Supreme Court blocks Purdue Pharma’s $6B opioid bankruptcy settlement
On Thursday, the justices ruled that the settlement inappropriately shielded the Sackler family, who own Purdue Pharma, from thousands of OxyContin-related deaths and who have denied any wrongdoing.
The US Supreme Court tossed out Purdue Pharma LP’s $6 billion opioid settlement, opening a new chapter of uncertainty for the company by ruling that the accord would improperly shield the Sackler family owners.
The 5-4 ruling scuttles a plan that would have ended a mountain of civil litigation against the OxyContin maker and funneled billions of dollars toward efforts to abate the opioid crisis. As part of the accord, Sackler family members had agreed to give up ownership of the company and pay as much as $6 billion.
More broadly, the ruling upends a key tool used by bankrupt companies to settle lawsuits spawned by harmful or toxic products. The tool, known as a non-consensual third-party release, forces holdout plaintiffs to settle with companies if an agreement has support from most of the victims. A Justice Department unit monitoring bankruptcy courts opposed the Sackler settlement, arguing such mechanisms are unlawful.
Congress authorized similar maneuvers decades ago in bankruptcies related to asbestos lawsuits, and over time lawyers and judges have used the approach to address an array of corporate wrongdoing. Similar deals have ended mass litigation over dangerous products and waves of sex abuse claims against Catholic dioceses, the Boy Scouts of America and USA Gymnastics.
“Someday, Congress may choose to add to the bankruptcy code special rules for opioid-related bankruptcies as it has for asbestos-related cases, Justice Neal Gorsuch wrote for the majority. “Or it may choose not to do so. Either way, if a policy decision like that is to be made, it is for Congress to make.”
Purdue’s settlement won overwhelming support from opioid crisis victims who voted on it. But a vocal contingent remained bitterly opposed to letting Purdue’s billionaire owners put the lawsuits behind them.
Proponents have said victims won’t get more money from the Sacklers by taking them to trial; the Justice Department has said ending the settlement could force the owners to shell out more money for victims. Members of the Sackler family have denied wrongdoing and said the settlement avoids expensive litigation that may not succeed.
Related: ‘Forget a better deal!’ Supreme Court hears arguments on $6B Purdue Pharma settlement
During arguments in December, lawyers representing Purdue and the largest group of victims each said the company could be forced to liquidate if the settlement is invalidated. A Justice Department lawyer said the sides could return to the negotiating table to hammer out a deal that doesn’t force objectors to give up their claims against the Sacklers.
The Justice Department contended federal bankruptcy courts lack power to insulate the Sacklers from lawsuits since they haven’t filed for protection themselves.
The Supreme Court in August halted implementation of the settlement while the justices heard the appeal.
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