The Supreme Court ruled against Purdue Pharma’s bankruptcy plan on Thursday, denying protection for the Sackler family from a “broad sweep of present and future claims” over their role in the opioid epidemic.
Purdue, the maker of OxyContin, filed for bankruptcy in 2019 as it dealt with a mountain of lawsuits alleging it deceptively marketed its addictive opioid painkiller. The Sackler family, which owned Purdue, ultimately agreed to settle with opioid victims, states and others for about $6 billion, in exchange for immunity from any future lawsuits.
But the Court denied that plan in a 5-to-4 ruling, with the majority finding that “nothing in present law authorizes the Sackler discharge.”
“The Sacklers have not agreed to place anything approaching their full assets on the table for 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,” the majority said in its opinion.
Part of the problem is that the Sacklers themselves have not filed for bankruptcy, the justices said, noting that bankruptcy code doesn’t authorize such protections for a third party without the consent of claimants.
“Describe the relief the Sacklers seek how you will, nothing in the bankruptcy code contemplates (much less authorizes) it,” according to the majority opinion.
In a statement to Endpoints News Thursday, Purdue said that it will “immediately reach back out to the same creditors who have already proven they can unite to forge a settlement in the public interest, and renew our pursuit of a resolution that delivers billions of dollars of value for opioid abatement and allows the company to emerge from bankruptcy as a public benefit company.”
Dissenting opinion
Justices Brett Kavanaugh, John Roberts, Sonia Sotomayor and Elena Kagan dissented, arguing in a separate opinion that “opioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation.”
Kavanaugh wrote that the bankruptcy plan ensured a “guaranteed substantial and equitable compensation to Purdue’s many victims and creditors,” preventing a “race to the courthouse against the Sacklers.” Now, he wrote, a few plaintiffs could secure wins against Purdue or the Sacklers, depleting their assets and leaving “nothing for everyone else.”
Connecticut Attorney General William Tong praised the Court’s opinion on Thursday, calling it a “definitive rebuke of the Sackler family’s abuse of the bankruptcy code.”
“In practical terms, this sends us back to bankruptcy court, where I expect we will re-enter mediation,” Tong said in a news release.
Massachusetts Attorney General Andrea Campbell said Thursday that the Sacklers “must and will be held responsible, and, in the wake of this decision, we will use every power available to us to make sure that occurs.”
A ‘narrow’ decision
The Supreme Court specified on Thursday that their decision “is a narrow one,” adding that it should not be used to scrutinize consensual third-party releases.
While justices acknowledged arguments from the US Trustee that a ruling for the Sacklers “would provide a roadmap” for misuse of the bankruptcy system, they added that “this Court is the wrong audience for such policy disputes.”
“Our only proper task is to interpret and apply the law; and nothing in present law authorizes the Sackler discharge,” the majority opinion reads.
Dissenters argued that the plan was a “shining example of the bankruptcy system at work,” urging Congress to take up the issue.
“Only Congress can fix the chaos that will now ensue. The Court’s decision will lead to too much harm for too many people for Congress to sit by idly without at least carefully studying the issue,” Kavanaugh wrote.