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Purdue Continues to Peddle Malarkey About Why It's in White Plains

posted by Adam Levitin

Purdue Pharma continues to peddle some malarkey about why it filed for bankruptcy in White Plains, New York.  In response to my House Judiciary testimony yesterday, Purdue told the Stamford Advocate:

Purdue Pharma Inc., the general partner of Purdue Pharma LP, has been a N.Y. corporation since its incorporation on Oct. 1, 1990. White Plains is about 15 miles from our corporate headquarters and is the closest federal bankruptcy courthouse. Thus it was the most appropriate place for us to file.

Let’s get real. Purdue—and that really means the Sacklers, who were still in control when Purdue's bankruptcy filing strategy was worked out—filed in White Plains because it wanted its case to be heard by Judge Robert Drain. If Judge Michael Wiles—who has held that bankruptcy courts do not have the power to issue third-party releases—had been the judge sitting in White Plains, there’s no chance Purdue would have gone anywhere near White Plains. On top of that, Purdue’s claim about convenience doesn’t pass the smell test. Convenience to corporate headquarters is never a real consideration in bankruptcy filings. If it were, would GM and Chrysler have filed in NY? Would Nieman Marcus or Belk have filed in Houston? Would anybody ever file in Delaware?

Convenience to corporate HQ doesn’t matter because a bankrupt firm’s employees spend very little time in the bankruptcy court. That’s for the lawyers, and if you’ve ever taken a black car from Manhattan (where Purdue’s attorneys are based) to White Plains, it’s a very long (and expensive) ride. But if convenience to HQ really matters, let’s just not that according to Google, the drive from Purdue’s headquarters to the Bridgeport, Connecticut courthouse is only two minutes longer than to White Plains. Now Purdue also points to its general partner being a long-standing NY corporation, making a NY venue appropriate. That’s true, but it glosses over two points. First, it’s a BS general partner. &Purdue Pharma, Inc., doesn’t have an equity stake in any of the Purdue entities.  That’s the antithesis of being a partner.  It’s a rent-a-partner (something Delaware law authorizes)—basically an agent of Purdue Pharma LP. 

Second, the existence of a NY entity general partner just means that venue in New York is appropriate. It does not mean that a White Plains case assignment is appropriate.  The SDNY local rule on case assignment is based on the debtor’s petition address, and specifically excludes post office boxes.  Only debtors with Westchester or Rockland County addresses are supposed to be assigned to White Plains.  Purdue Pharma, Inc.’s petition lists a Connecticut address (and it does not appear to have any actual operations in NY state), so it has no claim on a White Plains venue.

The catch is that the courthouse assignment is, in the first, instance, decided by the debtor in the CM/ECF system. For Purdue’s case to end up in White Plains, one of its attorneys had to have indicated in the CM/ECF that White Plains was the appropriate venue  that WP was appropriate.  What possible basis could there be for that claim?

Well, 198 days before filing for bankruptcy, Purdue Pharma, Inc., changed its service of process agent to one with a White Plains address. That’s a post office box for all purposes, and the local case assignment rule says that post office boxes don’t count.  Now remember who was in control of Purdue 198 days before the bankruptcy filing: the Sacklers, not the independent committee.

Lest you think that this change of process agent might have been routine corporate maintenance, around the same time Purdue also restated its certificate of incorporation. The restated certificate specified that a copy of any process served should be sent to the law firm of Davis, Polk & Wardwell LLP, attention Marshall S. Huebner. Mr. Huebner, is, of course, Purdue’s bankruptcy attorney. All of these changes were being done in preparation for bankruptcy, and they all occurred when the Sacklers were firmly in control of Purdue, meaning that the changes were being done for the benefit of the Sacklers.

Purdue’s claims about convenience notwithstanding, it’s obvious that the Sacklers carefully prepared to maneuver their case into the White Plains courthouse by (and this is to put it generously) stretching the local case assignment rules. You don’t go to that sort of effort just to save a two minute drive. The Sacklers didn’t want a White Plains venue. They wanted Judge Drain, and, at the very least, this sort of judge-picking creates an indelible appearance of impropriety that taints the entire case.

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