The Supreme Court has temporarily blocked a reorganization plan by Purdue Pharma, the maker of OxyContin, which aimed to shield the Sackler family from future liability in opioid claims. The plan, which had been approved by the United States Court of Appeals for the Second Circuit, included a $6 billion settlement for thousands of plaintiffs. The Supreme Court's order "recalled and stayed" the previous ruling, halting the bankruptcy settlement. The court has directed parties to address the question of whether the Bankruptcy Code allows the approval of a release that extinguishes claims against nondebtor third parties without the consent of the claimants.
Purdue Pharma, founded in 1892, has been accused of playing a significant role in the country's opioid crisis. The company faced multiple lawsuits and fines for allegedly misleading the public about the addictive nature of OxyContin. Currently in Chapter 11 bankruptcy, Purdue Pharma had reached a settlement that would allow it to emerge as a new entity, with its profits dedicated to combating the opioid epidemic. However, the agreement also aimed to shield the Sackler family, who funneled nearly $11 billion out of the company, from future lawsuits.
The case, titled Harrington v. Purdue Pharma, involves a challenge by the U.S. Trustee and the Justice Department to the bankruptcy settlement. They argue that bankruptcy law does not authorize releasing the Sackler family from legal liability. The Supreme Court's decision to review the case adds to the uncertainty surrounding the settlement plan. The justices will hear arguments in December, with a decision expected next year.
The government has raised concerns about the breadth of the release from liability granted to the Sackler family and the potential misuse of the bankruptcy system. The U.S. Trustee Program argues that bankruptcy judges do not have the power to permanently block lawsuits against company owners who have not sought personal bankruptcy protection. The settlement agreement, if allowed to proceed, could set a troubling precedent, according to the government.
The decision to halt the settlement has drawn mixed reactions. Lawyers for Purdue Pharma and other parties involved in the agreement have criticized the stay, arguing that it would harm victims and delay the distribution of funds to address the opioid crisis. However, some victims' groups have expressed frustration, as the stay further delays compensation for those harmed by the crisis.
The Supreme Court's involvement in the case highlights the ongoing legal battle over compensation for opioid victims. The case raises important questions about the extent of liability protection in bankruptcy proceedings and the balance between compensating victims and holding responsible parties accountable.
