US Supreme Court blocks Purdue Pharma bankruptcy settlement

Washington, June 27, 2024 (AFP) -Issam AHMED The US Supreme Court on Thursday rejected Purdue Pharma's $6 billion opioids settlement immunizing the Sackler family, which controlled the drugmaker, from future litigation.

In a 5-4 ruling, the judges agreed with the Justice Department which argued that the Sacklers, who earned tens of billions of dollars flooding the country with highly addictive opioids, should not gain sweeping legal protection in the controversial deal.

The court held that "the bankruptcy code does not authorize this kind of order," with the majority opinion written by Neil Gorsuch and joined by Clarence Thomas, Samuel Alito, Amy Coney Barrett and Ketanji Brown Jackson.

Brett Kavanaugh, Chief Justice John Roberts, Sonia Sotomayor and Elena Kagan dissented, in a case where judges defied conservative-liberal fault lines.

"The Sacklers have not agreed to place anything approaching their full assets on the table for opioid victims," wrote Gorsuch.

"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."

"If past is prologue," Gorsuch quoted the Justice Department as saying, "there may be a better deal on the horizon."

- Flawed deal better than no deal? -In a blistering dissent, Kavanaugh said: "Today's decision is wrong on the law and devastating for more than 100,000 opioid victims and their families."

"The plan was a shining example of the bankruptcy system at work," he continued.

"Not surprisingly, therefore, virtually all of the opioid victims and creditors in this case fervently support approval of Purdue's bankruptcy reorganization plan," Kavanaugh said, with a only a "small group" opposed, including some creditors in Canada.

What's more, he added, Thursday's decision could have ramifications for cases such as those involving abuse claims against the Catholic Church, which relied on similar deals.

The 2022 Purdue agreement, suspended since last August, came after years of negotiations involving officials from all 50 US states.

It set aside $6 billion for victims of the opioid epidemic from the 2019 bankruptcy of Purdue, which made prescription painkillers like OxyContin.

The settlement gave the families of Raymond Sackler and Mortimer Sackler protection from all future civil claims, effectively protecting their other assets from opioid-related lawsuits.

The Justice Department, acting as a bankruptcy watchdog body known as the US Trustee, accused the Sacklers of withdrawing $11 billion from Purdue Pharma over the decade before the company filed for bankruptcy protection.

- Free-wheeling prescriptions -Arguing the case in December, Deputy Solicitor General Curtis Gannon outlined the Biden administration's objections to the deal.

"It permits the Sacklers to decide how much they're going to contribute," Gannon said. "It grants the Sacklers the functional equivalent of a discharge."

But Purdue Pharma argued rejecting the settlement could lead to years of litigation and leave victims with no compensation at all.

"Today's ruling is heart-crushing," Purdue said in a statement, adding however "the decision does nothing to deter us from the twin goals of using settlement dollars for opioid abatement and turning the company into an engine for good."

Purdue's bankruptcy filing resulted directly from the massive, country-wide litigation against it and other major drugmakers and pharmacy companies for knowingly fomenting the addiction crisis.

Under the March 2022 settlement, the Sacklers were "absolutely, unconditionally, irrevocably, fully, finally, forever and permanently" released from further legal liability.

The opioid epidemic has caused more than 500,000 overdose deaths in the United States over two decades, authorities say.

Purdue and other opioid makers were accused of encouraging free-wheeling prescription of their products through aggressive marketing tactics while hiding how addictive the drugs are.

Facing an avalanche of litigation, in 2021 Purdue pled guilty to three criminal charges over its marketing of OxyContin.

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(Adds comment from Sackler family members)

By John Kruzel

WASHINGTON, June 27 (Reuters) - The U.S. Supreme Court on Thursday blocked OxyContin maker Purdue Pharma's bankruptcy settlement that would have shielded its wealthy Sackler family owners from lawsuits over their role in the nation's deadly opioid epidemic.

The 5-4 decision reversed a lower court's ruling that had upheld the plan to give Purdue's owners immunity in exchange for paying up to $6 billion to settle thousands of lawsuits accusing the company of unlawful misleading marketing of OxyContin, a powerful pain medication introduced in 1996.

The ruling represented a victory for President Joe Biden's administration, which had challenged the settlement as an abuse of bankruptcy protections meant for debtors in financial distress, not people like the Sacklers who have not filed for bankruptcy.

Conservative Justice Neil Gorsuch wrote the ruling, which was joined by fellow conservative Justices Clarence Thomas, Samuel Alito and Amy Coney Barrett, as well as liberal Justice Ketanji Brown Jackson.

"The Sacklers have not filed for bankruptcy and have not placed virtually all their assets on the table for distribution to creditors, yet they seek what essentially amounts to a discharge. They hope to win a judicial order releasing pending claims against them brought by opioid victims. They seek an injunction 'permanently and forever' foreclosing similar suits in the future," Gorsuch wrote. "And they seek all this without the consent of those affected."

Purdue filed for Chapter 11 bankruptcy in 2019 to address its debts, nearly all of which stemmed from thousands of lawsuits alleging that OxyContin helped kickstart an opioid epidemic that has caused more than half a million U.S. overdose deaths over two decades.

At issue in the case was whether U.S. bankruptcy law lets Purdue's restructuring include legal protections for the members of the Sackler family, who have not filed for personal bankruptcy. These so-called "non-debtor releases" originally arose in the context of asbestos litigation, but their use has been expanded by companies looking to use such protections as a bargaining chip.

The Stamford, Connecticut-based company estimates that its bankruptcy settlement, approved by a U.S. bankruptcy judge in 2021, would provide $10 billion in value to its creditors, including state and local governments, individual victims of addiction, hospitals and others who have sued the company.

The Biden administration and eight states challenged the settlement. All the states dropped their opposition after the Sacklers agreed to contribute more to the settlement fund, but the U.S. Trustee - the Justice Department's bankruptcy watchdog - and some individual opioid plaintiffs maintained their opposition.

Purdue issued a statement expressing disappointment in the court's decision.

"Today's ruling is heart-crushing because it invalidates a settlement supported by nearly all of our creditors - including states, local governments, personal injury victims, schools and hospitals - that would have delivered billions of dollars for victim compensation, opioid crisis abatement, and overdose rescue and addiction treatment medicines," it said.

Justice Brett Kavanaugh wrote a dissenting opinion that was joined be fellow conservative Chief Justice John Roberts, and liberal Justices Sonia Sotomayor and Elena Kagan.

"Today's decision is wrong on the law and devastating for more than 100,000 opioid victims and their families," Kavanaugh wrote.

'I'LL SEE THEM IN COURT'

Several state attorneys general issued statements praising the ruling, with some saying that it would bring Purdue back to the negotiating table.

"Purdue and the Sacklers must pay so we can save lives and help people live free of addiction," said Josh Stein, attorney general of North Carolina. "If they won't pay up, I'll see them in court."

Purdue, in its statement, said the company "will immediately reach back out to the same creditors who have already proven they can unite to forge a settlement in the public interest."

In a statement, members of the Sackler family said they "remain hopeful about reaching a resolution that provides substantial resources to help combat a complex public health crisis."

A group comprising more than 60,000 people who have filed personal injury claims stemming from their exposure to Purdue opioid products had told the Supreme Court they support the settlement, including legal immunity for members of the Sackler family.

In upholding the settlement in May 2023, the Manhattan-based 2nd U.S. Circuit of Appeals concluded that federal bankruptcy law permits legal protections for non-bankrupt parties like the Sacklers in extraordinary circumstances. It ruled that the legal claims against Purdue were inextricably linked to claims against its owners, and that allowing lawsuits to continue targeting the Sacklers would undermine Purdue's efforts to reach a bankruptcy settlement.

The Supreme Court in August 2023 paused bankruptcy proceedings concerning Purdue and its affiliates when it agreed to take up the administration's appeal of the 2nd Circuit's ruling.

Lawsuits against Purdue and Sackler family members accused them of fueling the opioid epidemic through deceptive marketing of its pain medication. The company pleaded guilty to misbranding and fraud charges related to its marketing of OxyContin in 2007 and 2020.

Members of the Sackler family have denied wrongdoing but expressed regret that OxyContin "unexpectedly became part of an opioid crisis."

(Reporting by John Kruzel; Editing by Will Dunham)