By: Donald L Swanson
On January 3, 2022, Reuters reports, under the heading “Judge orders mediation for Purdue, Sacklers over opioid settlement,” as follows:
- A U.S. bankruptcy judge orders mediation in the Purdue Pharma bankruptcy [fn. 1], calling for the company, the Sackler family members that own it and nine states to determine whether they can reach a new opioid litigation settlement by Jan. 14;
- That’s because a previously-mediated deal has been rejected on appeal—which deal provided the Sacklers protection against future opioid litigation in exchange for their contribution of $4.5 billion to Purdue’s reorganization plan;
- If the mediating parties do not reach agreement by January 14 [that’s tomorrow], the mediation will end and Purdue’s appeal of the prior deal’s rejection will continue; and
- U.S. Bankruptcy Judge Shelley Chapman will serving as Mediator—she’s the same person who mediated the prior settlement.
Managing a Tension
Mediation efforts often struggle with a tension between competing interests—it’s a tension that must be managed.
The tension is between needs for:
- free-flow of information between the parties and mediator; and
- confidentiality of relevant information.
To establish the mediation process and manage the tension, the bankruptcy Judge enters a nine-page “Order Establishing the Terms and Conditions of Mediation Before the Honorable Shelley C. Chapman” (Doc. 4261, dated 1/3/2021).
What follows is a summary of such Order.
A prompt resolution of pending issues is critically important.
Facilitation of negotiations by Mediator is in everyone’s best interests: the estate, creditors, and other parties in interest.
Bankruptcy Court has jurisdiction and authority to enter this Order.
Mediator will exercise her discretion in facilitating the negotiation of pending issues.
Mediating parties may negotiate among themselves without Mediator’s direct involvement.
Parties are to begin consulting with Mediator at once, either together or separately, on mediation processes.
Mediator will determine procedures governing the Mediation, in her sole discretion and consistent with terms of this Order.
Each mediating party may communicate separately with Mediator.
Prompt Action Required
Unless Mediator determines otherwise, the Mediation will terminate on January 14, 2022 at 11:59 p.m. (Eastern Time), if a resolution is not reached by that time. Such deadline may be extended by the Mediator to get settlement terms documented.
Parties must devote substantial time and resources to negotiations during the week of January 3, 2022. That includes constructive dialogue about open issues and exchanging proposals so an agreement in principle can be reached before the deadline.
Parties must also execute and agree to be bound by the prior protective order in this case.
Unless excused by Mediator, each party must, (i) attend and participate, by principals and attorneys, and (ii) make recommendations.
Mediator may request each party to participate with at least one principal selected by that party.
But Mediator may direct that a particular person participate for a particular party.
Upon Mediator’s invitation or further Court order, additional parties may participate voluntarily.
Mediator may ask the Court to require one or more additional parties to participate.
Any interested person may ask the Court for permission to participate, and the Court will base its decision on whether such participation will facilitate resolution.
All additional parties are subject to the provisions of this Order and shall agree to be bound by the protective order.
Mediator shall have no communication with the Court on the substance of the Mediation.
Mediator shall not disclose whether a verbal agreement is reached or a mediating party has refused to execute a written settlement agreement.
Mediator has no obligation to make written comments or recommendations.
Mediator cannot be compelled to testify or disclose any information concerning the Mediation in any forum or proceeding.
No one may:
- Call or subpoena Mediator as a witness or expert in any proceeding relating to the Mediation, its subject matter, or Mediator’s thoughts about the parties or their respective positions;
- Subpoena any notes, documents or other materials prepared by Mediator in connection with the Mediation; or
- Offer any statements, views or opinions of Mediator in connection with any legal proceeding.
No party shall be bound by anything said or done during Mediation, unless a party voluntarily agrees otherwise in a written and signed stipulation.
Mediation results are non-binding unless parties otherwise agree.
Any mediated settlement agreement, reduced to writing and signed, shall be binding against each signatory, subject to court approval requirements of § 363(b) and Rule 9019.
Bankruptcy Court retains jurisdiction to enforce any such settlement agreement.
All Mediation communications are confidential and must not be available to the public, including:
- discussions among parties or with Mediator during Mediation;
- information provided to Mediator or to parties in the course of Mediation; and
- correspondence, settlement proposals, counterproposals, term sheets, and offers of compromise produced for, as a result of, or in connection with Mediation;
Nevertheless, a party making a settlement proposal may agree to its disclosure, and this Order does not limit the ability of a party to:
- speak publicly (whether through court pleadings, court statements or otherwise) about issues in this case, without disclosing confidential Mediation information;
- comment on the opioid crisis and those involved in it; or
- comment on Debtor or this case, provided that doing so does not violate the protective order.
Confidential information is protected from disclosure and:
- shall not be used for any purpose other than the Mediation;
- shall be subject to protection under Rule 408;
- shall not be admissible for any purpose in any judicial or administrative proceeding (except to enforce a written settlement agreement); and
- if no such settlement agreement is reached, shall not be admissible anywhere.
Parties, their counsel and advisors may not disclose to any court any information or settlement proposal arising in connection with the Mediation.
Nothing prevents a party from:
- sharing with Mediator legal arguments to be raised, expert reports, discovery documents, the party’s work product, information available outside the Mediation, or pleadings filed or to be filed with a court;
- disclosing requested information to a governmental or regulatory entity with oversight or authority over such party, as required by law, provided the party furnishes advance written notice of such disclosure and provides only information that’s legally required; or
- disclosing to Mediator privileged or confidential information provided to that party under the protective order.
A party may provide information to Mediator that is subject to a privilege or protected from discovery (e.g., attorney-client privilege or work product doctrine) without waiving that protection.
Nothing waives, releases, compromises, or impairs any claims or defenses that a party has or may have, whether known or unknown, in connection with or relating to acts or omissions that took place prior to entry of this Order.
Nothing in this Order grants relief from automatic stay in the chapter 11 or from the Court’s preliminary injunction in a related adversary proceeding.
Promptly after termination of Mediation, Mediator is to file notice of the following:
- Mediator has conducted the Mediation;
- names of participants;
- whether participants acted in good faith; and
- whether and to what extent the Mediation was successful.
Lack of good faith exists when a party refuses to have an authorized decision maker attend a mediation session through conclusion.
Mediator and assisting staff shall be immune from claims arising out of acts or omissions incident to service as Mediator.
Debtors are authorized to take all actions necessary or appropriate to effectuate the relief granted in this Order.
To the extent any part of this Order conflicts with Local Rule 9019-1 or the General Order, the terms and provisions of this Order shall govern.
Notwithstanding B.R. 6004(h), terms and conditions of this Order are immediately effective and enforceable.
Bankruptcy Court retains jurisdiction over all matters arising from or related to implementation of this Order.
The Mediation Order summarized above illustrates (and models) how a tension between two competing interests can be managed during mediation.
The two competing interests are:
- need to protect rights of confidentiality; and
- need for free and open communications during mediation.
It will be interesting to see how this mediation effort, and the tension management, work out.
Footnote 1. Purdue Pharma, the maker of OxyContin, filed for bankruptcy in 2019 to deal with thousands of lawsuits accusing it and the Sackler family of fueling the opioid epidemic through deceptive marketing.
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