The Sackler family, who made billions of dollars from the addictive OxyContin painkiller, cannot shield its money from opioid victims’ claims in the bankruptcy deal for drugmaker Purdue Pharma, the Supreme Court ruled Thursday.
The ruling upends a complicated deal meant to compensate the opioid victims by having the Sacklers give some of their wealth to Purdue Pharma, their company, and then have Purdue declare bankruptcy and pay on the hundreds of thousands of claims against it.
The catch was that the bankruptcy judge had to issue an order releasing the family from further claims by opioid victims, effectively shielding some of the family’s wealth.
Justice Neil M. Gorsuch, writing for the majority in the 5-4 ruling, said the agreement violates bankruptcy law.
“Describe the relief the Sacklers seek how you will, nothing in the bankruptcy code contemplates (much less authorizes) it,” Justice Gorsuch wrote.
Justice Brett M. Kavanaugh, writing in dissent, said the result would be devastating to “more than 100,000 opioid victims and their families” who have been waiting for the bankruptcy deal to be finalized so they can receive payouts.
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He said the bankruptcy judge worked out an admirable deal that gave the families something and gave funds to state and local governments to use in opioid addiction treatments.
“With the current plan now gone and non-debtor releases categorically prohibited, the consequences will be severe,” Justice Kavanaugh wrote. “Without releases, there will be no $5.5 to $6 billion settlement payment to the estate, and ‘there will be no viable path to any victim recovery.’”
OxyContin was initially billed as a powerful, nonaddictive pain reliever, but a Purdue affiliate admitted in a 2007 felony guilty plea that the drug was misbranded.
Along the way, the pills helped fuel an opioid epidemic that claimed hundreds of thousands of lives and enriched international criminal cartels.
Last year, fentanyl and other synthetic opioids led to an estimated 74,702 deaths, down roughly 1,500 from 2022. It was the first decrease in opioid deaths in years.
The high court described the opioid epidemic as “one of the largest public health crises in this nation’s history.”
Facing a tidal wave of lawsuits, Purdue filed for bankruptcy in 2019, but not before the Sackler family engaged in what it called “milking” the company, siphoning off as much as 75% of its assets, or $11 billion.
As part of the bankruptcy deal, the Sacklers would return as much as $6 billion, subject to being released from future claims.
Most of the victims and states that joined the lawsuit signaled approval of the deal. They were in line for compensation payments of $3,500 to $48,000.
The U.S. trustee for the federal government opposed the settlement, saying that releasing the Sacklers from liability without the consent of all parties would violate the bankruptcy code.
Justice Gorsuch agreed. He said bankruptcy protections apply only to those who put all their assets on the table in proceedings, at least in cases where the creditors don’t consent.
He was joined in his ruling by Justices Clarence Thomas, Samuel A. Alito Jr., Amy Coney Barrett and Ketanji Brown Jackson.
Justice Kavanaugh’s dissent was joined by Chief Justice John G. Roberts Jr. and Justices Elena Kagan and Sonia Sotomayor.
They urged Congress to step in and rewrite the law to “fix the chaos that will now ensue.”
“The Court’s decision will lead to too much harm for too many people for Congress to sit by idly without at least carefully studying the issue,” Justice Kavanaugh wrote.
A spokesperson for Purdue Pharma called the court’s ruling “heart-crushing,” saying the settlement was “supported by nearly all of our creditors — including states, local governments, personal injury victims, schools, and hospitals.”
The company said the agreement would have given billions of dollars to victims, programs to abate the opioid crisis, and rescue and addiction treatment efforts.
“We will immediately reach back out to the same creditors who have already proven they can unite to forge a settlement in the public interest, and renew our pursuit of a resolution that delivers billions of dollars of value for opioid abatement and allows the Company to emerge from bankruptcy as a public benefit company,” the company’s statement read.
John Richer, a bankruptcy expert from the national law firm Hall Estill, said the case will most significantly impact companies that deal with bankruptcy, such as Purdue.
“This issue is common and typically arises in privately held companies like Purdue Pharma where the owners of the company have potential liability for tort claims in addition to the Chapter 11 debtor,” Mr. Richer said.
Matthew Gold, a partner with Kleinberg Kaplan, who represents the state of Washington in the litigation, said cases as big as the Purdue dispute are rare.
“Most cases do not deal with mass-tort issues. Many smaller cases have aspects of these types of issues, as it is not uncommon for corporate insiders or insurers to look for releases in connection with a plan,” Mr. Gold said. “It could affect other prominent cases such as the Boy Scouts bankruptcy, various Catholic Church diocese bankruptcies, and the [Johnson & Johnson] potential bankruptcy.”
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
• Alex Swoyer can be reached at aswoyer@washingtontimes.com.
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