The Supreme court on Thursday blocked, for now, a multi-billion dollar bankruptcy settlement by Purdue Pharma which will protect its Sackler family owners from civil lawsuits related to the opioid crisis.
The Supreme Court also said it will hear the US Bankruptcy trustee’s challenge to the settlement by Purdue, the maker of the opioid OxyContin, along with all 50 US states, and other parties.
Thursday’s order ordered the parties to file briefs on a question of whether bankruptcy courts can approve a Chapter 11 reorganization that discharges the claims of non-debtors against third parties. who did not borrow “without the consent of the claimants.”
None of the court’s justices dissented from the order granting the requested hold, which was requested by the Department of Justice.
The DOJ argued in a court filing that releasing the Sacklers from civil liability “is not permitted by the Bankruptcy Code, constitutes an abuse of the bankruptcy system, and raises serious
constitutional questions.”
The Sackler family agreed as part of the settlement to contribute $6 billion to it over the next two decades. The agreement also obligates Purdue to contribute more money after it becomes another entity whose proceeds will be used to alleviate the opioid abuse crisis.
The case will be argued in December in the high court.
Purdue Pharma said, in a statement, “We are confident in the legality of our nearly universally supported Plan of Reorganization, and hope that the Supreme Court will agree.”
“However,” the company added, “we are disappointed that the US Trustee, despite having no concrete interest in the outcome of this process, has single-handedly delayed the billions of dollars that should be used for victim compensation, reducing the opioid crisis for communities across the country, and overdose rescue medications.”
A spokeswoman for some of the Sackler settlement parties did not immediately respond to a request for comment.
Purdue reached the agreement in May with US states and thousands of local governments.
Under the deal, the Sackler family agreed to relinquish control of the company, which is based in Stamford, Connecticut.
In May, the 2nd US Circuit Court of Appeals in New York approved the plan.
Bankruptcy trustee William Harrington asked the Supreme Court to halt the settlement and hear his challenge to the deal.
Solicitor General Elizabeth Prelogar, who represented Harrington in seeking the stay, wrote in a filing, “Allowing the appeals court’s decision to stand would leave a road map for wealthy corporations and individuals who abuse the bankruptcy system to avoid broad tort liability.”
