The Supreme Court agreed Thursday to consider the government’s challenge to a bankruptcy settlement involving Purdue Pharma, which halted a deal that would have shielded members of the wealthy Sackler family from civil opioid lawsuits in exchange for payout of up to $6 billion to thousands of plaintiffs.
In doing so, the court sided with the Justice Department, which asked the court to halt the settlement plan while it considers a review of the settlement. The government argued that the family behind Purdue Pharma, maker of the prescription painkiller OxyContin, should not take advantage of legal protections for debtors in “financial distress.”
The court order, which was not signed, did not provide reasons and did not include public dissent, adds to the uncertainty surrounding the plan to compensate states, local governments, tribes and individuals hurt by the crisis. on opioids while offering protection for the Sackler family. The order specifies that the justices will hear arguments in the case in December.
The court’s decision to address the challenge to the bankruptcy settlement is the latest twist in the years-long legal battle over compensation for victims of the prescription drug crisis.
In May, the US Court of Appeals for the Second Circuit approved the settlement plan as part of the court’s review of the bankruptcy reorganization for Purdue Pharma. The company filed for bankruptcy protections in September 2019. At the time, both the company and members of the Sackler family faced lawsuits related to the opioid crisis.
While it is customary for companies seeking bankruptcy protection to be shielded from legal claims, an unusual part of this agreement is the extension of liability protection to the company’s owners. Sackler family members said they would not sign a settlement without an agreement protecting them from lawsuits.
The US Trustee Program, a Justice Department office that oversees the administration of bankruptcy cases, has long argued that bankruptcy judges do not have the power to permanently block lawsuits against company owners if the That owner did not seek personal bankruptcy protection.
The government argued that federal appeals courts were split on the issue and that the settlement agreement could set a troubling precedent.
“Allowing the appeals court’s decision to stand would leave a road map open for wealthy corporations and individuals to abuse the bankruptcy system to avoid mass tort liability,” the solicitor general wrote, Elizabeth B. Prelogar, in a brief for the government.
The appeals court, wrote Ms. Prelogar, is “pinned firmly on one side of a widely recognized circuit split regarding an important and recurring question of bankruptcy law.”
Ms. called The agreement was prefaced with “a release from liability of exceptional and unprecedented extent.” He argued that the agreement “applies to an untold number of claimants who did not specifically consent to the terms of the release,” an agreement that “constitutes an abuse of the bankruptcy system, and raises serious questions about constitution.”
In a statement released after Thursday’s decision, a spokesman for Purdue Pharma said the company is “confident in the legality” of the bankruptcy plan.
Members of the Sackler family are no longer on the board of the pharmaceutical company. Once the bankruptcy is complete, they will no longer be owners of the companyto be renamed Knoa Pharma and property of its creditors. However, the family remains wealthy. Some estimates put their fortune at $11 billion, most of it in offshore holdings.
Victims’ groups have expressed dismay at the government’s position, raising concerns that it will further delay payments to those injured.
“Regardless of how one feels about the Sackler family’s role in creating and exacerbating the opioid crisis, the fact remains that billions of dollars in relief and victim compensation funds depend on the confirmation and fulfillment of the existing plan,” a brief filed on behalf of a group of victims. “These funds, provided by members of the Sackler family in exchange for the releases, are critically needed now.”
Jan Hoffman contributed reporting.
