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The Ephedra Bankruptcy Cases and the Twinlab Global Settlement Model
It began a little over four years ago, in late September 2003, with a simple but urgent telephone call from pioneering ephedra plaintiffs' attorney Anne Andrews (of Orange County, CA-based Andrews & Thornton) to one of the authors. The caller asked about the impact of the then-recently filed bankruptcy of TwinLab, an ephedra weight-loss product manufacturer and a significant player in the food and vitamin supplement industry, on that company's products liability insurance policies. Four major ephedra manufacturer bankruptcies later, the situation ended on Sept. 25, 2007, when the United States Bankruptcy Court for the Southern District of California entered an order in the ephedra-related Chapter 11 bankruptcy case of Metabolife International confirming Metabolife's plan of liquidation, which allowed for the settlement of over 150 fully insured and approximately 259 under-insured personal injury tort and wrongful death ('PITWD') claims against Metabolife and non-debtor third parties for an aggregate sum of approximately $90 million.
The Metabolife case was the last and largest in a series of ephedra-related bankruptcy cases/insolvency proceedings that commenced in 2003, just before the Food and Drug Administration's April 2004 ban of ephedra dietary products. These included such companies as TwinLab, Muscletech (a cross-border proceeding), NVE, Inc. and Nutraquest. The ephedra cases presented myriad unique and challenging issues, including the propriety of non-debtor third party releases and injunctions in aid thereof in cases dealing with mass torts other than asbestos; the disposition of purported class claims in bankruptcies; and the interplay of bankruptcy cases and federal multidistrict litigation proceedings. Despite the numerous challenges that plagued each ephedra case, Brown Rudnick, as counsel to official committees in all but one of the bankruptcy cases (Nutraquest), together with other bankruptcy parties and the constituent creditors that Brown Rudnick represented in each of the ephedra cases ' many of whose representatives (such as Ms. Andrews and other recognized plaintiffs' attorneys such as Steven Skikos of California's Lopez, Hodes, Restaino, Milman & Skikos; Ed Blizzard of Texas' Blizzard, McCarthy & Nabers LLP; Russell Briggs of Texas'
Fibich Hampton & Leebron LLP; Robert Rikard of South Carolina's Whetstone, Myers, Perkins & Young; and Robert Roden of Alabama's Shelby-Roden LLC) were instrumental participants ' formulated and successfully implemented global settlement architecture, which has become known as the TwinLab model. This architecture has now resulted in over $150 million in settlement proceeds for the benefit of hundreds of injured PITWD claimants across the country and made available meaningful and fair recoveries for other non-tort creditor constituencies.
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