Supreme Court blocks bankruptcy deal that shields Purdue Pharma from future opioid claims
The Supreme Court on Thursday temporarily halted a reorganization plan by Purdue Pharma that would shield the Sackler family, which owned the company, from liability in future opioid claims.
Purdue Pharma had reached a bankruptcy deal that would pay as much as $6 billion to thousands of plaintiffs as a settlement for lawsuits.
A May decision from the United States Court of Appeals for the Second Circuit had allowed the deal to move ahead.
But the Biden administration appealed the decision, claiming the agreement would leave the Sackler family off the hook.
The original ruling was “recalled and stayed” by the Supreme Court in its Thursday order, which was presented by Justice Sonia Sotomayor.
The $6 billion dollar bankruptcy settlement is also on hold now.
“The parties are directed to brief and argue the following question: Whether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent,” the high court wrote in an order Thursday.
The Supreme Court also teed up a December 2023 argument session, meaning a decision will likely come down next year.
Purdue Pharma, founded in 1892, has been accused by critics of playing a pronounced role in exacerbating the nation’s opioid crisis.
The firm had reaped billions for the sale of OxyContin, a painkiller that got many Americans addicted to opioids.
Purdue Pharma was hit with massive fines and a mountain of lawsuits for allegedly misleading the public on the addictive nature of OxyContin. The company is currently in Chapter 11 bankruptcy.
Solicitor General Elizabeth Prelogar, who asked the high court to intervene, noted that Sackler family members funneled almost $11 billion out of the firm while seeking liability protections.
US Trustee William Harrington argued in court documents that the bankruptcy code doesn’t authorize the release of the Sackler family from future liability.
“The Sackler release is not authorized by the Bankruptcy Code, constitutes an abuse of the bankruptcy system, and raises serious constitutional questions by extinguishing without consent the property rights of nondebtors against individuals or entities not themselves debtors in bankruptcy,” Harrington argued.
The case is titled, Harrington v. Purdue Pharma.
