The Supreme Court has made a significant decision that will impact the future of Purdue Pharma, the maker of OxyContin, and the Sackler family. In a 5-4 ruling authored by Justice Neil Gorsuch, the court invalidated a multi-billion-dollar bankruptcy plan for Purdue Pharma that included broad protections for the Sacklers from civil lawsuits related to their role in the opioid epidemic.
The court’s decision was based on the interpretation of the bankruptcy code, which, according to Gorsuch, does not authorize a legal shield for non-debtors like the Sacklers that binds those who object to it. The ruling emphasized that it is up to Congress to make policy decisions regarding special rules for opioid-related bankruptcies, not the court.
The case, known as Harrington v. Purdue Pharma, involved a reorganization plan negotiated with state and local governments, as well as victims of the opioid epidemic. The plan included a commitment from the Sacklers to contribute up to $6 billion for opioid crisis abatement in exchange for the legal shield. Additionally, $750 million was allocated for compensation to victims.
Purdue Pharma expressed disappointment in the court’s ruling, calling it “heart-crushing” due to its impact on the settlement. However, the company clarified that the ruling only pertains to the scope of third-party releases in the bankruptcy plan and does not deter their goals of using settlement dollars for opioid abatement.
The Sackler family, who owned and operated Purdue Pharma during the height of the opioid epidemic, filed for Chapter 11 bankruptcy in 2019, putting a pause on numerous lawsuits seeking damages related to OxyContin. Despite not seeking bankruptcy protection themselves, the Sacklers were shielded from civil liability under the company’s bankruptcy plan.
The Supreme Court’s decision overturned a previous ruling by the U.S. Court of Appeals for the 2nd Circuit, which approved the plan by allowing the legal shield for the Sacklers. Justice Kavanaugh, in his dissent, criticized the majority’s decision for depriving opioid victims of monetary recovery and preventing communities from receiving much-needed funding for opioid addiction prevention and treatment.
The Purdue bankruptcy plan aimed to resolve lawsuits filed by various entities against the company for damages arising from the opioid crisis. In addition to the financial contributions from the Sacklers, the plan involved restructuring Purdue as a public benefit company dedicated to combating opioid addiction. Eligible claimants would receive payments ranging from $3,500 to $48,000.
While the agreement had the support of 95% of victims, several states, Canadian municipalities, indigenous tribes, and over 2,600 individuals opposed the plan due to the legal protections granted to the Sackler family. The plan was approved by a bankruptcy court in New York in September 2021, but faced challenges in federal district court.
The Supreme Court’s intervention came after the U.S. Trustee and other detractors raised concerns about the legality of the deal’s shield for the Sacklers. The district court in New York rejected the agreement in December 2021, leading to appeals and ultimately the Supreme Court’s decision to invalidate the plan.
The case has broader implications for other reorganization plans involving controversial entities, such as the Boy Scouts of America and the Catholic Church, which have faced lawsuits related to sexual abuse. The decision underscores the importance of legal protections and accountability in bankruptcy proceedings, especially in cases with significant public health implications.
Overall, the Supreme Court’s ruling on the Purdue Pharma bankruptcy plan sets a precedent for future cases involving corporate responsibility, accountability, and the role of the court in interpreting bankruptcy laws. It highlights the complexities of balancing financial reorganization with public health and justice for victims of crises like the opioid epidemic.
