Supreme Court shreds nationwide $6 billion opioid settlement plan in ruling against Sackler family

The Supreme Court said the Sackler family cannot use a Chapter 11 reorganization plan to protect themselves from civil liability

The Sackler family, who once owned Purdue Pharma, wanted protections from civil lawsuits in a opioid settlement plan (REUTERS)

The Supreme Court rejected a multi-billion dollar bankruptcy plan that protects the Sackler family – the former owners of the pharmaceutical giant Purdue Pharma which is responsible for marketing and selling the opioid OxyContin – from civil lawsuits.

The Sackler family reached a nationwide $6 billion settlement through Purdue Pharma’s bankruptcy for victims of the opioid crisis. That settlement, though, called for the Sacklers not to face future lawsuits.

In a 5-4 decision, justices said bankruptcy code does not permit a type of Chapter 11 reorganization plan that protects those who do not declare bankruptcy themselves.

“Once more, the Sacklers seek greater relief than a bankruptcy discharge normally affords, for they hope to extinguish even claims for wrongful death and fraud, and they seek to do so without putting anything close to all their assets on the table,” Justice Neil Gorsuch wrote in the majority opinion, joined by Justices Clarence Thomas, Samuel Alito, Amy Coney Barrett and Ketanji Brown Jackson.

Boy Scouts of America and the Catholic church used similar bankruptcy reorganization plans to protect individuals from civil lawsuits.

This means the Purdue Pharma bankruptcy plan, which initially had a $6 billion settlement for victims of OxyContin, will have to be sent back – something Justice Brett Kavanaugh pointed to in his dissent as an unfortunate result for victims waiting for compensation.

Campaigners and family members of those who have died of opioids gather outside the US Supreme Court, Washington, DC, in December (EPA)

For years, victims of the drug have been unable to receive compensation due to a legal back-and-forth the Sacklers and Purdue Pharma were engaged with.

“Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families,” Justice Kavanaugh wrote, joined by Chief Justice John Roberts, Justice Sonia Sotomayor and Justice Elena Kagan.

He said the deviation from the long-established authority of bankruptcy courts results in opioid victims being “deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation.”

In 2019, Purdue Pharma filed for Chapter 11 bankruptcy while facing a wall of lawsuits over OxyContin.

At the same time, the Sacklers withdrew $11 billion from Purdue Pharma and transferred it overseas with more than 40 percent of that going toward the company’s taxes. The family also began removing themselves from the company board – distancing themselves.

In its proposed plan for reorganization, Purdue Pharma agreed to pay $1.2 billion in administrative expenses and payments to opioid victims. About 138,000 plaintiffs could receive anywhere between $3,500 and $48,000 over the next 10 years.

A campaigner holds a pill container whilst outside the US Supreme Court, Washington, DC, USA, 04 December 2023. The US Supreme Court is hearing oral arguments in a bankruptcy case against Purdue Pharma, the makers of OxyContin (EPA)

In addition, the Sackler family agreed to contribute $6 billion to the plan, but would be free from opioid-related claims.

The government intervened, claiming the type of protections the Sacklers obtained in their plan were not warranted because the family was not in “financial distress.” They claimed the plan imposed on victims’ right to due process.

During oral arguments, Curtis Gannon, the deputy solicitor general, suggested the Supreme Court should ask Congress to narrow the scope of the protections to prevent these types of bankruptcy protections from continuing.

An attorney for Purdue Pharma argued that without the protections victims would not get the amount they’re owed because of the overwhelming number of lawsuits the Sackler family would be subject to. He highlighted that victims voted in favor of the plan – however, less than 20 percent of eligible people participated.

Millions of people in the U.S. have been impacted by the opioid epidemic.

Between 1999 and 2021, over 280,000 people died of overdoses involving prescription opioids, according to the CDC. In 2021 alone, the number of deaths involving prescription opioids was five times the number it was in 1999.

The Sackler families said in a statement that they, “remain hopeful about reaching a resolution that provides substantial resources to help combat a complex public health crisis. The unfortunate reality is that the alternative is costly and chaotic legal proceedings in courtrooms across the country.”

“While we are confident that we would prevail in any future litigation given the profound misrepresentations about our families and the opioid crisis, we continue to believe that a swift negotiated agreement to provide billions of dollars for people and communities in need is the best way forward,” the statement continued.

Harrington v Purdue Pharma is a bankruptcy case with implications for victims of the opioid crisis who wanted to sue the Sackler family for their part in falsely advertising Oxycontin.