The Supreme Court has put Purdue Pharma’s bankruptcy settlement of $6bn on hold. This would have shielded members of the Sackler Family who own the company against future lawsuits related to the US opioid epidemic.
The court granted a request on Thursday to suspend a May decision of the US Court of Appeals Second Circuit, which found that the settlement could shield parties who were not in bankruptcy in certain circumstances from future liability.
The Supreme Court announced that it will now examine the question whether bankruptcy code authorizes such an action, also known as “third party releases”. The Supreme Court will hear oral arguments on December.
The Sackler family members were disappointed by the decision. They had hoped to move on from their legal troubles and reach a settlement agreement that would protect them from future opioid claims.
Purdue Pharma, the company that made the powerful opioid painkiller OxyContin filed for Chapter 11 bankruptcy at the New York court in 2019. This was amid a wave litigation regarding its role in the Opioid Crisis, which has claimed the lives of almost 1mn Americans. The Sackler family, who owns the company, never filed for bankruptcy.
Federal appeals courts are divided on whether bankruptcy laws allow third-party releases.
The Department of Justice asked the Supreme Court not to approve the multi-billion dollar settlement with Purdue, arguing it was an abuse of legal protections meant for people in “financial hardship” and not rich people.
Purdue asked last week the Supreme Court to deny the DoJ’s request, arguing it would “take billions of dollars from opioid abatement programs that are sorely required” and rob victims of “meaningful recovery”.
In 2021, a bankruptcy court judge approved a settlement that required the Sacklers to pay Purdue $4.5bn. Later that year, a federal judge set the settlement aside.
After the initial deal, several states and dissident victim’s groups supported an increase in the Sacklers’ financial contribution to $6.5bn. The opponents of the original agreement pointed out that an analysis in bankruptcy court showed that the Sacklers, who own Purdue, had taken over $10bn from the company between 2008-2017.
Samir Parikh is a professor of bankruptcy law at Lewis & Clark Law School. He said that the Supreme Court had in the past reviewed bankruptcy practices fundamentally and found these unconstitutional.
He said, “This could be a case like that.” But losing non-consensual releases from third parties would be detrimental for victim recovery. Remember that the Purdue victims voted for the plan and the releases, because they allowed a meaningful recovery in a relatively short time frame. “Without the releases, these victims will be thrust into a much more chaotic situation.”
A spokesperson for the family who lost Mortimer Sackler refused to comment. The family of Raymond Sackler didn’t immediately respond to a comment request.
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