NECC: Fungal Meningitis Outbreak

Bankruptcy Judge Asked to Approve $100M Settlement

BOSTON (May 6, 2014) – – Judge Henry J. Boroff of the U.S. Bankruptcy Court for the District of Massachusetts (Eastern Division) has been asked to approve settlements between the owners of the bankrupt New England Compounding Pharmacy (“NECC”) and Chapter 11 Trustee Paul D. Moore.  The Official Unsecured Creditors’ Committee (the “Committee”) and the Plaintiffs’ Steering Committee (the “PSC”) in multidistrict litigation involving NECC pending in Federal Court in Boston (the “MDL”) played key roles in the settlement negotiations and joined in supporting approval of the settlements.  Under the settlements, NECC’s owners and insurers and one of its affiliates will contribute an aggregate amount estimated to exceed $100 million to a compensation fund to be distributed to NECC creditors, including those who died or suffered significant injuries after receiving injections of tainted steroids traced to NECC.

NECC’s owners will contribute nearly $50 million in cash to the victim compensation fund.  Those cash payments are expected to entitle the owners to tax refunds projected to total over $20 million, and substantially all of those refunds will also go to the common fund.  NECC’s owners will further contribute the proceeds of NECC’s and a related company’s insurance policies, totaling nearly $29 million, as well as proceeds from the sale of a related business, which may add an additional $10 million to the fund.

The Centers for Disease Control estimates that well over 700 people nation-wide have been diagnosed with fungal meningitis or other serious injuries.  At least 64 deaths have been confirmed.

Attorney Anne Andrews of Irvine, California, co-chair of the Committee, explained:

This settlement will bring hope to the lives of so many victims who lost loved ones and those who still are suffering the consequences from this horrible disaster. As we continue to mediate with the other parties in the case, we know that Paul Moore, the Trustee, has a vision that funds will be distributed quickly to victims and their families. The focus will now turn towards recovering additional compensation from other responsible parties who also played a significant role in causing the fungal infection epidemic.

“These settlements mark a critical milestone in compensating the victims of this tragedy for their horrible injuries and the deaths of their loved ones,” added David Molton and William Baldiga, partners at the law firm Brown Rudnick LLP and counsel to the Committee.  “These settlements will likely be followed by additional settlements with other defendants, and the Committee and the Trustee are committed to confirming a bankruptcy plan by year’s end that will enable these significant settlement monies to be promptly distributed to victims.”

Pursuant to the bankruptcy process, Judge Boroff will be asked to approve the settlements and, later, to confirm a plan implementing certain terms of the settlement agreements.  The hearing to approve the settlements is expected to be held shortly.

Information regarding the bankruptcy case and copies of the settlement documents can be found at

CBS News Boston and New York have provided extensive coverage of the NECC litigation. For the most recent broadcasts, click on the videos below:

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