The Supreme Court on Thursday dismantled a massive $10 billion bankruptcy reorganization plan for Purdue Pharma, the manufacturer of OxyContin, which had been at the center of the nation's opioid crisis. The Court's ruling challenges the legal protections granted to the Sackler family, owners of Purdue Pharma, threatening billions of dollars earmarked for opioid victims.
The Supreme Court ruled 5-4, in a non-ideological split, that the bankruptcy court overstepped its authority by including legal immunity for the Sacklers from future claims. Justice Neil Gorsuch, writing for the majority, asserted, "Nothing in present law authorizes the Sackler discharge." He emphasized that the Sacklers could have declared personal bankruptcy but chose instead to leverage the company's bankruptcy proceedings to shield themselves from liability without offering their full assets for settlement.
The overturned settlement, approved by the 2nd Circuit U.S. Court of Appeals last year, involved the Sacklers agreeing to pay $6 billion into a fund for opioid-related claims, contingent upon their release from future legal action. The ruling means that this provision cannot stand, effectively sending the parties back to the negotiating table and casting doubt on the finality of any settlement.
Justice Brett Kavanaugh, dissenting along with Chief Justice John Roberts and Justices Sonia Sotomayor and Elena Kagan, criticized the majority's decision as "devastating" for the over 100,000 opioid victims and their families. "Today's decision is wrong on the law and devastating to the more than 100,000 opioid victims and their families," Kavanaugh wrote, lamenting that victims are now deprived of the substantial monetary recovery they had long sought through extensive litigation.
The decision has far-reaching implications, as it disrupts years of negotiations and legal battles aimed at compensating those affected by the opioid epidemic, which has claimed over 500,000 lives since the mid-1990s. Purdue Pharma, under the control of the Sackler family, aggressively marketed OxyContin as a non-addictive pain relief solution, leading to widespread misuse and addiction.
Purdue Pharma, in a statement following the ruling, described the decision as "heart-crushing" for the victims and reiterated its commitment to seeking a resolution. "The decision does nothing to deter us from the twin goals of using settlement dollars for opioid abatement and turning the company into an engine for good," the company stated.
The bankruptcy court had originally described the settlement as the "only reasonably conceivable" way to address the myriad lawsuits effectively. Without the Sackler family's financial contribution, the court suggested that Purdue Pharma might face liquidation, which would severely limit the compensation available to creditors, including states, municipalities, hospitals, and individual victims.
The Biden administration's Department of Justice, through U.S. Trustee William Harrington, had opposed the settlement on grounds that it unfairly protected the Sackler family, who had not declared bankruptcy themselves. Harrington argued that allowing the settlement to proceed would undermine the integrity of the bankruptcy system, which is designed to offer such protections only to those who have fully subjected their assets to the bankruptcy process.
The ruling also affects other mass tort cases where bankruptcy settlements have been used to shield non-debtor parties from liability, including cases involving the Boy Scouts of America and some Catholic dioceses. The precedent set by this decision could complicate future attempts to resolve such cases through bankruptcy courts.
The Sackler family, who have denied any wrongdoing, had backed the settlement as a means to resolve the extensive litigation stemming from Purdue Pharma's role in the opioid crisis. Their lawyers warned that rejecting the settlement would lead to significant legal costs and uncertainties, particularly in enforcing judgments in foreign courts where many Sackler assets are held.
In his dissent, Kavanaugh underscored the practical impact of the decision, stating that the Court's interpretation restricts the established authority of bankruptcy courts to devise fair and equitable solutions for mass-tort victims. This ruling, he argued, leaves opioid victims without the financial restitution they have fought hard to secure.
