Supreme Court rejects Purdue Pharma’s $6 billion bankruptcy settlement

The Supreme Court, in a 5-4 decision with Justice Gorsuch writing for the majority, rejected a $6 billion bankruptcy settlement between OxyContin maker Purdue Pharma and opioid victims’ families.

The nationwide settlement would have shielded members of the Sackler family, who own the company, from civil lawsuits over the toll of the opioid epidemic.

The court ruled that the bankruptcy code does not allow Purdue to enter a settlement that extinguishes other existing and potential claims against it without the consent of affected claimants.

This decision overturns a plan that would have shielded the Sackler family, owners of Purdue Pharma, from future opioid-related lawsuits as well as criminal prosecution related to the deaths from prescription opioid overdoses of more than 300,000 people in the United States since 2000.

Families that have lost relatives to overdoses share plenty of outrage at Purdue Pharma, the bankrupt maker of OxyContin that has been accused in lawsuits of helping ignite the nation’s opioid crisis.

The ruling has significant implications for the ongoing litigation against Purdue Pharma and the Sackler family in relation to the opioid crisis.

“The Sackler family’s attempt to shield themselves from legal repercussions through Purdue Pharma’s bankruptcy deal has rightly been rejected,” said Lisa McCormick, a justice advocate. “This decision reaffirms the message that no one is above the law, especially those who have profited from the suffering of others.”

The Trump administration’s Department of Justice announced a global resolution of its criminal and civil investigations into the opioid manufacturer Purdue Pharma LP on October 21, 2020, as well as a civil resolution of its civil investigation into individual shareholders from the Sackler family. 

“The abuse and diversion of prescription opioids has contributed to a national tragedy of addiction and deaths, in addition to those caused by illicit street opioids,” said Deputy Attorney General Jeffrey A. Rosen. “With criminal guilty pleas, a federal settlement of more than $8 billion, and the dissolution of a company and repurposing its assets entirely for the public’s benefit, the resolution in today’s announcement re-affirms that the Department of Justice will not relent in its multi-pronged efforts to combat the opioids crisis.”

Health Care for America Now Executive Director Margarida Jorge called the settlement “a betrayal to the families of the more than 750,000 Americans who have lost their lives due to the opioid epidemic and countless others whose lives have been shattered by addiction.”

“According to this settlement, not one of Purdue Pharma’s top executives has yet been held criminally liable for their role in the opioid epidemic,” said Jorge. “And thanks to Trump’s Justice Department, the Sacklers will still come out ahead, with the fine making up only a fraction of the profit one of the country’s richest families made from peddling poison to Americans in pain.”

“The Trump administration’s settlement is not about justice and remedy for the families who lost loved ones or recompense for the billions wasted on public safety, incarceration, treatment and public services caused by the opioid crisis,” said Jorge. “It’s about letting Purdue Pharma and the Sacklers off the hook for the decades they spent marketing OxyContin, downplaying the drug’s addictiveness, and working with other industry giants like Johnson & Johnson to cash in.”

“In 2007, prosecutors built a case against Purdue and its executives, but they were not allowed to take it to trial,” said Maura Healey, who as Attorney General of Massachusetts was the first state to sue the billionaire Sackler family. “Our nation paid the price, including thousands of people who should still be alive today.”

Ed Bisch, who lost his 18-year-old son, Eddie, to an overdose in 2001, opposed the settlement because the Sacklers would retain billions of dollars of wealth accumulated over the years while the $6 billion payout would be stretched out over 18 years.

“Right now, today, the states have money. No amount of money is worth giving the architects of the opioid epidemic civil immunity for what they have done,” said Bisch, founder of a group called Relatives Against Purdue Pharma.

More than $50 billion has already been allocated to states through settlements with other pharmaceutical companies, drug distribution companies and pharmacy chains but the nation’s addiction crisis is still raging.

Even if far fewer people are dying of prescription-pill overdoses, the drug crisis in recent years has increasingly been propelled by fentanyl manufactured in illicit secret labs.

More than 110,000 people died of overdoses in 2022, two-thirds of them from synthetic opioids such as fentanyl, according to federal estimates.

Purdue declared bankruptcy in 2019, as it faced thousands of lawsuits and allegations that the company helped fuel the crisis by the marketing of its blockbuster painkiller OxyContin. Members of the Sackler family did not themselves file for bankruptcy.

The Office of the U.S. Trustee, a branch of the Justice Department, challenged the bankruptcy deal, saying it violated federal law.

The legal issue before the Supreme Court in Harrington v. Purdue Pharma was whether, according to federal bankruptcy laws, the Sacklers can be shielded from future opioid-related litigation by those who do not consent to give up their rights to sue.

A panel of the U.S. Court of Appeals for the 2nd Circuit in New York said yes, citing two provisions of the bankruptcy code. One says a bankruptcy court “may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of” the law. The other says a plan may “include any other appropriate provision not inconsistent with the applicable provisions of” the code.

The appeals court interpreted that to mean a bankruptcy court could approve provisions not expressly forbidden by the code. In August, the Supreme Court put the bankruptcy deal on hold to consider the 2nd Circuit’s ruling.

In a 5-4 decision that scrambled ideological lines on the Supreme Court on Thursday, the majority found the plan was invalid because all the affected parties had not been consulted on the deal.

Justice Neil M. Gorsuch, writing for the majority, concluded that the “bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants.”

The high-stakes legal fight has split relatives of overdose victims and those whose lives were shattered by opioid addiction. Some insisted the bankruptcy deal was allowing the Sackler family to get off easy, while others said immunity was the only way to get desperately needed settlement money to communities and victims themselves.

Sackler family members have long denied personal responsibility.

In 2021, a U.S. District Court judge overturned the deal initially approved in bankruptcy court, ruling that the family members who are not part of the bankruptcy proceedings cannot be exempted from future claims. The 2nd Circuit reversed and approved the bankruptcy plan, saying that shielding the Sacklers from lawsuits was needed to “ensure the fair distribution” of the settlement money.

The Justice Department asked the Supreme Court to intervene. Solicitor General Elizabeth B. Prelogar told the court that under bankruptcy law, the rights of alleged victims to sue cannot be taken away without their consent.

Purdue said the Justice Department’s position would allow a single person to veto the plan despite overwhelming support from victims, states and local governments.

The Justice Department separately resolved a civil and criminal probe into Purdue, which pleaded guilty in 2020 to three felonies; the company will pay $225 million to the government if the bankruptcy settlement goes through.

The Sackler family also agreed to pay $225 million in civil damages to the Justice Department.

From its $11 billion in assets, the fine is a spit in the ocean and it sends a message to America and the world declaring that there are two sets of rules: One for the rich and another for everyone else.