REID COLLINS OBTAINS RULING TO RECOUP $6 MILLION IN LEGAL FEES FROM INSYS FOUNDER IN OPIOID-RELATED LAWSUIT

On August 18, 2023, U.S. Bankruptcy Judge John T. Dorsey ruled that ex-Chairman and founder John Kapoor should repay bankrupt opioid manufacturer Insys Therapeutics about $6 million in legal fees that the company provided for his unsuccessful criminal defense.

Reid Collins, representing trustee William Henrich and the Insys Liquidation Trust in civil litigation arising from the company’s bankruptcy case, obtained the win on summary judgment. The Court found that the trustee can claw back $6 million it paid for the criminal defense as Kapoor cannot claim his defense was successful after serving prison time for the charges.

Kapoor was convicted in 2019 of conspiring to bribe doctors to prescribe the fentanyl spray Subsys and defraud insurers into paying for the drug. He was released from prison in June after serving two years of a 5-1/2 year sentence.

Reid Collins partner Eric D. Madden leads the Reid Collins trial team and was quoted in Reuters coverage saying that Henrich was pleased with the decision and would continue to pursue claims against Kapoor for the broader damages that he inflicted upon Insys and its creditors: “This is only the beginning of holding Kapoor accountable.”

Insys, a former public company, marketed and sold a highly addictive and inherently dangerous fentanyl spray to millions of people, contributing significantly to the nation’s opioid crisis. The Trust, as the successor to Insys, alleges in its lawsuit that the company’s executives engaged in a multi-faceted unlawful scheme involving off-label marketing of the drug (non-FDA approved uses), titration of drug dosages (higher than FDA-approved doses), and payment of bribes and other kickbacks to doctors who prescribed the drug. Due to the alleged misconduct, Insys and its executives became the target of multiple criminal proceedings, class actions, and other civil cases, as well as intense media scrutiny, including an HBO documentary and feature stories on 60 Minutes, Frontline, and NBC News. Ultimately, several of the company’s executives were convicted of racketeering charges, and the company agreed to a $225 million settlement with the federal government before collapsing into bankruptcy.

In April 2023, the Reid Collins trial team and the Trust settled claims with the company’s former outside directors in a $175 million settlement, alleging that their failures of oversight enabled this unlawful sales and marketing scheme.

Reid Collins was retained as special litigation counsel to investigate and pursue claims on behalf of the Trust in early 2021, after an extensive interview process. The Insys bankruptcy case is captioned In re Insys Therapeutics, Inc., No. 19-11292 (Bankr. D. Del.), and the Trust’s lawsuit is captioned Henrich v. Kapoor, et al., C.A. No. 12696-JTL (Del. Ch.). The Trust’s claims in that lawsuit remain pending against Kapoor and Michael Babich, the company’s former Chairman and CEO, who were convicted on racketeering charges.

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Prior results do not guarantee a similar outcome.