Federal judge rejects $4.3B Purdue Pharma bankruptcy deal
The DOJ and states appealing the ruling objected to the fact that the plan included releases of liability for members of the Sackler family.
U.S. District Judge Colleen McMahon of the Southern District of New York on Thursday ruled to vacate Purdue Pharma’s $4.3 billion bankruptcy settlement, finding that its controversial inclusion of a liability release for the Sackler family was not authorized by the U.S. Bankruptcy Code.
The settlement was approved by U.S. Bankruptcy Judge Robert Drain of the Bankruptcy Court for the Southern District of New York in September, but the parties opposing the plan—including eight states and the District of Columbia—quickly appealed Drain’s ruling, and they were joined by the U.S. Department of Justice.
The appellants objected to the fact that the plan included releases of liability for members of the Sackler family, who own Purdue and who were not debtors in the company’s bankruptcy.
“The Plan confirmed by the Bankruptcy Court extinguishes all civil claims against the Sacklers that relate in any way to the operations of Purdue—including claims on which certain members of the Sackler family could be held personally liable to entities other than Purdue (principally the various states),” McMahon wrote in her 142-page decision. “These claims could not be released if the Sacklers were themselves debtors in bankruptcy.”
McMahon found that Drain lacked the statutory authority to impose the non-consensual non-debtor releases, though she noted that her opinion “will not be the last word on the subject, nor should it be,” because courts have struggled with the issue for years.
New York Attorney General Letitia James released a statement responding to the ruling Thursday night, reiterating her support for the settlement. New York and 14 other states agreed to sign onto the deal in July following extensive negotiations.
“The appellate court will now make a determination as to whether this plan will be confirmed, but make no mistake, Purdue Pharma and the Sackler family remain named defendants in our ongoing litigation and we will hold them accountable for their unlawful behavior, one way or another,” James said. “We will get justice for the American people.”
U.S. Attorney General Merrick Garland also issued a statement in which he praised McMahon’s ruling.
“The bankruptcy court did not have the authority to deprive victims of the opioid crisis of their right to sue the Sackler family,” the statement reads. “The department remains committed to opioid abatement efforts and supporting victims of opioid abuse.”