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Fri, Nov. 15

Opioid manufacturer asking high court to reject Arizona AG claims

Arizona Attorney General. (Capitol Media Services/Courtesy, file)

Arizona Attorney General. (Capitol Media Services/Courtesy, file)

PHOENIX — Attorneys for a major opioid manufacturer are asking the U.S. Supreme Court to reject a bid by Attorney General Mark Brnovich to have the justices decide if the family members who own it are “looting’’ company assets.

In new legal briefs, the legal team does not specifically address Brnovich’s allegations that the company has transferred more than $4 billion to members of the Sackler family between 2008 and 2016. What that has done, Brnovich contends, is left less money available for those who have filed suit against the company, including the state and local governments, accusing Purdue of improperly promoting its OxyContin brand and helping cause the opioid crisis.


Purdue Pharma is one of the defendants in the lawsuit the City of Prescott filed

In August, Arizona District Court sent Prescott’s lawsuit back to Yavapai County Superior Court

Instead, attorney Benjamin Kaminetzky who leads the Purdue legal team told the justices that there is no reason for them to intercede.

He pointed out that Purdue filed for bankruptcy protection in September, after Brnovich filed suit. And Kaminetzky said federal law gives bankruptcy courts the authority to decide if assets have been wrongfully taken from the company to avoid paying the company’s legal obligations.

“The Bankruptcy Court will consider all fraudulent transfer claims in a single proceeding — a proceeding created by Congress to handle precisely this type of situation with consistency and fairness,’’ he wrote. And Kaminetzky told the justices that Arizona’s claim “is no longer within this court’s original jurisdiction.’’

Brnovich spokesman Ryan Anderson said his boss disagrees with those legal arguments.

“We filed our Supreme Court action before Purdue filed for bankruptcy, preserving the Supreme Court’s right to recover alleged illegal transfers of funds out of the company,’’ he said.

In a separate filing, Brnovich is asking Judge Robert Drain, who is handling the Purdue bankruptcy case in New York, to deny the move by Purdue to keep Arizona from pursuing its Supreme Court claim.

Ashley Keller, a private attorney hired by the state to handle the bankruptcy issue, told Drain that the U.S. Constitution gives the Supreme Court original jurisdiction in all cases where the dispute is between a state and citizens of another state.

Keller acknowledged that jurisdiction is optional. But he said that decision has to be made by the justices themselves and cannot be made by Drain.

The roots of the current legal fight go back to 2007 when Purdue agreed to a multi-state consent decree in which it agreed not to promote or market OxyContin in misleading ways. That included a payment of $19.5 million to the 26 states participating in the settlement, including Arizona.

Last year, however, Arizona went back to court, alleging that despite the 2007 consent order that Purdue “continued to engage in misleading and harmful practices’’ including “overstating benefits and downplaying risks associated with taking the drug.’’

The state now wants penalties of $25,000 for each violation. That case is set for trial in 2021.

In July Brnovich argued to the Supreme Court that Purdue has illegally been transferring cash — company assets — to the Sackler family.

That, he said, leaves less money for the state in pursuing its case against Purdue. So he asked the Supreme Court to step in to not just stop future transfers but also recoup funds already taken.

Kaminetzky, in his new filing with the Supreme Court, said the subsequent decision by Purdue to seek bankruptcy protection changed everything.

“Once bankruptcy is filed, fraudulent transfer issues are resolved in bankruptcy courts,’’ he told the justice.

Still pending is a proposed multi-state settlement, with the company agreeing to a deal that could be worth $12 billion to resolve outstanding claims.

Arizona has chosen to participate even as some states have not.

Since that time, however, Brnovich has indicated he is having second thoughts, saying in a court filing that Purdue has “sought to undermine material terms of the deal.’’ But he provided no specifics.

“Arizona is focused on securing a just and timely settlement,’’ Anderson said this week. “Our focus has always been on ensuring resources are provided to the victims and the Arizona communities impacted by the opioid crisis.’’

The justices have not set a date to consider whether to allow Brnovich to pursue his claim against the Sacklers in Supreme Court.

Purdue Pharma paid CEO $9M in year before bankruptcy

OxyContin maker Purdue Pharma paid its CEO $9 million and its board chairman nearly $4 million in the 12 months before the company's bankruptcy filing last month, according to recently filed financial documents.

Five other board members overseeing the private company were paid a combined $3.7 million over that span.

Purdue, a privately held company that usually does not disclose detailed financial information, had to make the information public as a part of its bankruptcy proceedings.

Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said it's hard to compare CEO Craig Landau's pay package to other executives. But the money paid to Steve Miller, a corporate turnaround specialist who was brought in to lead Purdue's board of directors last year, seems excessive, he said.

"In a public company, that would be a rather extraordinary sum to pay a non-exec chair," Elson said, while noting that Purdue can pay whatever it wants.

"In a private company, it's private and it's between them," he said.

In a statement last week, Purdue said its employees have highly specialized skills that would be hard to replace.

The disclosures were filed late Tuesday in U.S. Bankruptcy Court in White Plains, New York. Purdue sought bankruptcy protection in September in its effort to settle nearly 2,700 lawsuits that seek to hold the company accountable for its role in the nation's opioid epidemic.

The company's proposed settlement with state and local governments could be worth up to $12 billion over time.

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