Purdue Pharma Opioid Settlement Rejected by the Supreme Court; Ruling Shows Sacklers Cannot Avoid Responsibility

The U.S. Supreme Court yesterday blasted away the large bankruptcy reorganization of opioid maker Purdue Pharma, ruling that the settlement included inappropriate legal protections for the Sackler family, and now billions of dollars of settlement money secured now may be at serious risk.  

 Almost a year ago, the Biden administration, using the US Bankruptcy Trustee through the Justice Department, took the Purdue Pharma settlement and the Sackler family to the Supreme Court, opposing the agreement the company used to settle their culpability in the Opioid Crisis. After the request by the Justice Department, the Supreme Court agreed to block the bankruptcy deal which protected the Sackler family from legal liability. The government opposed releasing the family from blame. Before the ruling by the nation’s top court, Purdue Pharma issued a statement saying, “We are confident in the legality of our nearly universally supported Plan of Reorganization, and optimistic that the Supreme Court will agree. Even so, we are disappointed that the U.S. Trustee, despite having no concrete interest in the outcome of this process, has been able 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.” This week, the Supreme Court rendered their decision.

Court Rejects Protection for Sackler Family

 The High Court’s 5-4 decision  is a victory for the minority of plaintiffs who are opioid victims opposed to the settlement plan proposed by Purdue Pharma, which shielded the Sacklers. The Court said that US bankruptcy law doesn’t allow for a release of the Sacklers’ legal liabilities stemming from their ownership of Purdue, when not all opioid-related plaintiffs have accepted the terms offered by the family owners of the company.

Justice Neil Gorsuch wrote for the majority. He was joined by Justices Clarence Thomas, Samuel Alito, Amy Coney Barrett and Ketanji Brown Jackson. Justice Brett Kavanaugh filed a dissent. Chief Justice John Roberts and Justices Sonia Sotomayor and Elena Kagan also disagreed with the decision. According to Gorsuch, the Sacklers didn’t file for bankruptcy themselves and didn’t put their own assets on the table when their wealth is estimated to be $11 billion as reported by the Wall Street Journal.

Justice Gorsuch wrote that the family didn’t agree to put “anything approaching their full assets on the table” for distribution to opioid victims; “Yet they seek a judicial order that would extinguish virtually all claims against them for fraud, willful injury, and even wrongful death, all without the consent of those who have brought and seek to bring such claims.” Gorsuch added that nothing in US bankruptcy law allows for the family to do this. Gorsuch acknowledged this ruling put the settlement plan on hold, but went on to say the ruling might compel the Sacklers to “to negotiate consensual releases on terms more favorable to opioid victims” as accounted by the New York Times. Gorsuch continued, “if past is prologue,” he wrote, citing the U.S. Trustee Office, which challenged the deal, “there may be a better deal on the horizon.”

Dissent

Justice Brett Kavanaugh wrote the dissent and warned of the consequences for families seeking compensation under the now defunct agreement. Kavanaugh wrote the “decision is wrong on the law and devastating for more than 100,000 opioid victims and their families,” he added later that rejecting the provision “simply inflicts still more injury on the opioid victims.”

Some members of the Sackler family said they hoped another agreement could be reached. All but one of the Sacklers issued a statement saying the Supreme Court’s ruling will cause “costly and chaotic legal proceedings in courtrooms across the country,” which are now going to happen because of the decision.

Responsibility

The main issue is the Sacklers’ denial of financial responsibility, and this is the reason the Justice Department challenged the settlement. When filed, according  to Solicitor General Elizabeth Prelogar, “The plan’s release ‘absolutely, unconditionally, irrevocably, fully, finally, forever and permanently releases’ the Sacklers from every conceivable type of opioid-related civil claim, even claims based on fraud and other forms of willful misconduct that could not be discharged if the Sacklers filed for bankruptcy in their individual capacities.” Prelogar added the release of the Sacklers is not authorized by the bankruptcy code and constitutes an “abuse of the bankruptcy system.”

This was the issue for the majority decision by the court, because the Sacklers sought to insulate themselves from opioid-related lawsuits.  But the majority of justices found a third party could not use the bankruptcy system to shield themselves from litigation, binding others without their consent. The Sacklers didn’t want any claims from victims of the Opioid Crisis holding the family financially responsible. After a wave of opioid related lawsuits, Purdue Pharma filed for bankruptcy protection, but the Sacklers did not. Instead, the family asked the court overseeing Purdue’s bankruptcy for “an order extinguishing vast numbers of existing and potential claims against them.”

This didn’t go over well with Gorsuch. The justice wrote what the Sacklers did allowed them to avoid financial responsibility “without securing the consent of those affected or placing anything approaching their total assets on the table for their creditors.” Perhaps now, the Sackler family will take responsibility for the lives their company destroyed.