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Bankruptcy Court Gives Pre-Petition Antitrust Claims Administrative Priority Status
As we ring in the New Year, we hope for a "fresh start" out of the pandemic, but recognize that challenges remain, including the latest variant. In the restructuring bar, we see new approaches being attempted to address old problems. And courts continue to be asked to adjudicate these matters. One of the hottest areas of law practice today is antitrust. So today we decided to report on a decision issued by U.S. Bankruptcy Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware in In re Mallinckrodt, Case No. 20-12522 (JTD), where the court was asked to decide whether claims arising from pre-petition antitrust cases filed against the debtor could constitute post-petition claims entitled to administrative priority status. In a decision issued on Oct. 19, 2021, the court ruled they could, and the public policy that favors a "fresh start" for debtors would not preclude damages from post-petition sales of products in violation of federal antitrust laws from receiving administrative expense priority.
The Debtors Allegedly Unlawful Skyrocketing Product Pricing
The opinion recites that Mallinckrodt PLC and its affiliated Chapter 11 debtors (the debtors) operate a global pharmaceutical company. The opinion notes that in addition to less controversial drugs, the debtors produced and sold opioids, and had been named in over 3,000 opioid-related lawsuits asserting claims the debtors overstated the benefits of opioids while understating their risks and marketed the drugs in a manner that contributed to the national opioid addition crisis in the United States. Defending the lawsuits had become cost prohibitive, contributing in large part to the debtors' need to reorganize.
Separate from the opioids, the debtors' flagship and most valuable product was H.P. Acthar, a drug used in the treatment of infantile spasms, lupus, rheumatoid arthritis and certain other conditions. At the time of the opinion, a vial of Acthar cost over $38,000, and sales of the drug represented 30% of the debtors' overall business.
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