The Supreme Court announced Thursday that it will pause a bankruptcy deal for Purdue Pharma that would have provided billions of dollars to those harmed by the opioid epidemic in exchange for protecting members of the wealthy Sackler family from further lawsuits related to on opioids.
The settlement involving Purdue, maker of the prescription painkiller OxyContin, addresses one of the nation’s biggest public health crises. The court placed the case on its docket and is scheduled to hear oral arguments in December. Experts say the ruling could also have important consequences for other cases that use the bankruptcy system to settle mass injuries claims.
Here’s what you need to know about the court’s decision:
Why did the Supreme Court decide to weigh in?
It’s rare for the Supreme Court to agree to hear a dispute in bankruptcy court, experts say, let alone deal with a settlement agreement in a mass-injury case.
One of the main reasons why so few such cases reach court is that all parties are under pressure to settle. Litigation all the way to the highest court in the land is a costly and time-consuming proposition. In the case of Purdue, it is the US Trustee Programa watchdog office within the Justice Department, which petitioned the Supreme Court to review the agreement.
Several other aspects of the case make it more likely that the Supreme Court will grant review, legal experts said. For one thing, the opioid crisis is an issue of national importance. And such agreements that allow third parties – in this case, the Sacklers, who control the company – to be shielded from most of the liability without declaring bankruptcy themselves are increasingly popular and divide the lower court
What are the broader implications for mass-injury cases?
If approved, the deal presents a road map for other businesses and plaintiffs to turn more often to bankruptcy courts as a tool to resolve mass-injury cases.
On the other hand, the Supreme Court’s decision to block the use of the so-called nonconsensual third-party release — a mechanism that allows the Sackler family to be protected from civil lawsuits — is likely to jeopardize the entire Purdue Pharma bankruptcy settlement deal , years in the making.
Experts say they will watch for some cases, including Revlon bankruptcy, as the Purdue case continues. A decision against using third-party releases could throw those deals into doubt.
How is the Supreme Court likely to view this case?
Legal experts say it is unclear how the court will view the dispute. On the one hand, the court’s conservative majority tends to appear favorable to business interests. However, several conservative justices, including Chief Justice John G. Roberts Jr. and Justice Clarence Thomas, have been wary of aggressive litigation tactics. In general, this court has shown skepticism toward lower courts acting without express authorization from Congress.
It’s also unclear how the liberal justices will vote, experts say. Court watchers say this could be the kind of procedural case that ends up splitting the vote, but not necessarily along political or ideological lines.
Why is the Justice Department the only one opposing Purdue’s plan?
The battle between money and principle is at the heart of the Purdue litigation.
Thousands of plaintiffs in Purdue, who include states, local governments, tribes and individuals, have waited years for settlement funds, the amount of which has dwindled as litigation costs rose and time passed. time. As the Sacklers raised their offers, even the last handful of states that had gone ahead with the deal gave up. Bankruptcy court is ultimately a marketplace of blunt pragmatism.
By the time the US Court of Appeals for the Second Circuit heard the appeal, $6 billion from the Sacklers was on the table and the only major party still opposed was the US Trustee Program.
Its objection is that if the deal is approved, the Sacklers would get the benefits of bankruptcy, such as foreclosing on all of Purdue’s opioid-related lawsuits, without its costs, such as giving up their fortune for investigation. People who might still want to pursue individual family members in civil court will be barred from doing so, without having a chance to weigh in. The US Trustee argued that their constitutional due process rights would be waived.
At this point in the Purdue litigation, only the Justice Department can continue to press these principles. Tribes, states, local governments and people suffering from the opioid crisis have immediate costs to address.
What does the plan offer states, local governments and tribes?
Under the settlement, Purdue will immediately pay $1.2 billion toward the bankruptcy settlement, with millions more expected in the coming years. Sackler will pay up to $6 billion over 18 years, with about $4.5 billion due in the first nine years.
According to a settlement with tribal plaintiffs, all 574 federally recognized Native American tribes are eligible for payments from a trust worth about $161 million.
Each state worked out a formula with its local governments for distributing Purdue’s money. But everyone should follow the guideline for using the money: that it will be mostly applied to initiatives intended to alleviate the opioid crisis, including addiction treatment and prevention.
What about individual victims?
Under the current plan, a trust of $700 million to $750 million would be set up for individual victims and families of people who became addicted to OxyContin or died from an overdose.
About 138,000 filed claims; payments are expected to range from approximately $3,500 to $48,000. Caregivers of about 6,550 children who experienced withdrawal symptoms from drug exposure in the womb could each receive about $7,000. Although the payouts are small, the Purdue plan is one of very few opioid settlements nationwide that earmarks money for individuals.
If the plan is approved, what will happen to Purdue?
Purdue Pharma, which introduced OxyContin in the late 1990s and aggressively marketed it, is going out of business. Its assets will be transferred to a new company called Knoa Pharma. That company, which is owned by creditors, will make addiction treatment and opioid recovery drugs for no profit. Knoa will continue to make opioids like OxyContin as well as non-opioid drugs, with profits going toward settlement funds.
Purdue, which no longer sells the opioids it makes, is overseen by an independent monitor. The Sacklers have not been on board since 2018.