Rite Aid has received permission to access some of its $3.45 billion financial assistance as it proceeds through Chapter 11 bankruptcy. The retail giant lists many reasons for filing, but specifically cites lawsuits associated with the company’s alleged role in the opioid epidemic. According to Law360, Rite Aid seeks these funds to prevent layoffs while searching for a new buyer.
Rite Aid has been caught up along with a number of other pharmacies and retail entities in the latest wave of lawsuits that are intended to hold accountable all parties who contributed to the opioid epidemic, according to plaintiffs. These plaintiffs – including state attorneys general, individual citizens, and local governments – maintain that pharmaceutical companies failed in their duties to properly vet prescriptions and report suspicious prescription orders. In addition to Rite Aid, pharmacies belonging to Walmart, Walgreens, and CVS have been named as defendants in opioid lawsuits.
The majority of Rite Aid’s subsidiaries are seeking Chapter 11 bankruptcy protections. Over 120 legally distinct entities are filing for bankruptcy “under the case number assigned to the Chapter 11 case of Rite Aid Corporation.”
The sheer number of entities filing for bankruptcy protections may benefit Rite Aid in receiving protection from opioid lawsuits. A number of corporations who have sought bankruptcy protections to shield themselves from liability have failed to receive protections for a number of reasons. Most notably, bankruptcy courts note that the subsidiary used to absorb the opioid liabilities is not in financial distress since the parent company is not seeking Chapter 11 protections and is not claiming to be in distress.
In the case of Rite Aid, the entire organization and most if not all subsidiaries are seeking bankruptcy protections, seemingly precluding the argument that any part of the organization is not truly in financial distress. Bankruptcy Judge Michael B. Kaplan has authorized Rite Aid to access debtor-in-possession financing from Bank of America and allowed the company to continue paying taxes, wages, vendor fees, and utilities while the company restructures. A confirmation hearing has been set for February 20, 2024.
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