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Purdue Pharma: Bankruptcy court proper venue for Arizona's claim against company

Purdue Pharma: Bankruptcy court proper venue for Arizona's claim against company

  • Updated

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 the company are “looting” its assets.

In new legal briefs, the legal team does not specifically address Brnovich’s allegations that Purdue Pharma 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.

Instead, attorney Benjamin Kaminetzky, who leads the Purdue legal team, told the justices 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 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.

Brnovich argued in July 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.

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

On Twitter: @azcapmedia

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