The Purdue Pharma bankruptcy judge on Thursday approved a deal under which three law firms will lose $ 1 million in combined fees to resolve allegations they have not disclosed their links to family members Sackler owners of the company.

In a virtual hearing, U.S. bankruptcy judge Robert Drain in White Plains, New York, signed the agreement between the Office of the US Trustee, which serves as the US Department of Justice watchdog, and Skadden Arps Slate Meagher & Flom; Wilmer Cutler Pickering Hale and Dorr; and Dechert. There were no objections to the settlement, which was announced in April. As part of the deal, the firms will reduce their fee claims for their legal services to Purdue by a total of $ 1 million.

Purdue filed for bankruptcy protection in September 2019 in a bid to resolve approximately 3,000 lawsuits accusing him of fueling the national opioid crisis with deceptive marketing. He proposed a settlement he says is worth more than $ 10 billion to create trusts that would distribute funds to states, local governments and other organizations for opioid reduction programs. Members of the Sackler family, owners of the company, have agreed to contribute $ 4.3 billion to the deal, paid over nine years.

The US trustee accused the three companies of failing to comply with bankruptcy filing requirements when they were hired by Purdue by failing to disclose “joint interest agreements” with members of the Sackler family. The deals required law firms, representing Purdue in a pre-bankruptcy opioid litigation, to keep information shared between Purdue and members of the Sackler family confidential.

The US trustee argues that this arrangement created a conflict in the bankruptcy case, where the interests of the Sackler family members are unfavorable to the company’s creditors, noting that the company invoked the common interest agreement to avoid to deliver documents to its unsecured creditors committee in its investigation of the company’s pre-bankruptcy activities.

The US trustee says the deals created obligations for companies to the Sacklers related to defending hundreds of lawsuits that potentially involve billions of dollars in liability related to the manufacture and sale of OxyContin.

All three firms said they did not believe they were required to make the disclosures under bankruptcy law.

Drain called the settlement a “reasonable resolution.” In addition to waiving fees, the companies agreed to supplement their disclosures of potential conflicts to reflect joint defense agreements.

Thursday’s hearing also included an update on the state of the company’s discussions with its various creditor groups regarding its disclosures related to its proposed reorganization plan. Purdue attorney Marshall Huebner of Davis Polk & Wardwell told Drain the company is moving forward with some constituencies of creditors, but believes a deal may not be workable on some remaining issues with around 24 US states that have refused to sign the proposed settlement.

A hearing on Purdue’s request to send its statement to creditors and start soliciting votes for the plan has been postponed several times since April and is now scheduled to be held on May 26.

The case is In re Purdue Pharma LP, US Bankruptcy Court, Southern District of New York, No. 19-bk-23649.

For Purdue: Marshall Huebner, Benjamin Kaminetzky, Timothy Graulich, Eli Vonnegut and James McClammy of Davis Polk & Wardwell

For the American attorney: lawyer Paul Schwartzberg

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