The legality of OxyContin manufacturer Purdue Pharma’s bankruptcy settlement is being challenged by President Joe Biden’s administration, and the U.S. Supreme Court agreed to hear the case on Thursday, postponing a deal that would have protected the company’s wealthy Sackler family owners from legal action over their role in the nation’s opioid epidemic.
The justices halted Purdue and its affiliates’ bankruptcy proceedings and said that they would hear oral arguments in December over the administration’s appeal of a lower court decision upholding the settlement. The new term of the Supreme Court starts in October.
In exchange for paying up to $6 billion to settle thousands of lawsuits brought by states, hospitals, addicts, and others against the Stamford, Connecticut-based company over its deceptive marketing of the potent painkiller OxyContin, Purdue’s owners would receive immunity under the settlement.
Purdue released a statement in which it expressed disappointment at the U.S. Trustee’s ability 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 U.S. Trustee is the Justice Department’s bankruptcy watchdog.
“We are confident in the legality of our nearly universally supported plan of reorganization, and optimistic that the Supreme Court will agree,” the company added.
Justice Department officials opted not to comment.
The question at hand is whether American bankruptcy law permits Purdue’s restructuring to provide legal protections for the Sackler family members who haven’t declared personal bankruptcy.
In order to pay off its debts, Purdue filed for Chapter 11 bankruptcy in 2019. Nearly all of these debts were the result of several lawsuits alleging that OxyContin contributed to the commencement of an opioid crisis that resulted in more than 500,000 overdose deaths in the United States over the course of two decades.
According to Purdue, the bankruptcy settlement it reached with its creditors, who include hospitals, state and municipal governments, individuals who are addicted to drugs or alcohol, and other parties who have sued the corporation, will be worth $10 billion after it is authorized by a bankruptcy judge in the United States in 2021.
The deal was contested by the Biden administration and eight states, but once the Sacklers agreed to make a larger contribution to the settlement fund, all of the states withdrew their objections.
The settlement was upheld by the 2nd Circuit in May, coming to the conclusion that under exceptional circumstances, non-bankrupt parties like the Sacklers are entitled to legal protections under federal bankruptcy law.
The 2nd Circuit determined that the legal claims made against Purdue were intricately tied to those made against the company’s owners and that continuing legal actions against the Sacklers would jeopardize Purdue’s efforts to settle its bankruptcy.
Although they have denied involvement, members of the Sackler family have expressed remorse that OxyContin “unexpectedly became part of an opioid crisis.” The bankruptcy deal, according to their May statement, would offer “substantial resources for people and communities in need.”
The government claimed in a court document that the Purdue settlement violated bankruptcy laws intended to safeguard debtors in “financial distress,” not people like the Sacklers. The administration claims that before agreeing to contribute $6 billion to Purdue’s opioid settlement, members of the Sackler family took $11 billion from the company.
The administration’s attempt to put an end to the settlement has received resistance from a large number of other groups.
The Supreme Court was informed by a group of more than 60,000 plaintiffs in personal injury lawsuits resulting from exposure to Purdue opioid medications that they approve of the settlement, including the legal protection granted to the Sackler family members.
“Regardless of how one feels about the role of the Sackler family in the creation and escalation of the opioid crisis,” the group told the justices, “the fact remains that the billions of dollars in abatement and victim compensation funds hinge on confirmation and consummation of the existing plan.”