The Supreme Court has issued a temporary block on a reorganization plan proposed by Purdue Pharma, the manufacturer of OxyContin. The plan aimed to protect the Sackler family, who own Purdue Pharma, from future liability in opioid claims. The Court's order has effectively halted the $6 billion settlement that had been approved by the United States Court of Appeals for the Second Circuit.
The Supreme Court has directed parties involved to address the question of whether the Bankruptcy Code allows for the approval of a release that extinguishes claims against nondebtor third parties without the consent of the claimants. This move by the Court adds to the uncertainty surrounding the settlement plan and highlights the ongoing legal battle over compensation for opioid victims.
Purdue Pharma, a company founded in 1892, has faced numerous lawsuits and fines for allegedly misleading the public about the addictive nature of OxyContin, thus playing a significant role in the country's opioid crisis. Currently undergoing Chapter 11 bankruptcy, the company had reached a settlement agreement that would have allowed it to emerge as a new entity, with its profits dedicated to combating the opioid epidemic. However, this agreement also aimed to shield the Sackler family, who had funneled nearly $11 billion out of the company, from future lawsuits.
The case at hand, 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 government has raised concerns about the broad release from liability granted to the Sackler family and the potential misuse of the bankruptcy system. They argue that bankruptcy judges do not have the power to permanently block lawsuits against company owners who have not sought personal bankruptcy protection. If the settlement agreement were allowed to proceed, it could set a troubling precedent, according to the government.
The Supreme Court's decision to review the case has drawn mixed reactions. Lawyers for Purdue Pharma and other parties involved in the agreement have criticized the stay, stating that it would harm victims and further delay the distribution of funds to address the opioid crisis. On the other hand, some victims' groups have expressed frustration with the stay, as it prolongs the wait for compensation for those who have been harmed by the crisis.
The case raises important questions about the extent of liability protection in bankruptcy proceedings and the delicate balance between compensating victims and holding responsible parties accountable. The Supreme Court will hear arguments in December, with a decision expected next year. Until then, the fate of the settlement plan and the legal implications for the Sackler family remain uncertain.
