U.S. Supreme Court Rejects Opioid Settlement That Protected Sackler Family | Court News

The ruling overturns a lower court decision that had upheld a plan to grant immunity to Purdue Pharmas' owners in exchange for paying up to $6 billion to settle thousands of lawsuits.

The U.S. Supreme Court blocked the bankruptcy settlement of Purdue Pharma, the maker of OxyContin, which would have protected its wealthy owners, the Sackler family, from lawsuits over their role in the deadly opioid epidemic in the States -United.

The 5-4 decision overturned a lower court ruling that had upheld a plan to grant immunity to Purdue Pharmas' owners in exchange for paying up to $6 billion to settle thousands of lawsuits accusing the company of illegally misleading marketing of OxyContin, a powerful painkiller introduced in 1996.

Thursday's ruling represents a victory for U.S. President Joe Biden's administration, which had challenged the deal as an abuse of bankruptcy protections intended for financially distressed debtors, not people like the Sacklers, who do not have not filed for bankruptcy.

Purdue Pharma filed for Chapter 11 bankruptcy in 2019 to settle its debts, nearly all of which stemmed from thousands of lawsuits alleging that OxyContin helped spark an opioid epidemic that caused more than half a million overdose deaths in the United States over two decades.

At issue in this case was whether U.S. bankruptcy law allowed Purdue Pharma's restructuring to include legal protections for members of the Sackler family, who did not file for personal bankruptcy. These so-called “non-debtor releases” were initially implemented in the context of asbestos litigation, but their use has been expanded by companies seeking to use these protections as a bargaining chip.

The Stamford, Conn.-based company estimates its bankruptcy settlement, approved by a U.S. bankruptcy judge in 2021, would provide $10 billion in value to its creditors, including state and local governments, individual victims of drug addiction, hospitals and others who sued the company.

The Biden administration and eight states challenged the regulation. All states dropped their opposition after the Sacklers agreed to contribute more to the settlement fund, but the U.S. Trustee, the Justice Department's bankruptcy watchdog, and some individual opioid-related plaintiffs maintained their opposition.

A group including more than 60,000 people who filed personal injury claims following their exposure to Purdue Pharma opioid products told the Supreme Court they support the settlement, including legal immunity for family members Sackler.

In upholding the settlement in May 2023, the Manhattan-based U.S. Court of Appeals for the 2nd Circuit concluded that federal bankruptcy law allows legal protections for non-bankrupt parties like the Sacklers in extraordinary circumstances.

The Court ruled that the legal claims against Purdue Pharma were inextricably linked to the claims against its owners, and that allowing the suits to continue to target the Sacklers would undermine the company's efforts to reach a bankruptcy settlement.

In August 2023, the Supreme Court stayed bankruptcy proceedings involving Purdue Pharma and its affiliates when they agreed to take up the administration's appeal of the 2nd Circuit's decision.

During the December proceedings, a Justice Department lawyer said members of the Sackler family took billions of dollars from Purdue Pharma before agreeing to contribute up to $6 billion to the opioid settlement, and argued that the agreement effectively allowed the Sacklers to decide how much they would contribute.

Lawsuits against Purdue Pharma and members of the Sackler family have accused them of fueling the opioid epidemic through deceptive marketing of its painkillers. The company pleaded guilty to misbranding and fraud charges related to the marketing of OxyContin in 2007 and 2020.

Members of the Sackler family have denied any wrongdoing but expressed regret over OxyContin's unexpected involvement in an opioid crisis. They said in May 2023 that the bankruptcy settlement would provide substantial resources to people and communities in need.

Purdue Pharma accused the U.S. trustee of single-handedly delaying billions of dollars that should be used to compensate victims, reduce the opioid crisis in communities across the country and provide overdose rescue medications.

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