In the ongoing process of settling opioid litigation in numerous different proceedings, one of the cases has reached settlement. The opioid defendant is Mallinckrodt PLC, a manufacturer of generic opioids.

After being sued by many tribal, state, and local governments, and by other plaintiffs, Mallinckrodt declared bankruptcy in October 2020. The case was filed in the bankruptcy court in Delaware. Upon the filing of the bankruptcy proceeding, all litigation against Mallinckrodt was automatically stopped.

Purdue Pharma also declared bankruptcy, and that is a separate proceeding. Click here to read about the Purdue bankruptcy proceeding. Because the Purdue bankruptcy case is larger, much of the model for these two bankruptcy settlements was developed in that case. In each case, the major groups of plaintiffs began negotiations among themselves and the defendants in each case, Purdue and Mallinckrodt, to agree on a restructuring plan to allocate and distribute the bankrupt company’s assets. In short, the bankruptcy restructuring plan for Mallinckrodt is modeled on the plan negotiated among the same creditors in Purdue.

The assets of Mallinckrodt will be turned over to the “public creditors,” which are tribal, state, and local governments. These governments have reached agreements with various groups of “private creditors,” including individual people with personal injury claims, hospitals, third-party payors (such as insurance companies) and other private groups with claims against Mallinckrodt.

The plan provides for agreed-upon amounts to be paid to each group of private creditors. The public creditors will keep the balance of the assets and distribute those assets among themselves pursuant to various agreements they negotiated.

As in the Purdue bankruptcy, federally recognized Tribes will collectively receive an approximately 3 percent share of the total amount going to state and local governments.

The Mallinckrodt is the smallest of the cases, but the first to be resolved. In the Mallinckrodt bankruptcy, the total amount that will be shared among all the participating Tribes is estimated to total approximately $20-30 million, and it will be paid over 8 years. Pursuant to the settlement, these funds may be used only for purposes of abatement of the opioid epidemic.

The bankruptcy court in Mallinckrodt gave final approval to the restructuring plan on March 2, 2022. A copy of the restructuring plan is here and a copy of the bankruptcy court’s confirmation order is here. These documents will govern the distribution of funds.

The funds to be paid to the Tribes from the Mallinckrodt bankruptcy estate will be received by a Tribal Abatement Fund Trust (or TAFT). The Mallinckrodt trust fund will be called TAFT II (to distinguish it from other identically structured trusts that will be set up to receive funds from other tribal opioid settlements).

The TAFT II trust will be administered by three directors appointed by the Mallinckrodt bankruptcy court (and who are the same directors who will administer the settlement trusts for the other tribal opioid settlements). More information about the directors can be found here. The trust agreement setting up TAFT II is here, and the “Trust Distribution Procedures” (or TDP) that govern the payment of funds to Tribes by TAFT II is here. These funds will be allocated among federally recognized Tribes pursuant to an inter-tribal allocation matrix that was first developed in the context of the Purdue bankruptcy and has also now been approved by the bankruptcy court for use in the Mallinckrodt bankruptcy. The allocation matrix is attached to the TAFT II TDP and can be found here.

The Directors are moving deliberately to set up the TAFT II trust. Funds from the initial payment will be invested in creating all of the financial infrastructure for distribution of the funds, paying contactors and service providers, and developing a simple reporting system for Tribal governments so that the court can be assured that the funds are being spent for the court-ordered purpose (abatement of the opioid epidemic). Once the infrastructure is developed, initial payments can be sent to Tribal governments, but some time will be required to develop this system, test it, and insure the proper distribution of funds. Distribution of funds is likely to begin in 2023 and one or more larger settlements are likely to be completed by then as well.

THE BANKRUPTCY PLAN AND TRUST DISTRIBUTION PROCEDURES CAN BE REVIEWED BY CLICKING HERE.

In the meantime, be sure the Tribal Settlements Administrator, BrownGreer PLC, has your contact information so they know who to contact about wiring funds or mailing a check. Click here to log on to the Portal to check your contact information or email nato@browngreer.com.