The US Supreme Court tore up Purdue Pharma’s bankruptcy settlement

WASHINGTON, Dec 4 (Reuters) – U.S. Supreme Court justices battled on Monday over whether to approve OxyContin maker Purdue Pharma’s bankruptcy settlement, citing concerns that the deal would shield its wealthy Sackler family owners from lawsuits related to a deadly opioid epidemic. Destroying it will harm the victims.

The court heard arguments in President Joe Biden’s administration’s appeal of a lower court ruling upholding the settlement for the Stamford, Connecticut-based company.

Purdue’s owners under the deal will receive immunity in exchange for paying up to $6 billion to settle thousands of lawsuits filed by states, hospitals, addicts and others who have sued the company for mismarketing its powerful painkiller OxyContin.

At issue in the case is whether U.S. bankruptcy law allows Purdue’s reorganization to include legal protections for Sackler family members who have not filed for personal bankruptcy.

Some judges seemed to express skepticism toward Biden’s administration position.

“Bankruptcy courts have been approving plans like this for 30 years,” conservative Justice Brett Kavanaugh told Justice Department lawyer Curtis Cannon, while asking why the Supreme Court should rule such plans “peremptorily inappropriate.”

But some judges seemed wary of extending protections to the Sacklers under the bankruptcy code when family members themselves are not debtors under the plan.

“In some ways, they’re getting a better deal than a typical bankruptcy discharge,” liberal Justice Elena Kagan told Gregory Carey, an attorney representing Purdue, adding that under the deal the Sacklers would be “protected from claims of fraud and willful misconduct.” ,” which does not happen in a typical bankruptcy proceeding.

In August, judges halted bankruptcy proceedings involving Purdue and its subsidiaries when they accepted the administration’s appeal by the Manhattan-based 2nd US Circuit of Appeals.

Outside court, about 50 people, including family members of opioid victims, protested the settlement. “Sewermen lie, people die,” chanted some of the demonstrators. Some held signs commemorating those who died from opioids. Another sign read, “Deadly White Collar Criminals – Sackler Cartel”.

Chapter 11

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

Purdue estimates that its bankruptcy settlement, approved by a U.S. bankruptcy judge in 2021, will award $10 billion to its creditors, including state and local governments, individuals affected by addiction, hospitals and others who have sued the company.

The Biden administration and eight states challenged the settlement. All states dropped their opposition after the Sacklers agreed to contribute more to the settlement fund.

In upholding the settlement in May, the 2nd Circuit concluded that federal bankruptcy law allows legal protections for non-bankrupt parties like the Sacklers in unusual circumstances. The ruling ruled that the legal claims against Purdue were inextricably linked to those against its owners, and that allowing lawsuits aimed at the Sacklers would undermine Purdue’s efforts to achieve a bankruptcy resolution.

Carey warned the justices that blocking the bankruptcy deal could ultimately subject the Sacklers to a flood of lawsuits and leave many affected by the opioid crisis empty-handed.

“The billions of dollars that the program earmarks for opioid reduction and compensation will evaporate, leaving creditors and victims with nothing, and of course lives will be lost,” Carey said.

Cavanaugh suggested Cannon’s argument for the administration signals that the opinions of opioid victims and their families don’t matter.

Cannon said Sackler family members withdrew billions from Purdue before it agreed to contribute up to $6 billion to its opioid settlement. The agreement conflicts with the “nuts and bolts” of bankruptcy law because it “allows the Sacklers to decide how much they’re going to contribute,” Cannon said.

While most claimants who voted on whether to approve the deal viewed it favorably, some justices expressed concern that opponents of the deal would not be able to sue for their injuries.

“We generally do not say that a non-consenting party can dispose of a claim to property in this manner without permission or any process of the court,” conservative Justice Neil Gorsuch told attorneys for the creditors.

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