Supreme Court Halts Purdue Pharma's $6B Opioid Settlement

In a landmark 5-4 decision, the U.S. Supreme Court has blocked Purdue Pharma's proposed nationwide opioid settlement, citing abuse of bankruptcy protections. This ruling has significant implications for the Sackler family and the ongoing opioid crisis litigation.

Published June 28, 2024 - 00:06am

5 minutes read
United States
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The U.S. Supreme Court has issued a decisive 5-4 ruling, rejecting Purdue Pharma's $6 billion bankruptcy settlement plan aimed at resolving multiple lawsuits related to the company's role in the opioid crisis. The ruling, which sides with the Biden administration, asserts that the proposed settlement constitutes an abuse of the bankruptcy system designed for debtors in financial distress, rather than for the multibillion-dollar Sackler family, who own Purdue Pharma.

Justice Neil Gorsuch, writing for the majority, highlighted that the Sackler family had withdrawn $11 billion from Purdue Pharma before agreeing to contribute $6 billion towards the opioid settlement. The family had planned to transform Purdue Pharma into a nonprofit organization dedicated to addiction treatment; however, this proposal faced strong opposition. The U.S. Trustee Program, a watchdog of the Justice Department, intervened, arguing that the settlement terms required unanimous consent from all 60,000 personal injury claimants, despite garnering approval from over 95% of those who voted.

The Supreme Court's decision comes after years of intense litigation. In August, the court temporarily halted the bankruptcy proceedings, agreeing to review the Biden administration's challenge based on its merits. The Court's ruling has broad implications, setting a precedent on how the bankruptcy code is applied in cases involving substantial public health crises and private family wealth.

Purdue Pharma, renowned for producing the highly addictive pain medication OxyContin, faced extensive litigation due to its significant role in the opioid epidemic. The epidemic has devastated communities across the United States, claiming hundreds of thousands of lives since 2000. The Sackler family, while attempting to shield themselves from future claims, did not declare bankruptcy individually but instead sought protection through the company's bankruptcy filing.

Through this proposed deal, the Sacklers intended to shield themselves from civil liability without the consent of all affected parties. Justice Gorsuch, in his opinion, noted that the Sacklers did not place their total assets on the table for their creditors nor obtained the necessary consent from all impacted individuals. This aspect of the legal shield was a critical sticking point, and its rejection has now set the stage for renewed negotiations and potential further litigation.

The U.S. Trustee for the federal government echoed these sentiments, contending that bypassing the need for all victims' consent violated the bankruptcy code. The high court's decision to hear the trustee's objections signifies the broader legal concerns surrounding third-party release agreements in bankruptcy settlements.

The nationwide opioid crisis has involved various stakeholders including victims, families, hospitals, and state governments, all of whom have filed numerous lawsuits against Purdue Pharma. The extensive legal battles have led to widespread calls for accountability and restitution from those responsible for the crisis. The now-rejected bankruptcy plan would have seen Purdue Pharma emerge as a restructured entity focusing on addiction treatment, and the Sacklers would have contributed $6 billion towards compensation, opioid epidemic abatement, and making company documents public.

However, the provision of immunity from further lawsuits for the Sackler family without unanimous consent was deeply controversial. The bankruptcy courts' varying decisions reflected this complexity, particularly on whether such protections could extend to those who have not filed for bankruptcy themselves, like the Sacklers. With the Supreme Court's ruling, much uncertainty remains concerning the future path of these proceedings.

Purdue Pharma filed for bankruptcy in 2019, amidst mounting lawsuits over its aggressive marketing of OxyContin. The company was accused of downplaying the drug's addiction risks and pressuring doctors to prescribe it. The opioid epidemic, attributed significantly to opioid medications like OxyContin, has seen a drastic increase in overdose deaths, with opioids accounting for a substantial share. Synthetic opioids such as fentanyl have exacerbated the crisis in recent years.

In the decade leading up to Purdue Pharma's bankruptcy, the Sackler family reportedly received over $10 billion in payouts from the company. Despite ceasing payments to the family after the bankruptcy filing, the proposed settlement aimed to balance compensation for victims while providing necessary funds to combat the opioid crisis.

This setback means that all parties involved, including state and local governments, will need to return to the negotiating table to formulate a new settlement plan. Such a plan will need to address the Court's concerns, likely requiring a more equitable distribution of Purdue Pharma's assets and greater accountability from the Sackler family.

The case, Harrington v. Purdue Pharma, will remain a touchstone for future legal frameworks surrounding bankruptcy protections, third-party releases, and settlements related to public health disasters. The outcome will undoubtedly influence other major product liability cases, with the potential to reshape how corporate and individual responsibilities are managed within the legal and financial structures of the United States.

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