Supreme Court blocks Purdue Pharma bankruptcy deal that shields Sackler family from lawsuits

Justices will hear arguments in the case in December

The US Supreme Court has hit the brakes on Purdue Pharma’s multi-billion dollar bankruptcy deal that would have shielded members of the family behind OxyContin from civil lawsuits.

A single-page order from the nation’s highest court has sided with a request from the US Department of Justice to temporarily block what President Joe Biden’s administration has argued would provide the Sackler family with broad and “unprecedented” protections from liability.

The Supreme Court will hear the case in December.

The family behind Purdue Pharma, which manufactured the prescription painkiller OxyContin, should not be able to rely on legal protections meant for debtors in “financial distress” in an effort to avert liability, according to government attorneys.

An unsigned order did not outline reasons for the decision or provide any additional comment, as thousands of local governments and individuals pursue litigation targeting the company for its role in the overdose crisis and proliferation of powerful prescription opioids.

The justices will hear arguments whether US bankruptcy law authorizes the courts to approve a Chapter 11 arrangement “that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent.”

A federal appeals court approved a $6bn settlement plan in May as part of a court review of Purdue Pharma’s bankruptcy restructuring; the company had filed for bankruptcy protections in September 2019.

The deal reached with thousands of state and local government entities allowed Purdue to effectively transition to a new entity, with profits directed towards combatting the crisis. Members of the Sackler family were set to pay into the settlement over time.

But the agreement also extended liability protections to them. The Sackler family had signaled that they were not willing to agree to a settlement without an assurance that they would be protected from lawsuits.

US Solicitor General Elizabeth Prelogar has argued that the appeals court decision that allowed the agreement to stand would “leave in place a road map for wealthy corporations and individuals” to abuse the bankruptcy system to evade liability.

A release from that liability is of “exceptional and unprecedented breadth,” raising “serious constitutional questions,” she added.

A statement from Purdue Pharma shared with The Independent said the company is “confident in the legality” of the plan, and “and optimistic that the Supreme Court will agree.”

“Even so, we are disappointed that the US Trustee” – the Justice Department’s bankruptcy watchdog that filed the challenge to the Supreme Court – “has been able to single-handedly delay billions of dollars in value that should be put to use for victim compensation, opioid crisis abatement for communities across the country, and overdose rescue medicines,” the statement added.

A coalition of roughly 60,000 people who have filed personal injury claims related to the proliferation of prescription opioids and the overdose crisis told the Supreme Court that they support the contours of the settlement, including the immunity promised to members of the Sackler family.

The group wrote that “billions of dollars in abatement and victim compensation funds hinge on confirmation and consummation of the existing plan.”