to take a quick break, we’re going to hear from one of our sponsors and then when we come back we’re going to dive into Harrington versus Purdue Pharma and we’re going to talk about what the Supreme Court decided and the rationale and reasoning that they use to make that decision. So we’re going to be back with Elias and Michael in just a few moments, guys, stay tuned. Alright, and we are back. I know a lot of us, we think, oh man, bankruptcy, that’s a lot of arcane laws and rules, but we’ve got a case here that’s got some far reaching implications and we’re going to find out a little bit more about what the Supreme Court of the United States did and why it did it in Harrington versus Purdue Pharmaceuticals or Purdue Pharma. So we’ve talked about how we got from the bankruptcy court. The district court effectively reversed the bankruptcy court and then the second circuit reversed the district court and agreed with the bankruptcy court saying that the Sackler family can be released pursuant to or as part of this entire bankruptcy proceeding. Now we’re going to the Supreme Court. Alright, so what gentlemen would you say is kind of the key issue that the Supreme Court is taking up in this case? Why did they accept cert and what were they trying to decide here?
Elias M. Yazbeck:
I think the key issue is does the bankruptcy court have the power to do this to essentially grant what is similar to a discharge, which is a release of these claims that are being brought against a third party non debtor without their consent. And you mentioned earlier about how when people hear bankruptcy, they think about lots of rules and how it can be very complicated and I think that Justice Gorsuch starts the Supreme Court opinion sort of addressing that and he says the bankruptcy code, this is the first line of the opinion, contains hundreds of interlocking rules. Then he says, but beneath all that complexity is a simple bargain, which is that the honest debtor can win a discharge if he proceeds with transparency and kind of places virtually all of his assets on the table. And he just starts the opinion by saying, well, the Sackler family, they’re not a debtor, they didn’t place all their assets on the table and yet they’re getting this bankruptcy benefit and then the opinion kind of goes from there.
Rocky Dhir:
Do you think this was more about, was the Supreme Court really trying to help settle this issue of what these kind of catchall provisions of the bankruptcy code would allow bankruptcy courts to do? Because we talked about that earlier where I think you said it was subsection B five and subsection B six, these were kind of catchalls where the bankruptcy judges at least thought that they had a bit of discretion. Was the court trying to settle the limits of that discretion or was the court really more upset about what the Sackler family was doing vis-a-vis the bankruptcy code?
Michael Wombacher:
I think that they were just trying to resolve a circuit split because for example, if you’re in the fifth Circuit, we didn’t allow for non-consensual third party releases. The Second Circuit did and the third circuit in a few circumstances would. And so the Supreme Court faced that issue from these various circuits that are also major districts where people are filing, I think wanted to have a final saying as to what is and what is not allowed when it comes to non-consensual third party releases. And so it eventually determined that it’s not allowed, therefore resolving the circuit split
Rocky Dhir:
And maybe there’s more than one, but what’s the essential holding in this case and what was the court’s reasoning in reaching that holding it sounds like one L law school, what was the court’s holding?
Michael Wombacher:
It was just non-Consensual third party releases are not allowed under the bankruptcy code. They kept it with all these different things that were floating out in the ether. They just narrowed it down to this very specific thing and they throughout the opinion even mentioned that they weren’t addressing these other issues and that they were keeping it just to this one issue that non-consensual third party releases are not allowed.
Rocky Dhir:
What was the rationale? What was their logical steps from getting from A to B? Because as you said, there’s a circuit split, so how did they thread the needle and make it all work for either one of you, but I’m just wondering if you guys have a thought on what they did.
Elias M. Yazbeck:
Yeah, I mean I think that they sort of disagreed with the second circuit in that the second was like, Hey, section 1123, B6 says we can do this. It gives us the residual authority to do this and nothing else in the code expressly says that we cannot and so we can do this. And the Supreme Court was like, well, you’re saying because there’s nothing here that says you can’t, then you can, but we’re saying there really should be something here that says you can not the other way around and they use this term, I think they use the word like roving commission. They were saying that the bankruptcy court, just because it doesn’t say that you can’t do this doesn’t mean you have this sort of roving commission to do this and there’s a lot of different things implicated here.
Rocky Dhir:
We need a new rule here, Elias. If you’re going to quote from the opinion or use a term, I think you got to do it like an avenger. You brought up the whole infinity gauntlet and now I think you’re committed. So I think we’re going to have to figure out an avenger and you’re going to have to use Avenger voice whenever you talk about one. Okay. Roving commitment, is that what you said?
Elias M. Yazbeck:
Commission? Yeah. They were saying the bankruptcy of court doesn’t have a roving commission to do it. I mean to get it, let’s go Latin here for a second. They talk about this kind of canon of interpretation called Aju generics, which is essentially this way of interpreting statutes and they talk about how, Hey, this section 1123 B kind of lists these five different types of provisions that can be in a plan. Number six is sort of the catchall that the second circuit is clinging to, but if you look at the other five, they all sort of deal with the debtor’s rights and so kind of interpreting this cash all within the context of both the rest of the statute and history and this concept of bankruptcy is for the debtor, the honest debtor that puts his stuff on the table and he gets to discharge in exchange, we sort of interpret this more narrowly and you can’t just interpret it so broadly, so radically different from what’s around it in the text of the statute that it essentially turns into this. Okay. Avenger voice like roving commission? I don’t know. Is that an Avenger voice? Maybe
Rocky Dhir:
Not. I’m not sure, Michael. I don’t know that that wasn’t Avenger voice. I think that was more of maybe a Avenger voice. I’m not sure what we’d call that.
Michael Wombacher:
I wouldn’t know. I’m a DC fan.
Rocky Dhir:
Oh, okay. We might have a circuit split right here on the podcast. They’re kind of getting there about trying to do this overarching view. I guess it’s not just statutory interpretation, but really they’re looking at a policy consideration of what the statutes are meant to do. If I’m hearing you correctly now from that perspective, did the Supreme Court get this right? Did they miss anything? I mean it’s kind of the big question that was this the correct decision? I think a lot of people would agree that they didn’t like the idea of the Sacklers being released, but as a matter of statutory interpretation and really looking at what the bankruptcy code says, is this good or is this bad? Right wrong? What do you guys think?
Elias M. Yazbeck:
I, I looked at pretty closely at the second circuit and I felt like they could have easily gone another way. I felt like the result they got to at the second Circuit, which is that this is not inconsistent and appropriate. I mean, there is some limiting language in that catchall provision appropriate and not inconsistent, and this is 1123 B6 that suggests that there has to be an outside orbit. There has to be a limit to what the court can do, and there’s an argument for why this should be within what the court can do, but the Supreme Court sort of almost responded to how the Second Circuit opinion started saying, Hey, we don’t need to address all this other stuff. We just need to sort of focus in on are we just authorized to do this per the code? And they said, well, sort of the exercise of doing that kind of does implicate looking at the context a little bit.
So I mean I think it’s a well reason the Supreme Court, I think it’s a well reasoned opinion and it doesn’t necessarily, it’s not the end of times, and I think Michael can talk about this, they expressly say in the Supreme Court decision that this is not meant to mess with consensual third party releases. That kind of now opens up this sort of new door of like, well, what’s consensual? What’s not consensual? This is very narrowly focused on non-consensual third party releases, but it does not affect consensual third party releases, which the bankruptcy courts everyone clearly still have the authority for,
Michael Wombacher:
Which are much more commonly used like the non-consensual third party releases. It was a very limited, and even in these districts that allowed for it, it wasn’t like it was being used in every single case. It was typically only utilized in these mass court bankruptcy cases.
Rocky Dhir:
I noticed that Justice Gorsuch, he specifically used the term narrow one, that the court’s decision is a narrow one, it’s a narrow holding, and is that what he meant by that effectively, that this only goes to the issue of non-consensual third party releases and doesn’t really affect any other type of procedure within the bankruptcy code? Narrowing it even further than that,
Michael Wombacher:
I think it was just limiting it to non-consensual third party releases and that specific issue that had been coming up in a lot of these large chapter elevens that had a lot of mass fort litigation because it provided a way that a lot of these cases could streamline a lot of the litigation. For better or worse, there’s attraction to that for debtors that were facing this because it grant them some predictability.
Rocky Dhir:
We need to talk about what this case means. Before we do that, we’re going to hear from one of our sponsors. We’re going to take a quick commercial break and then we’re going to come back and we’re going to talk about the Purdue Pharma case in the context of the legal world, the bankruptcy world and beyond. So stay tuned, we’ll be right back. We are back talking about Harrington versus Purdue Pharma and 2024 has been a crazy year because there’s been so much going on in the news cycle. I don’t think people have heard much about this case. It’s not something that’s been making headlines. Even though this seems to be a rather important case. Could either one of you kind of talk to us about what does this case mean? Say first of all, in the bankruptcy world, was this a shocker? Was this one of those earth shattering holdings or did y’all foresee this coming down the pike at some point?
Michael Wombacher:
Yeah, I mean certainly because of the way it was presented in Supreme Court, the answer is either going to be non-consensual third party releases are allowed or they’re not, and now that they’re not allowed, the question that remains is what is a consensual release?
Rocky Dhir:
Maybe walk us through that. What a consensual release effectively means. As I understand it, the creditors or the potential creditors of the bankruptcy estate have to now agree if you’re going to take a third party who might be related to the debtor, but if you’re going to release them from any claims, that has to be done with the full consent of I guess all of the potential claimants or potential creditors. Is that effectively what it means now?
Michael Wombacher:
Oh, it doesn’t mean all. It just means there’s fine if you’re going to bind a party to a consensual third party release, what does consent mean? I know for the listeners it’s not be helpful, but I actually have a ballot that is simply sent out to creditors during these chapter elevens, and so it starts out just by telling you what kind of claim you hold, what class you are and where you can find the plan and the contents that apply to it, and then towards the back it says there’s a box that you’ll scratch, yes or no. That in the most form it’s called an optout, where it says by checking this box, you opt out of the third party releases. And so now the question is remaining is so what does a creditor have to do to this on this ballot to show that it senses to these third party releases? And that is sprung into kind of three different areas. One side is like the Western district of New York held in Towanda is you can’t even do opt-outs. The box on the ballot has to be, I opt in to these third party releases and you have to check that box. And if you don’t do that, the debtor can’t bind you to release your third party releases.
Rocky Dhir:
What happens if you just abstain? I mean, I get this thing in the mail, I’m an individual, I don’t even know I’m supposed to do anything with it, and I just let it lapse. Does that mean I’m not consenting?
Michael Wombacher:
So for opt-ins, then yes, but for opt-outs, that’s where courts tend to differ into these two realms of under the default theory and the contract theory. So under default theory, there’s a couple cases such as Arsenal Holdings and Robert Shaw where the courts determine that this is one of those things that happens all time in bankruptcy courts, whether it be with proofs to claim you have to file them by a bar date or you lose your claim with cure amounts when a debtor is going to assume your exec contractor lease, if you don’t object to what their cure amount they’re listed is, then that’s what it’s, you lost your ability. And it happens in other litigation as well. If I get served with a complaint, whether it’s in state or federal court and I just refuse to answer it, it doesn’t make it go away. And so therefore, by not doing anything to it by default consent to these third party releases. But then on the flip side, some courts have gone onto the contract theory where because there’s not a specific provision in the bankruptcy code that addresses what a consensual release is, then this theory of contract law, it fills in the gap. And so under basic one out contract law, there has to be affirmative consent for you to be bound by a contract. And so that’s what courts are now looking, some courts are now looking towards to find that you consent to a third party release.
Rocky Dhir:
Is this a potential future issue for the Supreme Court at some point about is this kind of the follow on to Purdue Pharma is what constitutes consent and what constitutes an opt-in?
Michael Wombacher:
It could very well be. It could be one of those issues where in one circuit then they file the default theory, and if you don’t check out of the third party releases, then you’re bound by it. Well, in other ones, they’re going to follow the opt-in theory where only opt-ins are allowed or they’ll follow the contract theory where a creditor has to show some form that they actually consent to these third party releases.
Rocky Dhir:
We talked about what this kind of means in the bankruptcy world. Do you have any thoughts on what it means outside of bankruptcy? So for non bankruptcy practitioners, what impact will the Purdue Pharma case have on them and on their practices?
Elias M. Yazbeck:
I would say that this sort of returns an equilibrium to the system a little bit, sort of where there are different court systems that can adjudicate disputes, they can impose liability, and they’re no longer necessarily can be totally trumped by a bankruptcy courts decision to release a claim without the consent of the claimant. I think that in that way there has been sort of a pushback to bankruptcy power, sort of like a nod towards the other judiciary systems that y’all are still, if that makes sense.
Rocky Dhir:
Do you think this is going to maybe give more deference to some of the lower courts to kind of make their own decisions about what constitutes an opt-in or what constitutes consent?
Elias M. Yazbeck:
No, no. I’m just talking about the concept of a court necessarily their adjudication of liability being subject to a bankruptcy courts and position of a release.
Rocky Dhir:
Ah,
Elias M. Yazbeck:
That’s what I’m talking about. I’m not talking about the determination of whether there was an opt-in or opt-out. That is actually, I think always going to be within the purview of the bankruptcy courts and the courts that bankruptcy decisions get appealed to. And yeah, like you said earlier, I think that it’s sort of teed up for the Supreme Court to maybe in a couple years make a decision on consent consensual third party releases. What is consent, like Michael was just talking about,
Rocky Dhir:
Do you think the Purdue Pharma case at all implicates the power of the jurisdiction of say, a bankruptcy court versus a regular district court when it comes to deciding what does and doesn’t get released? It sounds like to some extent there might be some bleed over. Was the Supreme Court in Purdue Pharma effectively saying that the bankruptcy courts exceeded their power by releasing the Sackler family and what they should have done was really let this be something that maybe a district court handles, or are they just saying this needs to be a completely separate lawsuit if you’re going to release somebody?
Elias M. Yazbeck:
Yeah, I think they’re saying that the bankruptcy court exceeded their power. I think they were saying that a consensual release is still possible, and so although the bankruptcy court still has the ability to stay litigation, that litigation will still exist and it can be used sort of as leverage for these claimants to negotiate higher numbers for consensual releases.
Rocky Dhir:
I wonder now this probably our final question, but I wonder, do either of what’s happening now with the Harrington case because the Supreme Court that’s getting all the attention, but now there’s the follow on to it, it’s going to go back presumably to the bankruptcy court to adjudicate the bankruptcy. So what’s going to happen to the Sacklers and the money? I mean, is this now a process of them trying to get consent? Do you know what’s been the follow-up to the Supreme Court’s decision in that particular case?
Elias M. Yazbeck:
I know that the last thing I heard was that yes, it’s been remanded and the Sacklers are essentially looking to work with debtor, Purdue Pharma to negotiate some sort of a consensual release. And whether they’ll get there or not, I’m not sure. I’m sure they’ll get there with a majority probably of claimants, but for those who want to hold out and refuse to consensual release, I think their rights to do that are now in place to the Supreme Court decision. For the record, I just want to mention this. Harrington is the US trustee’s name, so leading the appeal here against the debtors is William Harrington, who’s the US trustee for region two, which is New York’s region. So that’s where the Harrington comes from.
Rocky Dhir:
Here’s the real last question for you guys, and I’ll let you guys weigh in on this one. The final last question. For non bankruptcy practitioners as bankruptcy lawyers, what is the number one thing you want non bankruptcy practitioners to know when they’re advising their clients, so that way clients don’t come in all confused about what the bankruptcy process is? Is there something you wish that those of us on the outside of bankruptcy kind of knew so that we’re better able to inform our clients moving into things?
Michael Wombacher:
Hire a bankruptcy attorney,
Rocky Dhir:
Hire a bankruptcy attorney,
Elias M. Yazbeck:
Hire a bankruptcy attorney? I think that’s right.
Rocky Dhir:
Here’s my engagement letter.
Elias M. Yazbeck:
I think that a lot of times the word bankruptcy is used as sort of this scary word and negotiations and different litigation tactics. If you don’t do this, we’re going to have no choice but to file for bankruptcy or whatever. And I think to litigants, commercial litigants, I do a fair amount of commercial litigation also, not just in the bankruptcy space, but outside it. I would say that don’t be afraid to dig into that because there’s a lot of nuance to bankruptcy, and so it’s not a get out of jail free card. So I would say push back and ask them questions. How exactly are you going to hide behind bankruptcy and why does that matter here? That’s my general advice is just like these third party non-consensual releases are now not allowed. There’s a lot of other stuff that there’s necessarily a gray area or maybe some nuance to whether or not a party can do something or not do something and it’s worthy of exploring.
Rocky Dhir:
Fair enough. So either way, call a bankruptcy lawyer. It all goes back to the same thing. Alright, so Elias and Michael, I want to thank you guys for joining us today. This is, we don’t usually do bankruptcy topics, and so this was refreshing and it was very informative. So thank you both for being part of this.
Michael Wombacher:
Thanks. Thanks for having us.
Rocky Dhir:
And of course, I want to thank you for tuning in and I want to encourage you to stay safe and continue to be well. If you like what you heard today, please rate and review us wherever you get your podcast. Until next time, remember, life’s a journey, folks. I’m Rocky Dhir signing off.
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