CHARLESTON, WV (LOOTPRESS) — West Virginia Attorney General Patrick Morrisey praised news Wednesday that his closing argument has ended the “California Carve Out,” an achievement that will result in West Virginia receiving a larger share of the Purdue Pharma bankruptcy.
The Attorney General railed against the carve out last week as he pushed for greater accountability and more resources for West Virginia in closing arguments at Purdue Pharma’s bankruptcy hearing.
“This is great for West Virginia and other small states,” Attorney General Morrisey said. “There was never a rational basis for one state, California, to ignore the intensity fund and thereby disregard the inordinate devastation that opioid abuse has wrought upon smaller states, chief among them West Virginia.
“Many flaws remain with the multistate’s population-based approach to allocating settlement funds, but ending the California Carve Out in the Purdue plan is indeed a significant step in our continued fight to press every legal lever to ensure that West Virginia receives fair distribution of recoveries as opioid litigation continues,” he added.
The bankruptcy judge took particular note of the “California Carve Out” during closing arguments, which the Attorney General told the court involved an exclusion in the multistate allocation plan that allowed California to be the only state not to contribute to a 1 percent intensity fund.
The intensity fund is designed to allocate additional funds to smaller states hardest hit by the opioid epidemic including West Virginia.
The Attorney General’s closing argument led the judge to express immediate concern. The judge cited bankruptcy law that requires the plan provide the same treatment for each claim or interest of a particular class.
The judge suggested the parties discuss the matter further, which led to an announcement Friday, Aug. 27, in court that California had reversed course and agreed to contribute – a move then formally recognized by the court Wednesday.
The confirmation hearing began earlier this month in the U.S. Bankruptcy Court for the Southern District of New York.
The West Virginia Attorney General’s Office had already introduced evidence and expert testimony. The Attorney General then gave his closing argument Wednesday, Aug. 25.
In April, the Attorney General filed his objection in U.S. Bankruptcy Court for the Southern District of New York, arguing that Purdue’s failure to disclose how its multibillion-dollar proposal would be split among states undermined its desire to avoid court challenges to an inherently inequitable arrangement.
Purdue Pharma responded by disclosing publicly the once-closely held Denver Plan, which the Attorney General opposes since it would distribute settlement funds largely based on population – not intensity of the problem.
Attorney General Morrisey filed suit against Purdue Pharma and former chief executive Richard Sackler in May 2019. The lawsuit alleges Purdue Pharma created a false narrative to convince prescribers that opioids are not addictive and that its opioid products were safer than they actually were.
The lawsuit contends Purdue Pharma proliferated a deceptive marketing strategy with reckless disregard for compliance enforcement. It also alleges company sales representatives routinely claimed that OxyContin had no dose ceiling, despite assertions by federal regulators that OxyContin’s dose ceiling was evident by adverse reactions.
The lawsuit marked West Virginia’s second against Purdue Pharma. The first, filed in 2001, resulted in a $10 million settlement in 2004. However, that case involved an earlier version of the opioid than the reformulated, so-called tamper-resistant OxyContin that debuted in 2010.
The Purdue matter is one of the West Virginia Attorney General’s pending lawsuits against five opioid manufacturers and other national chain distributors.