The Supreme Court on Thursday temporarily blocked a bankruptcy deal for Purdue Pharma that would have protected members of the billionaire Sackler family, which once controlled the company, from additional civil suits over the opioid epidemic that limited the Sacklers’ personal liability to $6 billion.
command – order It would likely delay any payments to the thousands of plaintiffs who have sued Sacklers and Purdue, the maker of the painkiller OxyContin, which is widely blamed for sparking the opioid crisis. Under the deal, the Sacklers agreed to pay the plaintiffs billions in exchange for complete immunity from all civil legal disputes.
The order came in response to the Justice Department’s objection to the plan, which the government said would allow members of the Sackler family to benefit from legal protections reserved for debtors in “cash straits,” not for billionaires.
The justices said they will hear arguments in December to decide whether the agreement is authorized under US bankruptcy law. The case could have far-reaching implications for similar lawsuits.
This is because the Bordeaux Convention includes A common but controversial practice: Solution Mass injury lawsuits through bankruptcy courts, rather than allowing cases to work their way through the traditional court system. In many of these agreements, third parties — in this case, Sacklers — are protected from liability without having to declare bankruptcy.
“What does the Sackler get out of this?” said Lindsey Simon, an associate professor at Emory University School of Law and a bankruptcy expert. “They get one deal to get done. Whereas if they don’t get it, people can still sue them forever.”
Ms. Simon simply said, “They get all the benefits at no cost.”
A representative for the Sackler family did not respond to a request for comment. A Purdue Pharma spokeswoman said in a statement that it was “confident of the legality” of the bankruptcy plan.
The court’s decision to hear the case adds to uncertainty about a plan to compensate states, local governments, tribes and individuals affected by the opioid crisis, while providing protection for the Sackler family. The plaintiffs are also likely to wait at least another year before they receive payment from the Perdue deal.
Any verdict in the case can affect how other collective tort cases turn out—a broad term for lawsuits claiming injuries to a group of people who suffered things like a plane crash, toxic spill, or pesticide spray.
“They raise a question that really is the basis for billions of dollars in collective damages, from cases involving not just opioids, but Boy Scouts and wildfires and allegations of sexual abuse in church parishes — where third parties benefit from a law professor at the University of Southern California,” said Adam Zimmerman, a professor of law at the University of Southern California.
The experts cited Johnson & Johnson, which sought recourse to bankruptcy court to resolve class-action claims for baby powder containing talc.
The company faces about 40,000 lawsuits which has been suspended since 2021 due to allegations that the powder contained asbestos and caused ovarian cancer. The company denies the allegations and has said it needs a bankruptcy process to resolve current and future lawsuits.
The court’s decision is the latest development in the years-long legal battle over compensation for those affected by the opioid crisis.
In May, the US Court of Appeals for the Second Circuit approved the settlement plan after Purdue Pharma filed for bankruptcy protection in September 2019. In that time, the company and members of the Sackler family have collectively faced thousands of opioid-related lawsuits.
Although companies routinely seek bankruptcy protection to protect against legal claims, this particular agreement was unusual in that it expanded liability protection for the company’s owners. The Sacklers said they would not sign a settlement without an agreement that protects them from lawsuits.
The Supreme Court has been skeptical of some aggressive litigation techniques, particularly in cases involving class action and patent lawsuits, suggesting that it may be wary of allowing bankruptcy courts to provide legal immunity for the rich and powerful accused of serious wrongdoing and not declared bankrupt. .
the US Trustee ProgramIt is an office in the Department of Justice that oversees the administration of bankruptcy cases, and has long argued that bankruptcy judges do not have the power to permanently block lawsuits against business owners if those owners do not seek personal bankruptcy protection.
In its memorandum, the government said federal appeals courts were divided on the issue and that the Purdue Agreement could set a troubling precedent.
“Allowing the appeals court’s decision to stand leaves a roadmap for companies and wealthy individuals to abuse the bankruptcy system to avoid collective liability for tort,” wrote Solicitor General Elizabeth Prilugar.
The appeals court “holds firmly on one side of the circuit’s widely acknowledged division over an important and recurring issue of bankruptcy law,” Ms. Prilogar wrote.
Ms. Prilogar described the agreement as “exemption from liability on an extraordinary and unprecedented scale” given the “countless number of claimants who did not specifically agree to the terms of release.” Ultimately, she added, the deal “offends the bankruptcy system and raises serious constitutional questions.”
in her briefAttorneys for Purdue Pharma responded that the government’s request to stop the deal was “unfounded”. If approved by the court, they wrote, it would “harm victims and unnecessarily delay the distribution of billions of dollars to alleviate the opioid crisis.”
Members of the Sackler family are no longer members of the company’s board of directors. When bankruptcy is completed, They will give up their ownership stake in the companywhich will be renamed Konwa Pharma. However, the family is still wealthy, with some estimates putting their fortune at $11 billion.
Victim groups and entities that had expected to receive money to combat the opioid crisis have expressed frustration with the government’s defiance, raising fears that it will further impede payments to those affected.
“We are very disappointed with the additional delay, but it appears they are working to resolve the issue as quickly as possible,” said Joe Rice, the lead attorney for the local governments negotiating with Purdue Pharma.
Ryan Hampton, a person in recovery who was co-chair of the unsecured creditors committee in the Perdue bankruptcy case, said he’s pleased the Supreme Court will hear the case.
However, he added that he hopes that “it will be decided by law and not be politicized at the expense of the victims, who have been waiting for more than two years to get their share of the settlement.”
Representatives of Native American tribes, which have been hardest hit by the opioid crisis, said the money is urgently needed to prevent more deaths. Approximately 575 tribes in the United States were designated to participate in the Purdue settlement.
Lloyd B. said: “The nation’s tribes cannot wait years for the help that would have come two years before the Purdue bankruptcy settlement, while real estate bankruptcies continue to wane,” Miller, the attorney representing the tribes that sued Purdue. Pharma.
Mr. Miller said he hopes the case will move quickly, adding: “Time is the enemy.”
Adam Liptak Contributed reporting from Washington.