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Judge Robert Drain, Overseer of Mega Bankruptcies, to Retire

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(Bloomberg) -- U.S. Bankruptcy Judge Robert Drain, an acerbic jurist who oversaw high-profile reorganizations including those of Sears Holdings Corp. and Purdue Pharma LP, plans to retire next year.

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Drain intends to step down on June 30, 2022, according to a statement. He joined the bench in the Southern District of New York in 2002 after a career in private practice, where he was a partner at the law firm of Paul, Weiss, Rifkind, Wharton & Garrison.

“It seemed like a good time for a change,” Drain said in an email, noting that he’ll be turning 65 next year and will have then been on the bench for more than 20 years.

Drain has for years been the lone bankruptcy judge in White Plains, New York, just north of New York City, giving rise to a legal quirk allowing troubled companies to ensure Drain would oversee their bankruptcies if they set up shop and file their paperwork in his venue. So-called forum shopping has at times drawn the ire of legal scholars and politicians alike.

As a referee of multibillion dollar bankruptcy cases, Drain has attained an almost-mythical status among restructuring professionals and investors who specialize in troubled companies. He’s known to lambaste lawyers for wasting his time and delivers lengthy rulings from the bench on key issues. Recently, he spoke nearly without pause for more than six hours while deconstructing his rationale for a decision.

Drain is not shy about criticizing lawyers that were ill-prepared, or their clients’ lack of understanding of the U.S. Bankruptcy Code. He once blamed rising fees in bankruptcy cases on hedge fund managers and other distressed debt investors and their lawyers.

“A lot of these people don’t know what they are doing,” Drain told an audience of bankruptcy lawyers and their clients at a legal conference in Washington, D.C. in 2016.

Blockbuster Bankruptcies

Drain’s courtroom in Westchester County has played host to a number of blockbuster bankruptcies in recent years, like the fallout from rural phone operator Windstream Holdings Inc.’s fight with Aurelius Capital Management, and former Sears Chief Executive Officer Edward Lampert’s work to salvage what he could from his failed investment in the retailer. Bidding wars took place in the hallways outside his courtroom.

During the Sears case, Drain pushed creditors to compromise with the company in a deal that would keep the once-venerable retailer from being shut down. He clashed with creditors who had suggested quickly liquidating the chain was better than reorganizing. When attorneys for the creditors complained about the auction process for Sears, Drain said all the lawyers in the case knew they could raise any serious concerns about unfairness while the sale was still being negotiated, instead of complaining afterward.

Drain recently approved a landmark opioid settlement proposed by Purdue Pharma, the maker of OxyContin, after a nearly two-year bankruptcy process. He called the case the most complex matter he has ever overseen as a bankruptcy judge and occasionally chastised the media’s depiction of the events.

“One cannot put a price on a human life or an injury such as opioid addiction. And yet, that’s what courts do with respect to personal injuries,” Drain said during his ruling on the Purdue Pharma settlement. At one point, he called an aspect of the case’s outcome “a bitter result,” before spelling out “B-I-T-T-E-R.”

Drain also presided over bankruptcies including Frontier Airlines Inc., Hostess Brands Inc., Frontier Communications Corp. and Fullbeauty Brands Inc., the last of which once marked the fastest Chapter 11 case in history. He’ll remain active with cases until his retirement date, according to the statement.

(Adds comment from Drain in paragraph three.)

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