On Friday August 7th, the NAACP filed a motion to intervene in the chapter 11 bankruptcy cases of Purdue Pharma L.P. and its affiliated debtors (collectively, “Debtors”).[1] The Motion argues that “[i]ntervention is warranted because the NAACP has an interest to ensure that the settlement allocates appropriate relief to communities of color adversely affected by the Opioid Crisis. Attention has been disproportionately focused on white suburban and rural communities with little consideration for the communities of color that have similarly experienced harm by the [c]risis, including dramatic increases in opioid misuse, addiction, and death.”[2] These concerns are only exacerbated by the COVID-19 pandemic, the NAACP contends, which has led to economic contraction that has decreased states’ tax revenue, leading to concerns that the settlement fund may have a “disproportionate allocation and distribution” and “may be diverted for other use.”[3] By intervening in the bankruptcy case, the NAACP hopes to protect communities of color from the repetition of “the long-storied history of [the] government’s disproportionate treatment of communities of color.”[4]

Pursuant to Rule 2018(a) of the Federal Rules of Bankruptcy Procedure, “[i]n a case under the Code, after hearing on such notice as the court directs and for cause shown, the court may permit any interested entity to intervene generally or with respect to any specified matter.”[5]

The Motion contends that there are several factors the Court should consider in evaluating the NAACP’s request to intervene. In particular, the NAACP identifies three factors: (1) the nature and extent of the NAACP’s interests; (2) the degree to which the NAACP’s interests are adequately represented by other parties; and (3) whether the NAACP will significantly contribute to the full development of the underlying factual issues in the suit and to the just and equitable adjudication of the legal questions presented.[6] While acknowledging “that the states already have legal representation,” the Motion argues that intervention should be granted “to ensure that [settlement] funds are used, at least in part, to provide resources to assist communities of color plagued by the Opioid Crisis. These are communities that have already been disproportionately affected by the Crisis. Reasonable and legitimate concern therefore exists that this disproportionate impact will continue and that adversely affected communities of color are not and will not be adequately represented by the current counsel representing the states.”[7] It is also noteworthy that while the NAACP itself may not have a direct economic stake in the outcome of the proceedings, this fact alone should not necessarily be fatal to its request; Bankruptcy Courts in this Circuit have observed that “Bankruptcy Rule 2018 authorizes a broad and elastic interpretation of those entities entitled to intervenor status.”[8]

It is unclear at this time whether any of the key constituencies in the case will oppose the NAACP’s request. In its submission papers, the NAACP states that it has notified all relevant parties of its intent to request to intervene. In response, the NAACP received consent to the intervention from some of the parties, while some others neither gave their consent nor agreed not to oppose the motion. Notably, as reported by the Wall Street Journal (“WSJ”), the Debtors’ spokeswoman Michele Sharp said that the company would not oppose the NAACP’s motion.[9] The WSJ quotes Sharp as saying that “[Purdue Pharma] view[s] the NAACP’s motion as an effort to ensure that the funds distributed under Purdue’s bankruptcy plan to states and other entities will be used to address the opioid crisis and serve communities that need them most, including communities of color. We agree with the NAACP regarding these social goals.”[10]

The NAACP frequently uses intervention under Rule 24 as a legal tool to advocate for the advancement of communities of color. However, the NAACP does not appear to rely on this strategy as frequently in the bankruptcy context under Bankruptcy Rule 2018. In fact, we are not aware of any other instance in which the NAACP filed a motion to intervene in a bankruptcy of this size and scope. Thus far, the Department of Justice, states, tribes, and other local communities already have pulled their chairs up to the negotiation table.[11] And according to recent WSJ reporting, the DOJ is seeking as much as $18.1 billion from Purdue Pharma.[12] Despite the number of negotiating participants, the NAACP contends that none of the current lawyers representing the parties have advocated for limitations on how funds awarded to their clients can be used. [13] The NAACP also contends that none of the current lawyers representing the parties have asked for guarantees for a percentage of the funds to be used for comprehensive services for opioid crisis-affected communities of color.[14] Should the court allow the NAACP’s permissive intervention, this would change and the Purdue Pharma Chapter 11 process would account for all communities hurt by the opioid crisis.

The NAACP’s motion is scheduled for a hearing on August 26, 2020. Time will tell if the NAACP will have a seat at the table or will have to watch through the window.

[1] Motion of the National Association for the Advancement of Colored People (“NAACP”) to Intervene In Chapter 11 Case, Case No. 19-23649 (Bankr. S.D.N.Y. August 7, 2020) (“Motion”).

[2] Motion at 4.

[3] Id. at 5.

[4] Id. at 13.

[5] Fed R. Bankr. P. 2018(a). The Motion also argues that the NAACP ought to be allowed to intervene “as of right” pursuant to Rule 24 of the Federal Rules of Civil Procedure. Motion at 10. However, because the NAACP seeks to intervene in the bankruptcy case generally, and not in an adversary proceeding or proceedings, we analyze its request under Bankruptcy Rule 2018.

[6] Motion at 7.

[7] Id. at 8-9.

[8] In re Ionosphere Clubs, 101 B.R. 844, 853 (Bankr. S.D.N.Y. 1989).

[9] Peg Brickley, NAACP Wades Into Fight Over Purdue Pharma’s Role in the Opioid Crisis, The Wall Street Journal (Aug. 8, 2020 1:10 PM), https://www.wsj.com/articles/naacp-wades-into-fight-over-purdue-pharmas-role-in-opioid-crisis-11596906628.

[10] Id.

[11] Id.

[12] Sara Randazzo, Justice Department Seeks as Much as $18.1 Billion from Purdue Pharma, The Wall Street Journal (Aug. 4, 2020 10:47 PM), https://www.wsj.com/articles/justice-department-seeks-as-much-as-18-1-billion-from-purdue-pharma-11596595629.

[13] Motion at 10.

[14] Id.