RIDAY, JULY 19, 2013 Committee Seeks to Sue Others Possibly Liable in Meningtis Outbreak By STEPHANIE GLEASON | MORE ARTICLES BY AUTHOR The official committee of unsecured creditors has requested that the U.S. Bankruptcy Court in Boston formally declare that New England Compounding is insolvent so it can begin that process, according to court documents.

A group representing the victims in the New England Compounding Pharmacy Inc. Chapter 11 case is asking the bankruptcy court to open the door for lawsuits against other potentially liable companies, such as health-care providers who administered the injections responsible for a deadly meningitis outbreak last year.
The official committee of unsecured creditors has requested that the U.S. Bankruptcy Court in Boston formally declare that New England Compounding is insolvent so it can begin that process, according to court documents.

Some states--specifically Tennessee, where 153 cases of meningitis linked to the tainted injections were reported and 15 people died as a result--require this declaration of insolvency before permitting litigation against third parties in product liability cases to move forward.
However, the committee has asked that the bankruptcy court make this declaration apply exclusively to lawsuits filed as part of the consolidated proceeding in Massachusetts, in an effort to keep all of the litigation and all of the money under one umbrella.
The ultimate goal, the committee said in court documents filed Thursday, is to set up a process for these third parties to contribute funds to the bankruptcy estate in exchange for a release of their liabilities.
The trustee in charge of the administration of the bankruptcy case is in the process of gathering, through lawsuits and settlements, all of the funds available to victims and setting up procedures to fairly dole out that pool of money, a technique that also has been used in asbestos bankruptcy cases.
This request from the committee came on the heels of a lawsuit filed Wednesday in Tennessee.
That lawsuit didn't name New England Compounding Pharmacy, which is under bankruptcy protection and can't be sued. Rather, the lawsuit named three companies that share ownership with the pharmacy, the owners of the pharmacy, the hospital that administered the injection, a doctor, a nurse and a company that had inspected the pharmacy.
An exclusive insolvency declaration from the bankruptcy court will provide filers of this type of lawsuit with incentive to either file with or transfer into the consolidated proceeding in Massachusetts, the committee said.
The bankruptcy court will hold a hearing on the committee's request on July 24.
New England Compounding Pharmacy sought Chapter 11 protection on Dec. 21 after the Centers for Disease Control and Prevention identified the pharmacy as the origin of meningitis-contaminated medicines as part of an ongoing investigation.
As of this month, 749 people in 20 states had been sickened with meningitis as a result of the injections and 61 people have died.
The pharmacy said it entered bankruptcy hoping to set up a personal injury fund to "provide a greater, quicker, fairer and less expensive payout to its creditors than they could achieve through piecemeal litigation."
The court later appointed a trustee to carry out that task amid allegations that New England Compounding executives drained millions from the company during the last year.
Write to Stephanie Gleason at stephanie.gleason@dowjones.com.