# Purdue Pharma L.P.

> United States Bankruptcy Court, S.D. New York · August 10, 2021

URL: https://www.frixlaw.com/law-library/cases/10460523

## Case

- **Court:** United States Bankruptcy Court, S.D. New York
- **Decided:** August 10, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10460523

## Opinion text

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK

In re Chapter 11

PURDUE PHARMA L.P., et al., Case No. 19-23649 (RDD)

Debtors. (Jointly Administered)

MEMORANDUM OF DECISION ON REMAINING PORTION OF MOTION TO
UNSEAL FILED INFORMATION

Appearances:

THE REPORTERS COMMITTEE FOR FREEDOM OF THE PRESS, attorneys for Media
Intervenors Dow Jones & Company, Inc., Boston Globe Media Partners, LLC, and Reuters News
& Media, Inc, by Katie Townsend, Esq.

GREGORY P. JOSEPH LAW OFFICES LLC, attorneys for the Raymond Sackler Family, by
Gregory P. Joseph, Esq.

MILBANK LLP, attorneys for the Raymond Sackler Family, by Gerard Uzzi, Esq., Alexander B.
Lees, Esq., Ashley Satterlee, Esq.

JOSEPH HAGE AARONSON LLC, attorneys for the Raymond Sackler Family, by Mara
Leventhal, Esq., Benjamin Albert, Esq.

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP, attorneys for the Raymond
Sackler Family, by Theodore V. Wells, Jr., Esq., Roberto Finzi, Esq.

DEBEVOISE & PLIMPTON LLP, attorneys for Beacon Company, by Maura Kathleen
Monaghan, Esq., Jasmine Ball, Esq.

DAVIS POLK & WARDWELL LLP, attorneys for Debtors, by Marshall Huebner, Esq.,
Benjamin S. Kaminetzky, Esq., Gerard McCarthy, Esq.

PILLSBURY WINTHROP SHAW PITTMAN LLP, attorneys for the Ad Hoc Group of Non-
Consenting States, by Andrew Troop, Esq.

AKIN GUMP STRAUSS HAUER & FELD LLP, attorneys for the Official Committee of
Unsecured Creditors, by Arik Preis, Esq., Mitchell Hurley, Esq.

Hon. Robert D. Drain, United States Bankruptcy Judge
This memorandum of decision explains the Court’s reasons for resolving in news outlets’
favor the remaining contested issue in motions seeking the disclosure of redacted filings on the
docket in these cases, which requires determination of the “commercial information” exception
in 11 U.S.C. § 107(b)(1) to 11 U.S.C. § 107(a)’s grant of public access to such filings.
Background

Purdue Pharma, L.P. and twenty-three corporate affiliates (collectively, “Purdue” or the
“Debtors”) filed these chapter 11 cases on September 15, 2019. Purdue and members of the
Sackler family that own it have long faced media reporting over the scope of their role in the
widespread misuse of opioids that for years has constituted a national health crisis, including
coverage of litigation in this and other courts.1
From the start of these chapter 11 cases, in addition to the Debtors’ own review of
potentially avoidable transfers to members of the Sackler family or their investment vehicles,2
the Official Committee of Unsecured Creditors (the “UCC”) has extensively investigated
potential claims against Sackler family members. Indeed, one of the conditions to the Court’s

grant of a preliminary injunction of litigation of Purdue-related causes of action against Sackler
family members has been their compliance with this investigation, which the UCC coordinated
and shared with other parties that have taken an active role in these cases, such as ad hoc
committees of states and other governmental entities that have asserted claims against the
Debtors, as well as ad hoc committees of other claimants.

1 Memorandum of Law in Support of Motion to Intervene and Unseal Judicial Records by Dow Jones & Company,
Inc., Boston Globe Media Partners, LLC, and Reuters News & Media, Inc. [ECF No. 2022] ¶¶1, 4.
2 Any Sackler family members on the Debtors’ boards or in management resigned before the bankruptcy petition
date, and the board authorized an independent committee to investigate such transfers with the assistance of the
Debtors’ counsel. Report of Stephen D. Lerner, Examiner [ECF No. 3285], at 21.
As is typical with such investigations, there was no ongoing, piecemeal public disclosure
of them on the docket or otherwise as they were being pursued, although, again, parties playing
an active role in these cases were kept apprised. As is also common, the parties to the
investigations agreed on protective orders regarding the material to be produced in the
investigations, which gave them some comfort that information released in that process

designated as confidential would not be publicly disclosed by those bound by the orders without
the producing party’s right to seek to keep the material from the public record.
The investigation/discovery process was not uncontested. Although most discovery
disputes were resolved in conferences with the Court, the UCC filed motions to compel
production of certain information withheld by Sackler family members and businesses and the
Debtors under claims of privilege.3 The Motions to Compel were later fully resolved as to the
Debtors and sufficiently resolved as to the Sacklers without the need, to date, for a decision by
this Court.
Dow Jones & Company, Inc., Boston Globe Media Partners, LLC, and Reuters News &

Media, Inc. (the “Media Intervenors”) filed two motions, however, for orders directing that all
material filed in these cases under seal or in redacted form - essentially under the protective

3 Official Committee of Unsecured Creditors’ Motion to Compel Production of Purportedly Privileged Documents,
or for In Camera Review, Based on Failure of the Sacklers and the Debtors to Demonstrate Documents Identified on
Logs Are Privileged [ECF No. 1752]; Official Committee of Unsecured Creditors’ Motion to Compel Production of
Purportedly Privileged Documents, or for In Camera Review, Based on Good Cause, Crime Fraud, and At Issue
Exceptions to Claims of Privilege [ECF No. 1753] (together, the Motions to Compel”).
orders described above centering on the redacted information in the UCC’s Motions to Compel -4
be disclosed.5
All but one of the issues raised by the Unsealing Motions were resolved, either by the
parties’ agreement or a ruling by the Court directing unsealing, at hearings held on January 20,
2021 and February 17, 2021. This memorandum of decision addresses the remaining issue,

which was the subject of a third, evidentiary hearing on March 24, 2021: whether the previously
undisclosed names of current business counterparties and investment advisors to Sackler family
members or their businesses who characterize themselves as the Raymond Sackler Family are
subject to the “confidential commercial information” exception in 11 U.S.C. §107(b)(1) to the
disclosure mandate of 11 U.S.C. § 107(a).
Discussion
1. The Legal Standard
Under federal common law there is a strong policy and presumption in favor of public
access to pleadings filed on the courts’ dockets: “Under the common law, there is a long-
standing presumption of public access to judicial records.”6 This presumption is “no mere paper

tiger.”7 The “preference for public assess is rooted in the public’s first amendment right to know

4 The UCC Motions to Compel, along with supporting materials and exhibits, were filed in heavily redacted form.
The UCC explained in ¶ 6 of the Declaration of Mitchell Hurley, dated September 29, 2020 [ECF No. 1754] that it
filed certain exhibits under seal because they were designated as Confidential, Highly Confidential, or Professional’s
Eyes Only during discovery pursuant to the Second Amended Protective Order entered in these cases [ECF No.
1540].
5Motion to Intervene and Unseal Judicial Records by Media Intervenors Dow Jones & Company, Inc., Boston Globe
Media Partners, LLC, and Reuters News & Media, Inc. [ECF 2022] and Second Motion to Unseal Judicial Records
by Media Intervenors Dow Jones & Company, Inc., Boston Globe Media Partners, LLC, and Reuters News &
Media, Inc. [ECF No. 2188] (together, the “Unsealing Motions”). After hearings held on January 20, 2021 and
February 17, 2021, the Court entered an order granting, among other things, that portion of the Media Intervenors’
Unsealing Motion that sought leave to intervene in these cases [ECF No. 2404].
6 Nixon v. Warner Communications, Inc., 435 U.S. 589, 597 (1978).
7 F.T.C. v. Standard Financial Mgmt. Corp., 830 F.2d 404, 410 (1st Cir. 1987).
about the administration of justice.”8 “It helps safeguard ‘the integrity, quality, and respect in
our judicial system.’”9
For purposes of access to court filings in bankruptcy cases, Congress codified this policy
in 11 U.S.C. § 107(a),10 which provides:
(a) Except as provided in subsections (b) and (c) and subject to section 112, a
paper filed in a case under this title and the dockets of a bankruptcy court are
public records and open to examination by an entity at reasonable times
without charge.

The right of access established by § 107(a) is not absolute, however.11 Section 107(a)
states that documents filed with the bankruptcy court are public records and open to examination
“[e]xcept as provided in subsection[] (b) . . . under this title[.]” Section 107(b) states, in relevant
part to the present dispute:
(b) On request of a party in interest, the bankruptcy court shall, and on the
bankruptcy court’s own motion, the bankruptcy court may –

(1) Protect an entity with respect to a trade secret or confidential research,
development, or commercial information.

“[Section] 107(b) made an important change in the common law regarding public access
to bankruptcy court records. It is no longer left it to the bankruptcy court to balance the interests
of the public and private parties in determining whether to seal records from public view,”12 as
under the common law. The Second Circuit has held that the language of § 107(b) is
mandatory.13 “Thus, if the information fits any of the specified categories, the court is required to

8 Video Software Dealers Ass’n v. Orion Pictures Corp. (In re Orion Pictures Corp.), 21 F.3d 24, 26 (2d Cir. 1994).
9 Id. (quoting In re Analytical Sys., 83 B.R. 833, 835 (Bankr. N.D. Ga. 1987).
10 Id.
11 Id. at 27.
12 Motors Liquidation Co. Avoidance Action Trust v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Co.),
561 B.R 36, 42 (Bankr. S.D.N.Y. 2016) (quoting In re Food Mgmt. Group, LLC, 359 B.R. 543 (Bankr. S.D.N.Y.
2007)); see also Togut v. Deutsche Bank AG (In re Anthracite Capital, Inc.), 492 B.R. 162, 182-83 (Bankr. S.D.N.Y.
2013).
13 In re Orion Pictures, 21 F.3d at 27.
protect a requesting interested party and has no discretion to deny the application,”14 although
the court has discretion to “decid[e] how to protect commercial information” and fashion the
form of relief granted,15 with the court’s discretion to be exercised only as necessary to protect
against the applicable harm, such as by redaction instead of wholesale sealing.16 In addition, by
codifying the exceptions to disclosure in § 107(b), Congress precluded other exceptions that

might exist under common law.17 Relatedly, the plain meaning of 11 U.S.C. § 107(a) mandates
that all papers filed in a bankruptcy case are public records open to examination unless the court
decides to protect information in them under § 107(b).18 Decisions applying the common law to
sealing confidential information in only certain types of court records, such as Brown v.
Maxwell,19 therefore are inapposite.
The party asserting the right to protection under § 107(b) has the burden of proof to show
that one of the listed grounds exists.20 The nature of this burden is somewhat unclear. Courts
have stated that in keeping with the strong policy of public access to the courts’ dockets, §
107(b) should be applied only in “compelling or extraordinary circumstances,”21 quoting In re

Orion Pictures. for the proposition that “[i]n most cases a judge must carefully and skeptically
review sealing requests to ensure that there really is an extraordinary circumstance or a
compelling need.”22 On the other hand, the quoted language appears in Orion Pictures’
discussion contrasting the discretionary common law analysis with the “special rule” of §

14 Id.
15 In re Motors Liquidation Co., 561 B.R. at 42 (emphasis added).
16 In re Anthracite Capital, 492 B.R. at 180.
17 In re Food Mgmt. Group, 359 B.R. at 555; In re Anthracite Capital, 492 B.R. at 182-83.
18 In re Ionosphere Clubs, 156 B.R. 414, 433 n.7 (S.D.N.Y. 1983); In re Food Mgmt. Group, 359 B.R. at 544.
19 929 F.3d 41 (2d Cir. 2019)
20 In re Rapid-American Corp., 2017 Bankr. LEXIS 4266, at *3 (Bankr. S.D.N.Y. Dec. 15, 2017); In re Northwest
Airlines Corp., 363 B.R. 704, 706 (Bankr. S.D.N.Y. 2007).
21 See, e.g., In re Anthracite Capital, 492 B.R. at 174; In re Food Mgmt. Group, 359 B.R. at 554.
22 In re Orion Pictures Corp., 21 F.3d at 27.
107(b);23 indeed, the Orion court later noted that, in contrast to Fed. R. Civ. P. 26(c)(7), “[w]hen
congress addressed the secrecy problem in § 107(b) of the Bankruptcy Code, it imposed no
requirement to show ‘good cause’ before a discovery protective order could be granted -- even
when the material sought to be protected was ‘a trade secret or other confidential research,
development, or commercial information.’”24

But in a different though related sense, given the strong public policy in favor of open
court records, the “commercial information” exception in § 107(b)(1) is a narrow one.25 In
Orion Pictures, “commercial information” was defined as “information that would cause an
unfair advantage to competitors by providing them information as to the commercial operations
of the debtor.”26 That definition has arguably expanded in other contexts to cover “information
that could harm or give competitors an unfair advantage,”27 and has been held to include
information that if publicly disclosed would adversely affect the conduct of the bankruptcy
case.28 But it “is not a safe harbor for those who crave privacy or secrecy for its own sake,”29
and while “[i]n a sense, all information relating to a commercial transaction is ‘commercial
information,’30 and arguably any harm to a debtor or third party would give competitors an unfair

advantage, one must be careful not to extend the term too readily to any disclosure that would

23 Id.
24 Id. at 28.
25 In re Borders Group, Inc., 462 B.R. 42, 47 (Bankr. S.D.N.Y. 2011); In re Northwest Airlines Corp., 363 B.R. at
706.
26 In re Orion Pictures Corp., 21 F.3d. at 27.
27 GLM DFW Inc. v. Windstream Hldgs. Inc. (In re Windstream Hldgs. Inc.), 614 B.R. 441, 455 (S.D.N.Y. 2020); In
re Rapid-American Corp., 2017 Bankr. LEXIS 4266, at *3; In re Anthracite Captial, 492 B.R. at 177; Gowan v.
Watford Asset Mgmt. LLC (In re Dreier LLP, 485 B.R. 821, 823 (Bankr. S.D.N.Y. 2013) (emphasis added).
28 In re Lomas Fin. Group, 1991 U.S. Dist. LEXIS 1589, at *4-5 (S.D.N.Y. Feb. 11, 1991); In re Global Crossing
Ltd., 295 B.R. 720, 725 (Bankr. S.D.N.Y. 2003) (each relying on prejudice to the conduct of the bankruptcy case
that would result from the release of filed information). See also In re Hemple, 295 B.R. 200, 2002 (Bankr. D. Vt.
2003) (when request to seal involves not only allegedly confidential commercial information but also adverse effects
on the administration of the estate, the court should apply a balancing test under 11 U.S.C. § 105(a) as well as §
107(b)(1)).
29 In re Rapid-American Corp., 2017 Bankr. LEXIS 4266, at *3.
30 Id.
allegedly cause harm; a request under § 107(b)(1) should be supported by specific evidence, not
argument or conclusory statements in a declaration, to establish the exception.31
Lastly, the existence of a “so ordered” protective stipulation covering the information as
to the parties to such stipulation does not create an additional basis for shielding information
from disclosure if it is filed on the docket and other parties seek its unsealing; one of the grounds

in § 107(b) must be established.32
2. Application Here
In the light of the foregoing, at the end of the first hearing on the Unsealing Motions the
Court required the Sacklers to make a “particularized” showing to justify their requested
redactions,33 specifically directing them to provide “actual court filings that are sought to be
redacted and a further description of what the concern is in real terms that the Sacklers have with
regard to [them].”34
The Raymond Sackler Family filed its supplemental limited objection on February 7,
2021, reiterating the contention that they are entitled to redact from the privilege log materials

attached to the Motions to Compel the names of business counterparties and investment advisors
with whom they have ongoing commercial relationships (the “Current Counterparty
Information”).35 In support, they submitted the Declaration of Garrett Lynam, General Counsel
of Kokino LLC, a single-family office owned by the Jonathan Sackler family,36 and the

31 In re Borders Group, 462 B.R. at 43; In re Rapid-American Corp., 2017 Bankr. LEXIS 4266, at *4.
32 In re Anthracite Capital, 492 B.R. at 181-82; see also Loussier v. Universal Music Grp., Inc., 214 F.R.D. 174, 176
(S.D.N.Y. 2003), reconsideration denied, 258 F. Supp. 2d 308 (S.D.N.Y. 2003); In re FiberMark, Inc., 330 B.R.
480, 504 (Bankr. D. Vt. 2005).
33 January 20, 2021 Hearing Transcript, 120:13-15, 122:14.
34 Id.
35 Limited Objection of the Raymond Sackler Family to the First and Second Motions to Unseal Judicial Records by
Media Intervenors Dow Jones & Company, Inc., Boston Globe Media Partners, LLC, and Reuters News & Media,
Inc. (“Raymond Sackler Opp.”) [ECF No. 2360].
36 ECF No. 2360-3 (the “Lynam Decl.”).
Declaration of Frank S. Vellucci, Executive Vice President and General Counsel of Summer
Road LLC, a single-family office owned by the Richard Sackler family.37 Mr. Lynam attached
to his declaration newspaper articles intended to “show how disclosure of current non-public
commercial relationships resulted in economic harm to the Sackler family, particularly with
respect to investments that are intended to help fund the family’s share of any settlement in the

chapter 11 cases.”38 Mr. Vellucci attached two news articles and a forum comment to
demonstrate the “historical precedent for the negative consequences of the publication of a
business relationship with the Sackler family[.]”39 The Media Intervenors filed a combined reply
in response.40
The Court held a hearing on February 17, 2021 during which it heard further argument on
other aspects of the Unsealing Motions41 and thereafter entered an Order on February 22, 2021
covering all of the issues raised by those Motions with the exception of the issue addressed in the
February 7, 2021 supplemental pleading by the Raymond Sackler Family.42 At that hearing, the
Court gave the Media Intervenors the opportunity to cross-examine Messrs. Lynam and Vellucci
on their Declarations at an evidentiary hearing, which the Media Intervenors accepted.43

The Court held that evidentiary hearing on March 24, 2021,44 at which it admitted the
Declarations as Messrs. Lynam and Vellucci’s direct testimony, heard their cross-examination
and re-direct testimony and admitted the following exhibits.

37 ECF No. 2360-4 (the “Vellucci Decl.” with the Lynam Declaration, the “Declarations”).
38 Lynam Decl. ¶ 10.
39 Vellucci Decl. ¶ 5.
40 Combined Reply of Media Intervenors Dow Jones & Company, Inc., Boston Globe Media Partners, LLC, and
Reuters News & Media, inc. to the Raymond Sackler Family’s and Mortimer D. Sackler ICSP’s February 7
Objections to the Media Intervenors’ Motions to Unseal Judicial Records [ECF No. 2384].
41 February 17, 2021 Hearing Transcript [ECF No. 2448].
42 Order Granting in Part, Denying in Part, and Continuing in Part Media Intervenors’ Motions to Unseal Judicial
Records [ECF No. 2404].
43 Id.
44 March 24, 2021 Hearing Transcript (“3/24 Tr.”).
Exhibit 1 Declaration of Garrett Lynam

Exhibit 2 ECF No. 2441-3 titled “Amended Exhibit B [to the Declaration of Arik
Preis], Side B/Raymond-Side Initial Covered Sackler Persons’ Privilege Log
Entries Subject to UCC’s General Challenges Motion and Exceptions
Motion.”

Exhibit 3 Wall Street Journal article entitled “Hedge Fund Tosses Family That
controls Maker of OxyContin,” dated March 7, 2019.

Exhibit 4 New York Times article entitled “Purdue Pharma Payments to Sackler
Family Soared Amid Opioid Crisis,” dated December 16, 2019.

Exhibit 5 Declaration of Frank S. Vellucci.

Exhibit 6 VTDigger article entitled “Sackler family has largest stake in Mount Snow’s
parent company,” dated April 18, 2019.

Exhibit 7 Boston Globe article entitled “The Sackler family’s involvement in Mt.
Snow stirs controversy,” dated May 6, 2019.

Exhibit 8 Tetongravity.com comment thread: Boycott Any of the Peak “Resorts,”
dated April 21, 2019.

Mr. Lynam testified that Hildene Capital Management, LLC (“Hildene”) forced the
Jonathan Sackler and Richard Sackler families out of its managed hedge funds in late 2018.45 He
based his belief that this was for reputational concerns on hearsay statements in the Wall Street
Journal Article admitted as Exhibit 3 (although apparently not based on any news outlet’s
identification of a relationship between Hildene and the Sacklers).46 On cross-examination, he
also acknowledged that no one from Hildene communicated its reasons for the redemption to
him or others at the office,47 and that the article itself referenced a personal opioid related
tragedy affecting one of Hildene’s principals that might have uniquely influenced this decision.48

45 Lynam Decl. ¶5.
46 Id.; 3/24 Tr. 137:2-5.
47 3/24 Tr. 133:12-18.
48 Id. 132:13-25; 133:19-25.
The Wall Street Journal article reporting on the Hildene redemption also mentioned
another previously confidential Jonathan Sackler family investment counterparty, DeepCurrents
Investment Group, LLC (“DeepCurrents”).49 Shortly thereafter, DeepCurrents redeemed the
Jonathan Sackler family from its hedge fund, and Mr. Lynam testified that he believes that this
decision was directly related to the Wall Street Journal article.50 On cross-examination,

however, Mr. Lynam acknowledged that the basis for this belief was an interpretation of
DeepCurrents’ actions given by another employee of the Jonathan Sackler family office,51 as
well as, of course, the timing of the decision in relation to the article’s appearance.52 He also
declined to ascribe a motivation for DeepCurrents’ decision to the article’s reference to Purdue’s
consideration of filing for bankruptcy and the increasing number of lawsuits against members of
the Sackler family, which arguably might affect their underlying financial ability to support their
investment in the fund.53 The article also mentioned other counterparties, and the record is at best
unclear whether the article had an effect on any of those entities ceasing to do business with the
Sackler family.54

Mr. Lynam further testified that two days after a December 16, 2019 New York Times
article reporting that the Attorney General of the State of New York was seeking transparent
disclosure of the finances of the Sackler family,55 a financial intermediary notified Kokino that it
would terminate its business relationship with the Jonathan Sackler family in 2020 due to the
perceived impact on it if its relationship with the family became public.56 (Mr. Lynam stated that

49 Ex. 3.
50 Lynam Decl. ¶5; 3/24 Tr. 142:15-22.
51 3/24 Tr. 143:10-17.
52 Id. 177:8-11.
53 Id. 144:5-146:16.
54 Id. 149:16-152:5; 153:1-155:8. It appears that only one counterparty mentioned in the article ended its
relationship, and its reasons for doing so are the subject of speculation.
55 Ex. 4.
56 Lynam Decl. ¶8; 3/24 Tr. 156:5-20.
this termination resulted in the Jonathan Sackler not realizing $20 million in the form of forgone
investment profits in 2020.57) Again, however, Mr. Lynam testified that this reason was not
actually communicated by the counterparty but was, rather, an inference made by another
employee of the family office.58 Mr. Lynam also acknowledged that the New York Attorney
General’s possible investigation of the Sackler family’s assets might have been a legitimate

business concern of a counterparty.59
Finally, Mr. Lynam testified that he was aware or informed of at least six other financial
institutions that either terminated their banking or broker-dealer relationships with the Jonathan
Sackler family or decided to avoid or limit business with them between May 2019 and late
2020.60 Again, though, on cross-examination Mr. Lynam testified that none of these firms stated
their reasons for terminating or limiting the relationship, and none had been publicly identified as
having a relationship with the Sackler family before they acted.61
Mr. Vellucci similarly testified that he was informed that seven financial institutions
terminated their banking or broker-dealer relationships with the Richard Sackler family and

associated business entities or private foundations and one decided to avoid or limit such
business between April 2019 and February 2021,62 and that he believes that these actions were
motivated by concerns over the risk that such relationships would become public to the detriment
of their business.63 Like Mr. Lynam, though, Mr. Vellucci acknowledged that these
counterparties’ relationships with the Sackler family were not a matter of public knowledge

57 Lynam Decl. ¶8.
58 3/24 Tr. 158:3-159:15.
59 Id. 173:15-174:11.
60 Lynam Decl. ¶9; 3/24 Tr. 164:13-165:2.
61 3/24 Tr. 165:14-170:14.
62 Id. 189:9-17.
63 Vellucci Decl. ¶4.
before such actions.64 Also like Mr. Lynam, Mr. Vellucci testified that none of these firms stated
their reasons for terminating or limiting the relationship, with the exception of three that did so
based on an increased “financial risk” profile (although he viewed this as pretextual), and that his
view was based instead on inferences made by employees of Sackler family-owned firms.65
Mr. Vellucci further testified that after publication of a Richard Sackler family

investment in a ski resort in Spring 2019, there were calls for boycotts of the resort.66 Mr.
Vellucci could not state whether there in fact was an organized boycott, however, or even if there
was any negative financial impact from the articles.67
The Media Intervenors view the underlying premise of the Raymond Sackler Family’s
argument to be misguided as resting on an unduly broad interpretation of § 107(b)(1). They
contend that shielding investment counterparties from the potential reputational effects of public
association with the Sackler family is not the type of interest that § 107(b)(1) was meant to
protect, highlighting that “mere embarrassment, or harm to reputation based on [disclosure of]
non-scandalous, nondefamatory information is [insufficient]” for purposes of establishing an
exception under § 107(b).68 But the business harm to the Sackler families, not the possible

reputational harm to their counterparties, is the relevant harm here,69 although, that said, the
Current Counterparty Information does not fit as well into § 107(b)(1)’s use of the term
“commercial information” as the kinds of commercial information protected in the reported

64 3/24 Tr. 190:11-15.
65 Id. 191:13-204:2.
66 Vellucci Decl. ¶5.
67 3/24 Tr. 211:20-212:19.
68 In re Food Mgmt. Grp., 359 B.R. at 554.
69 It is worth noting in this regard that the Food Mgmt. Grp. case involved a request to seal, under 11 U.S.C. §
107(b)(2), allegedly “scandalous or defamatory matter,” not confidential commercial information under § 107(b)(1).
Id. at 552.
decisions.70 It has nothing to do with the Sackler families’ businesses with the exception that
some of their business opportunities may be limited based on associational reputation risk
purportedly felt by their counterparties or advisors, which might, in turn, impair the Sackler
family’s ability to fund a settlement under a chapter 11 plan in these cases. Nor is this harm a
bankruptcy-process-related harm, in contrast with the Global Crossing and Lomas decisions

cited above.71
In any event, the likelihood of other counterparties or advisors ceasing or limiting
business with the Sackler family because of associational publicity has not been sufficiently
established for the Raymond Sackler Family to carry its burden of proof regarding the Current
Counterparty Information. The testimony was largely speculative as to the named
counterparties’ motives for terminating business relationships and therefore doubly speculative
that still unnamed counterparties that are identified in the UCC’s Motion to Compel would
terminate business relationships upon the release of their names. It is true that some businesses,
unlike most lawyers, take the path of least resistance to avoid the risk of adverse publicity related

to their clients, and, if taken, such actions might harm the Sacklers and curtail their ability to
fund claims. But counterparties and advisors may also see the ugly light that such actions would
cast on their professions of loyalty to their customers, in contrast with the only limited luster to
their reputation that such actions might lend, and choose to continue their business relationships,
the bona fides of which, in and of themselves, have not been questioned.
Conclusion

70 See, e.g., In re Orion Pictures, 21 F.3d at 26 (terms of promotional agreement related to movie reviewed in
camera, where debtor would be negotiating other promotional agreements with other parties); In re Windstream
Hldgs., 614 B.R. at 455 (list of vendors debtor deemed critical to the debtor’s operations); In re Borders Group, 462
B.R. at 48 (list of key employees).
71 See n. 28 supra.
For the foregoing reasons, the Unsealing Motions are granted to end the redaction of
Current Counterparty Information. Counsel for the Media Intervenors shall submit an order to
chamber consistent with this memorandum of decision.
Dated: White Plains, New York
August 9, 2021
/s/ Robert D. Drain____________
United States Bankruptcy Judge

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10460523. Public record. Not legal advice.