Why Did Purdue Pharma File for Bankruptcy in Westchester County?
The OxyContin maker was expected to file for Chapter 11, but why here?
After agreeing to settle some 2,600 separate lawsuits over the company’s involvement in fostering the nation’s opioid crisis, Stamford-based Purdue Pharma filed for bankruptcy protection this week — in Westchester, of all places.
The basic points of the settlement have been widely available since it was announced on September 16: The Sackler family, which owns Purdue, will relinquish control of the company and contribute all of its assets to a form of trust that will then operate with all profits going to benefit the various claimants in their respective cases and the American population at large.
The company will devote considerable funds to the marketing of restrictions on promotion or sale of opiates and addiction treatment. All this, at an estimated $10 billion, will be added to a minimum of $3 billion from the Sackler family directly.
Experts, however, were surprised by the location of the filing: the U.S. Bankruptcy Court Southern District of New York in White Plains. It was here that the OxyContin maker asked a U.S. bankruptcy judge to temporarily halt the 2,600-plus lawsuits against the Stamford firm for 270 days while settlement details are worked out, to authorize $34 millions in bonuses to employees who have met “target performance goals,” and to protect the Sackler family fortune from additional litigation. (According to CNN, $26 million was authorized for payment to employees, and the Sacklers were not guaranteed protection.)
Westchester has, sadly, not been unaffected by the national opioid crisis. According to a poll conducted by Westchester Magazine just this year, 63% of residents have or know someone who has been addicted to opioids. Only 21% of respondents believed the county has sufficient support systems in place, with fewer than one-in-four people able and willing to recommend helpful experts or treatment facilities. The City of Yonkers, the county, and New York State are all among municipalities currently suing Purdue, the Sacklers, and various other pharmaceuticals makers.
Still, this doesn’t explain why a Connecticut-based company that has been chiefly negotiating out of Chicago for the last several months would file for bankruptcy in White Plains.
“You can usually file [in a district] if you have a place of business there,” says Westchester Top Lawyer and bankruptcy expert Lawrence R. Reich of Reich Reich & Reich in White Plains. Or, he says, “You can file where your principle assets are located within the last 180 days.”
This would have made the most likely venues for filing Fairfield County’s Bridgeport courthouses or Manhattan’s Bowling Green courthouses. However Manhattan and White Plains are both part of federal bankruptcy court’s Southern District of New York. To find out why Purdue might have filed locally, we turned to another of Westchester’s Top Lawyers, Judith Elkin.
“The only benefit to filing in Westchester is you know exactly what judge you’re getting,” she says, “and that’s Judge Drain.”
While the District of Connecticut and the District of Southern New York are both Second Circuit courts, the Manhattan courts currently boast seven different judges — eight if you count visiting Judge Robert E. Grossman — and Connecticut only Chief Judge Julie A. Manning, who has served as a Connecticut bankruptcy judge since 2013, and as Chief Judge since 2014.
White Plains’ Judge Robert. D. Drain, meanwhile, has served since 2002, presiding over numerous high-profile bankruptcies, including a few notable enough even laypersons would recognize the names — A&P and Sears, anyone?
“He’s a very astute judge,” Reich says.
Purdue Pharma provided a helpful press release and brief when reached by Westchester Magazine, but had no comment on the selection of filing venue as of press time. As to why the company would choose the long-serving and high-profile Judge Drain, Elkin was more willing to speculate.
“There’s a little bit of a comfort level to knowing who you’re getting.”
Reich adds that while there is no way to know for sure, the possibility of judge shopping is “not terribly unlikely.”
“They may wind up being faced with a motion to change the venue,” he says. “It’s not a matter of jurisdiction — there’s nationwide jurisdiction in the banks’ court — but the venue, or the place its heard, can be changed at the discretion of the court.”
Even if they secure Judge Drain for their bankruptcy proceedings, Purdue Pharma and the Sackler family might still have plenty to worry about. Attorneys general in more than twenty U.S. states and territories have openly opposed the proposed settlement, including both Connecticut and New York.
“It shouldn’t come as a shock that Purdue’s bankruptcy filing comes just 48 hours after my office exposed about $1 billion in wire transfers involving Swiss bank accounts,” says New York Attorney General Letitia James.
“Any deal that cheats Americans out of billions of dollars, allows the Sacklers to evade responsibility, and lets this family continue peddling their drugs to the world is a bad one,” she says, promising to continue New York’s lawsuit.