High court: Arizona must wait on bankruptcy court to pursue Purdue Pharma assets
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High court: Arizona must wait on bankruptcy court to pursue Purdue Pharma assets

PHOENIX — The U.S. Supreme Court on Monday slapped down Arizona’s bid to get an early crack at the assets of the family that owns one of the largest opioid manufacturing operations in the country.

In a brief order, the justices refused to hear Arizona Attorney General Mark Brnovich’s claim that the Sacker family that owns Purdue Pharma has been looting the company of assets — assets he said need to be preserved should Arizona win a lawsuit against the company pending in Pima County Superior Court. The justices gave no reason for their decision.

Monday’s ruling does not keep Brnovich from going after company assets. But it means that Arizona will have to pursue its claims in bankruptcy court along with another 2,000 state, local and private entities that also have filed suit accusing Purdue of creating the opioid crisis and seeking financial damages.

The move by Brnovich to take his case directly to the Supreme Court, without going through lower courts, was highly unusual. The justices rarely agree to hear claims that have not been through the regular process.

Still, Brnovich said he was disappointed.

“Today’s ruling will not end our efforts to hold Purdue and the Sacklers accountable for their role in the opioid crisis,” he said in a written statement Monday. “We will continue to fight for Arizona’s interests in the Purdue bankruptcy proceedings.”

In its own prepared statement, Purdue praised Monday’s decision, saying that bankruptcy court “is the appropriate forum to maximize the value of the company,” and, by extension, to provide more money to settle all claims. The company says that deal would provide more than $10 billion “to address the opioid crisis and save lives.”

Central to the failed legal maneuver is a 2007 consent judgment between the state and Purdue in which the company agreed not to promote and market its oxycodone painkillers in deceptive ways.

Brnovich has since gone back to court seeking fines of $25,000 for each violation, contending the company has not lived up to its end of the bargain. That case is set for trial in 2021 —assuming it is not halted because of the bankruptcy case playing out in New York.

Brnovich contends that after the settlement the Sackler family has been “looting” the company, squirreling away company assets that he wants to keep available should the reopened Pima County case go his way.

In legal briefs, he cited a memo by Richard Sackler, prepared after the 2007 settlement with not just Arizona but other states, that sought to explore options to protect the family from the “dangerous concentration of risk” it faced. Brnovich said the Supreme Court needed to intercede to bar the transfer of company assets to family members.

“They were basically taking cash out of the company to enrich themselves when they knew there was likely to be judgments or financial risk associated with them,” he said, pegging the amount transferred between 2008 and 2016 at $4 billion.

Brnovich acknowledged that the owners of a privately held company are entitled to reap the financial benefits.

“We are arguing that the transfer of the funds was made with an intent to hinder, delay or defraud present and future creditors or avoid, basically, paying what they knew was going to be owed,” he said.

He compared that to someone who is going through a divorce or a bankruptcy proceeding either hiding or liquidating assets to keep the money from creditors.

Purdue attorney Benjamin Kaminetzky 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.

After Brnovich’s filing with the U.S. Supreme Court, Arizona and about half of the states agreed to a multi-state settlement with Purdue, with the company paying about $10 million and the family agreeing to give up control.

But the status remains unclear given that many states have declined to go along and continue to pursue their own claims.

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