The Department of Justice’s US Trustee Program (USTP) has reached an agreement with three law firms representing Purdue Pharma (Purdue) in its pending bankruptcy cases. The companies are Skadden, Arps, Slate, Meagher & Flom LLP; Wilmer Cutler Pickering Hale and Dorr LLP; and Dechert LLP (the firms).
The settlement, which is pending approval by the Southern District of New York bankruptcy court, resolves USTP’s concerns about the adequacy of corporate disclosures in Purdue’s bankruptcy cases. Under the settlement, the firms, collectively, will forgo $ 1 million in fees earned in the cases and are required to complete their prior disclosures so that the court and other parties can determine their sufficiency.
According to the USTP, the companies failed to adequately disclose a common defense and common interest agreement (the agreement) between Purdue and the Sackler families that created obligations on the companies to the Sacklers with respect to defense against hundreds of lawsuits potentially involving billions of dollars. liability relating to the manufacture, sale and distribution of the prescription pain reliever OxyContin. During the bankruptcy cases, Purdue used the Accord to avoid handing over documents to the official Unsecured Creditors Committee as it proceeded with its review of debtors’ conduct.
“These disclosure violations are of particular concern because a central issue in these cases has been Purdue’s independence from the Sackler families,” USTP Director Cliff White said. “This agreement reflects USTP’s continued efforts to monitor law firms and other bankruptcy professionals who do not disclose relationships that could raise questions about their ability to perform their duties without conflicts of interest.”
Due to the multiplicity of interests in a bankruptcy case, the Bankruptcy Code and Bankruptcy Rule 2014 require law firms and other professional firms to disclose their connections to other parties in a case. The USTP examines applications for employment from companies seeking payment of a Chapter 11 bankruptcy estate under Articles 327 and 1103 of the Bankruptcy Code and advocates strict compliance with the law to ensure the protection of the interests of all stakeholders. Where there has been a failure to disclose a link in an application, even inadvertently, the bankruptcy court may remedy the failure to disclose by requiring, among other remedies, the reimbursement of all or part of the fees collected by the lawyer. In this settlement, the parties agreed to the return.
USTP’s work on this issue has been managed by US Administrator William Harrington, US Deputy Administrator Linda Riffkin, Assistant General Counsel for Chapter 11 Practice Nan Eitel, and Prosecutor Paul Schwartzberg.
The US Trustee Program is the part of the Department of Justice that protects the integrity of the bankruptcy system by overseeing business administration and advocating for the application of bankruptcy laws. The program has 21 regions and 90 field offices. To learn more about the program, visit: https://www.justice.gov/ust.