Insys Therapeutics Trust reaches $175 million settlement with former company directors

By Sarah Lizee

Olympia, Wash., April 14 – Insys Therapeutics, Inc. successor Insys Liquidation Trust has reached a $175 million settlement agreement with former directors of the company, partially resolving civil litigation arising from its bankruptcy case.

The settlement includes a $175 million judgment against former directors Patrick Fourteau, Pierre Lapalme, Steven Meyer and Brian Tambi, a partial payment from their personal assets, and assignment of their claims to recover the balance from XL Specialty Insurance Co. and other insurers that issued D&O policies to Insys and its directors.

“Insys, a former public company, marketed and sold a highly addictive and inherently dangerous fentanyl spray to millions of people,” Reid Collins & Tsai LLP, which represents the trust, said in a Friday evening press release.

“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 media scrutiny.

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 2019.

The trust then brought the lawsuit against the former directors of the company, alleging that their failures of oversight enabled the unlawful sales and marketing scheme.

“The alleged misconduct by defendants in this case contributed to the opioid crisis in this country and the demise of the company,” Reid Collins partner Eric D. Madden, who leads the prosecution of the lawsuit, said in the release.

“The $175 million settlement, a substantial portion of the damages sought by the trust, is an excellent result for the company's creditors, the culmination of hard-fought litigation and extensive negotiations, and comprised in part from personal assets of the defendants.”

Madden further noted that this settlement is noteworthy as a successful resolution of a Caremark claim, which Delaware courts have described as “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.”

Reid Collins was retained as special litigation counsel to investigate and pursue claims on behalf of the trust in early 2021.

The trusts claims remain pending against John Kapoor and Michael Babich, the company's former chairman and chief executive officer, who were convicted on racketeering charges.

The specialty pharmaceutical company was based in Phoenix. The company filed bankruptcy on June 10, 2019 under Chapter 11 case number 19-11292.

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