Supreme Court blocks Purdue Pharma opioid settlement; agreement 'broke a basic tenet of bankruptcy law'

OxyContin's success made the Sacklers billionaires
and sparked the U.S. opioid crisis. (A.S. photo)

The U.S. Supreme Court rejected the Purdue Pharma opioid bankruptcy agreement that would have safeguarded Sackler family members from civil liability suits related to the opioid crisis.

"In a 5-to-4 decision, the justices found that the deal, carefully negotiated over years with states, tribes, local governments and individuals, had broken a basic tenet of bankruptcy law by shielding members of the Sackler family from lawsuits without the consent of those who might sue," reports Abbie Van Sickle of the New York Times. Purdue Pharma, which was owned by the Sackler family who developed and marketed the prescription painkiller OxyContin, is "largely considered to have ignited the [opioid] crisis."

Meanwhile, there are more than 100,000 opioid victim families waiting for financial restitution from Purdue Pharma. For some, the ruling is considered a setback. Other family members welcomed the decision. Van Sickle writes, "Although most creditors who voted on the proposed plan supported it, Justice Gorsuch wrote, 'fewer than 20 percent of eligible creditors participated' and 'thousands of opioid victims voted against the plan, too, and many pleaded with the bankruptcy court not to wipe out their claims against the Sacklers without their consent.'"

As Van Sickle reports, the court's majority "homed in on the method the Sacklers used to insulate themselves from opioid-related lawsuits, finding that a third party could not use the bankruptcy system to shield themselves from litigation, binding others without their consent. . . . This approach, Justice Gorsuch wrote, allowed them to win relief 'without securing the consent of those affected or placing anything approaching their total assets on the table for their creditors.'"

The proposed deal would have required the Sacklers to pay up to $6 billion over 18 years, but its building blocks demonstrate the tightrope negotiators are trying to walk between getting family members, states and tribes money now, even if the agreement shielded the Sacklers' personal wealth. "In a strongly worded dissent, Justice Brett M. Kavanaugh, "warned of the consequences for the tens of thousands of families seeking compensation," Van Sickle reports. "Justice Kavanaugh wrote that upending the settlement to prevent the Sacklers from escaping future litigation would only add to the pain of opioid victims and their families."

Within the deal's bankruptcy reorganization, Purdue Pharma "would become a 'public benefit' company with a mission focused on opioid education and abatement," Van Sickle reports. "The company, with the help of the Sacklers’ planned contributions, offered individual victims payments from a base amount of $3,500 up to a ceiling of $48,000." Purdue Pharma has committed to working toward a new settlement deal.