The Supreme Court on Thursday rejected a central provision of a multibillion-dollar settlement with Purdue Pharma that would have funneled billions of dollars to help curb the opioid epidemic in exchange for protecting members of the wealthy Sackler family from related lawsuits.
In a 5-4 decision written by Justice Neil M. Gorsuch, the majority of justices held that the federal bankruptcy code does not authorize a liability shield for third parties in bankruptcy settlements. Justice Gorsuch was joined by Justices Clarence Thomas, Samuel A. Alito Jr., Amy Coney Barrett, and Ketanji Brown Jackson.
In a strongly worded dissent, Justice Brett M. Kavanaugh wrote that the “decision is legally wrong and devastating to more than 100,000 opioid victims and their families.” He was joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor and Elena Kagan.
The decision jeopardizes a carefully negotiated agreement Purdue and the Sacklers had reached in which family members pledged to donate up to $6 billion to states, local governments, tribes and individuals to address a devastating public health crisis.
It all but guarantees that members of the Sackler family, who controlled Purdue Pharma, the maker of the prescription painkiller OxyContin, will no longer be subject to a condition of the deal that had drawn significant criticism: immunity from liability in opioid-related lawsuits, even though it is not They had declared bankruptcy.
The United States Trustee Program, a Justice Department watchdog office, had asked the Supreme Court to intervene. The liability shield, which binds potential plaintiffs without their consent and offers broad legal protection for the Sacklers, was a misuse of a bankruptcy system intended to address “genuine financial hardship,” the office said.
The decision has broader implications for other bankruptcy settlements involving mass injury claims, including one between the Boy Scouts of America and sexual abuse victims. That’s because the liability shield underlying the Purdue deal has become increasingly popular in such deals.
The deal, which would have required the Sacklers to pay up to $6 billion over 18 years, with nearly $4.5 billion to be paid in the first nine years, underscores the difficult balancing act at play: ensuring that the money sought with urgency goes to victims, states and tribes. among others, despite broader concerns about freeing the Sacklers from further responsibility for the opioid crisis.
Purdue Pharma and the Sacklers have long been seen as helping spark the crisis because of the popularity of the company’s prescription painkiller, OxyContin.
In 2007, as the number of opioid overdose deaths rose, Purdue and three of its top executives pleaded guilty to federal criminal charges and were fined more than $600 million for misleading regulators, doctors and patients about the drug abuse potential.
The first opioid lawsuits were filed against Purdue Pharma around 2014, unleashing a flurry of litigation and intensified scrutiny over the role of members of the Sackler family, whose vast fortune has made them major donors to museums, colleges of medicine and academic institutions.
In 2019, Purdue filed for bankruptcy, which ultimately halted the lawsuits. At the time, the Sacklers faced about 400 related claims.
The measure was controversial from the beginning.
Under a deal approved by a bankruptcy judge in 2021, Purdue Pharma would dissolve; the company would donate billions of dollars to the opioid crisis, ending thousands of related claims; and the Sacklers would be guaranteed protection from civil liability.
A federal district judge later struck down the agreement, saying the plan had erred in granting such protections to members of the Sackler family.
But after the Sacklers increased their offer to about $1.73 billion, many of the parties that had opposed the plan signed on.
In May 2023, a federal appeals panel approved the latest version of the agreement. Judge Eunice C. Lee of the U.S. Court of Appeals for the Second Circuit, who wrote the decision, acknowledged the principles at play.
“Bankruptcy is inherently a creature of competing interests, compromises, and less than perfect outcomes,” Judge Lee wrote. “Because of these defining characteristics, complete satisfaction of all that is owed, whether in money or justice, rarely occurs.”
In July, the United States Trustee Program asked the Supreme Court to review the agreement. The plan, he said in his applicationconstituted “an abuse of the bankruptcy system.”
Purdue Pharma maintained that a ruling against it would cause significant harm. If the court rejected the settlement, he said, it would “harm victims and unnecessarily delay the distribution of billions of dollars to mitigate the opioid crisis.”
In August, the judges suspended the agreement and agreed to hear the case.
The justices’ questioning in December reflected the tension between the consequences for victims, states, tribes and local governments if the agreement unraveled and their concerns about allowing the Sacklers off the hook for future lawsuits.
Judge Brett M. Kavanaugh focused on the complication, asking the government why it would push to end a tactic approved during “30 years of practice in bankruptcy courts.”
In the opinion of victims and their families, he said, “the federal government, which has no interest in this,” questioned the agreement, putting at risk long-awaited payments to states to combat the crisis, as well as money to victims. and their families. Instead of focusing on a practical solution to securing funds to combat the opioid epidemic, he added, the government seemed determined to promote “this somewhat theoretical idea that they will be able to recover money from the Sacklers themselves in the future.”
Justice Elena Kagan joined him and pressed Deputy Attorney General Curtis E. Gannon on why the Justice Department sought to void the settlement despite the number of plaintiffs who had signed it.
“The support for this settlement is overwhelming, and among people who don’t love the Sacklers, among people who think the Sacklers are pretty much the worst people on Earth,” Justice Kagan said.
Jan Hoffman contributed reporting.
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