October 30, 2019, Arizona – OxyContin manufacturer Purdue Pharma urges the U.S. Supreme Court to reject the state of Arizona’s proposed filing seeking to “clawback” billions of dollars in transfers from its founders, the Sackler family, in light of its Chapter 11 bankruptcy.
By way of background, three months ago, on July 31, 2019, Arizona Attorney General Mark Brnovich brought a motion for leave to file a complaint, wherein he asked the Supreme Court to intervene in its opioid lawsuit. Two months after that, Purdue filed for Chapter 11 bankruptcy protection on September 15. In its motion, General Mark alleged that Sacklers made massive cash transfers—totaling billions of dollars—at a time when Purdue faced enormous exposure for its role in fueling the opioids crisis. General Mark insisted that the Supreme Court exercise its original jurisdiction to resolve the complaint it sought to bring against citizens of other states, precisely certain members of the Sackler family (the “Sackler Defendants”) and Purdue Pharma, Inc. and affiliated entities (“Purdue”). General Mark claimed that the Sackler Defendants and Purdue violated Arizona law by fraudulently transferring funds out of the companies. Purdue and the Sackler Defendants face substantively similar allegations of fraudulent transfer brought by states and others under various state laws in courts across the nation.
In its brief filed yesterday, Purdue countered that the Supreme Court lacked jurisdiction on these issues, given its petition in the U.S. Bankruptcy Court for the Southern District of New York. Purdue alleged that since it has filed for bankruptcy, all fraudulent transfer claims against Purdue or the Sackler Defendants may only be brought by the bankruptcy trustee or debtor in possession exercising the powers of a trustee. Next, it alleged that the Court did not have original jurisdiction over claims brought by a bankruptcy trustee or debtor in possession against private persons. Further, Purdue argued that Arizona’s argument for the exercise of original jurisdiction, the need for uniform treatment of the many fraudulent transfer claims involving Purdue, is eviscerated by the bankruptcy filing. Purdue asserted that the Bankruptcy Court should 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. Therefore, according to Purdue, as a debtor in possession, it had the powers of a bankruptcy trustee and an exclusive authority to assert all fraudulent transfer claims about the debtor during the pendency of the bankruptcy. Thus, Purdue argued that Arizona can no longer assert this claim, and it is no longer within this Court’s original jurisdiction.