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PHILADELPHIA — Rite Aid Corp. has sued the Department of Justice to suspend the agency’s lawsuit against over the company’s alleged involvement in the nation’s opioid crisis.
The DOJ, which sued Rite Aid in March, agreed only to a “brief pause” of its suit after Rite Aid filed for Chapter 11 bankruptcy protection last month. That stance threatens to undermine the company’s restructuring efforts, Rite Aid said in a complaint filed in bankruptcy court in New Jersey.
The company asked Judge Michael Kaplan to rule that the agency’s lawsuit cannot proceed while Rite Aid is operating under Chapter 11, which would put the government on equal footing with other opioid plaintiffs whose suits were automatically stopped by the filing. The DOJ has argued that bankruptcy law does not stop it from exercising its “police powers.”
Rite Aid would not concede that point, and said Kaplan, who is overseeing the Chapter 11 proceedings, should rule on the dispute rather than the judge overseeing the DOJ’s lawsuit in federal court in Cleveland.
Rite Aid attorney Josh Sussberg said in court that the pharmacy chain’s bankruptcy protection filing is “not an opioid case” like Endo or Purdue Pharma’s, because the company’s significant retail costs create more pressure to reach a settlement quickly.
Rite Aid filed for Chapter 11 as part of a voluntary restructuring plan that the company says will reduce its debt, increase its financial flexibility and allow it to accelerate its ongoing business transformation.
In connection with the process, the retailer said it has received a commitment for $3.45 billion in new financing from certain of its lenders, and that the money should provide sufficient liquidity to support it through a reorganization.
Rite Aid appointed Jeffrey Stein as chief executive officer, chief restructuring officer and a member of the board of directors. He is the founder of Stein Advisors, which describes itself as “a financial advisory firm that provides consulting services to public and private companies experiencing significant challenges, including financial restructuring, increased regulatory oversight and emergence from bankruptcy.”
Elizabeth “Busy” Burr, who had served as interim CEO since January, remains a board member.
“Rite Aid has served customers and communities across our country for more than 60 years, and the important actions we are taking … will enable us to move ahead as a stronger company,” Stein said. “With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy.” In one court filing, the retailer listed 347 stores with unexpired leases that it wants to exit. The locations span metropolitan areas across the country, including New York; Los Angeles; Las Vegas; San Diego; Toledo, Ohio; Pittsburgh; and Portland, Ore. Rite Aid said its “store-portfolio rationalization process has accelerated in recent months,” and that during the year ended September 30 it had closed 210 stores. It was unclear if any of those are among the 347 units for which it wants to give up leases.
The company said the reorganization will provide a forum to sell its Elixir Solutions PBM to MedImpact. Under the terms of the agreement, MedImpact will serve as the “stalking horse bidder” in a court-supervised sale. Accordingly, the proposed transaction is subject to higher and better offers, and court approval. Elixir is operating normally and continuing to serve clients.
