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Supreme Court Thursday said The inability of Sackler family members to shield themselves from liability for civil claims related to the opioid epidemic has jeopardized a bankruptcy plan that would have provided that protection in exchange for setting aside billions of dollars to respond to the crisis.
In a 5-4 ruling, the justices found that the deal, which took years to negotiate with states, tribes, local governments and individuals, violated a fundamental principle of bankruptcy law that shields Sackler family members from lawsuits without the plaintiffs’ consent.
The plan by Purdue Pharma, the maker of the prescription painkiller OxyContin widely blamed for sparking the crisis, is unusual because it provides broad protections that the Sackler family, which controls Purdue, has demanded for years even as it avoided bankruptcy itself.
“The Sacklers have not filed for bankruptcy or put substantially all of their assets on the table for distribution to creditors, yet they are seeking what is substantially equivalent to a discharge of their debts,” Justice Neil Gorsuch wrote. Justice Clarence Thomas, Justice Samuel Alito II, Justice Amy Coney Barrett and Justice Ketanji Brown Jackson joined in the opinion.
While he acknowledged that the decision put the program in limbo, Gorsuch wrote that the threat of future lawsuits from opioid victims, states, government entities and others could force the Sacklers to “negotiate a voluntary release on terms more favorable to opioid victims.”
“If the past is prologue, a better agreement may emerge in the future,” Justice Gorsuch wrote, citing the U.S. Trustee’s Office, which challenged the agreement.
It was unclear how the ruling affects other settlements involving large-scale injury claims, including those involving the Boy Scouts of America and sexual abuse victims.
In a strongly worded dissent, Justice Brett M. Kavanaugh warned of consequences for tens of thousands of families seeking compensation. Chief Justice John G. Roberts Jr., Justice Sonia Sotomayor and Justice Elena Kagan joined him. “This ruling is legally wrong and devastating to the more than 100,000 opioid victims and their families,” he wrote, later adding that rejecting the rule “would only cause more harm to opioid victims.”
Sackler family members have expressed hope that another settlement can be reached.
The Sacklers said in a statement that without the decision, “legal proceedings in courts across the country would inevitably become expensive and chaotic.”
The majority focused on methods the Sackler family used to protect itself from opioid-related lawsuits, finding that third parties cannot use the bankruptcy system to shield themselves from lawsuits and to bind others without their consent.
Justice Gorsuch wrote that the bankruptcy system, while complex, is based on “a simple transaction” that a debtor can be relieved of his or her financial obligations if he or she “acts in good faith and makes substantially all of his or her assets available to his or her creditors.”
Although Purdue Pharma filed for bankruptcy protection following a series of opioid-related lawsuits, its longtime owners, the Sackler family, did not do so. Instead, they asked the court overseeing Purdue’s bankruptcy to “order the elimination of a substantial number of existing and potential claims against them.”
That approach enables them to obtain relief “without the consent of those affected and without having to make available to creditors anything approaching their entire assets,” Justice Gorsuch wrote.
The U.S. Trustee Program, a watchdog group under the U.S. Department of Justice, has questioned the liability protection mechanisms used by the Sackler family.
The deal, which requires the Sacklers to pay up to $6 billion in damages over 18 years, highlights the difficult balancing act involved in ensuring much-needed funds flow to victims, states and tribes, among others, despite widespread concerns that the Sacklers could be shielded from further accountability for the opioid crisis.
Because of OxyContin’s popularity, Purdue Pharma — and the Sackler family — have long been seen as central to the crisis.
Justice Gorsuch wrote that from 1999 to 2019, about 247,000 people died in the United States from prescription opioids, and the epidemic costs the country between $53 billion and $72 billion a year. He added that “Purdue is at the center of these events.”
Purdue Pharma began selling OxyContin in the mid-1990s, and while such drugs have traditionally been used only in limited circumstances, the company claims it has developed a new formulation that reduces the risk of opioid addiction and could make the drug available to more patients.
The drug’s success catapulted the Sackler family into the wealthiest segment of American society, with an estimated net worth of $14 billion, and made them major donors to museums, medical schools and academic institutions.
But by 2007, as deaths from opioid overdoses mounted, three Purdue executives pleaded guilty to federal criminal charges, and the company was fined more than $600 million for misleading regulators, doctors and patients about the drugs’ abuse potential.
The first opioid lawsuit was filed around 2014 against Purdue Pharma, sparking a flood of litigation and heightened scrutiny of the roles played by members of the Sackler family.
Purdue Pharma filed for bankruptcy reorganization in 2019, ultimately suspending the litigation. At the time, the Sackler family was facing about 400 related claims.
Initiatives It is controversial Start from scratch.
under Bankruptcy judge approves deal In 2021, Purdue Pharma will be dissolved; the company will have committed billions of dollars to the opioid crisis and ended thousands of related claims; and the Sackler family will be protected from civil liability.
Judge Gorsuch explained that the Sacklers also “proposed to terminate all of these lawsuits without the consent of the opioid victims who filed them,” a release that “would not only prevent litigation against company officers and directors, but would also benefit hundreds or even thousands of Sackler family members and entities they control.”
Under the agreement, Purdue Pharma will become a “public benefit” corporation dedicated to opioid education and abatement. With the help of the Sacklers’ planned donations, the company will provide compensation ranging from $3,500 to $48,000 to individual victims.
Although the majority of creditors who voted on the proposed plan supported it, Judge Gorsuch wrote that “fewer than 20 percent of eligible creditors participated” and that “thousands of opioid victims also voted against the plan, with many imploring the bankruptcy court not to wipe out their claims against the Sacklers without their consent.”
Federal District Judge Later overthrown The agreement said the program wrongly provided such protection to members of the Sackler family.
But after the Sacklers raised their offer by about $1.73 billion, many of the parties that had opposed the plan signed on.
Purdue Pharma argued that a ruling against it would be costly. If the court rejected the deal, it “would harm victims and needlessly delay the distribution of billions of dollars to alleviate the opioid crisis,” the company said.
In August, the judge put the settlement on hold and agreed to hear the case.
In their ruling, the majority pointed to the section of the bankruptcy code regarding settlement plans and determined that the bankruptcy code did not authorize such agreements, finding instead that “the Sacklers sought to pay less than the amounts normally required by the bankruptcy code and received more than the amounts normally permitted by the bankruptcy code.”
Justice Kavanaugh wrote in his dissent that overturning the settlement to prevent the Sacklers from escaping future lawsuits would only increase the suffering of opioid victims and their families.
“To be sure, many Americans harbor deep animus toward the Sackler family,” Judge Kavanaugh wrote. “But allowing that animus to infect this bankruptcy case is completely wrong, counterproductive, and will only cause more harm to opioid victims.”
He added: “Today’s unfortunate and devastating decision will cost opioid victims and other future mass tort victims tremendously. Only Congress can fix the mess that now ensues.”
Jane Hoffman Contributed reporting.
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