Supreme Court justices appeared divided Monday over a hotly contested bankruptcy settlement for Purdue Pharma, which would devote billions of dollars to fighting the opioid epidemic in exchange for protecting members of the wealthy Sackler family from related civil proceedings.
The U.S. Trustee Program, an office of the Justice Department, had challenged the deal involving Purdue, the maker of the prescription painkiller OxyContin. He said the deal violated federal law by granting such broad legal immunity to the Sacklers, who once controlled the company even though they themselves had not declared bankruptcy.
The judges’ questions showed why the deal has drawn intense criticism in a dispute that pits money over principle. The debate focused on the practical effect of breaking the deal, painstakingly negotiated over years for victims and families who urgently sought settlement funds, and broader concerns about whether the waiver removing the Sacklers from accountability would free them from closer scrutiny of their role in the opioid crisis.
A ruling in this case could also impact similar deals resolved through the bankruptcy system that was structured to protect a third party from liability.
“Opioid victims and their families overwhelmingly approve of this plan because they believe it will ensure prompt payment,” Justice Brett M. Kavanaugh said. He questioned why the government was pushing to end a tactic approved over “30 years of bankruptcy court practice.”
Government lawyer Curtis E. Gannon acknowledged this tension, but he argued that the U.S. administrator “has been given this oversight role” and that a government decision would not prevent a deal. on opioids with the Sacklers. He noted that after a federal judge threw out the deal, the Sacklers increased their cash offer, from about $4 billion to $6 billion, to settle thousands of claims.
Judge Amy Coney Barrett discussed what a victory for the U.S. administrator would mean “for other victims of mass torts,” including plaintiffs who have accused the Boy Scouts of America and the Catholic Church of abuse sexual. These settlements included similar liability releases, known as non-consensual third-party releases.
Mr. Gannon responded that Congress could pass legislation specifying how such agreements could work. It was not the government’s role, he said, to speak on behalf of the victims but rather to be “concerned with the whole process”.
In the packed courtroom, the justices appeared deeply engaged, periodically leaning forward during the two hours of debate.
Their questions did not appear to align along ideological lines, indicating the decision could be closely divided.
Judge Ketanji Brown Jackson seemed skeptical that liability waivers were the only way to compensate opioid victims, questioning why the deal had to be reached in bankruptcy court.
The victims’ groups’ lawyer, Pratik A. Shah, insisted the releases were essential to the deal. Otherwise, he said, Sackler family members would not sign a deal, potentially leaving the victims with nothing.
“Without this publication, the plan will fail,” he said. “There will be no viable path to recovery for a victim. »
“Well, that seemed very categorical,” Justice Elena Kagan responded with a laugh.
Justice Kagan seemed perplexed by her views from the bench. She appeared to doubt the US administrator’s position and questioned whether the government was obstructing a deal that had the overwhelming approval of victims. They are among those “who think the Sacklers are just about the worst people on Earth,” she added.
But she then asked whether such deals had disrupted the bankruptcy process: Did the settlement allow wealthy individuals like the Sacklers to protect themselves from lawsuits, including allegations of fraud, without putting “on the table almost -all of their assets?
“In some ways, they get a better deal than the usual discharge in bankruptcy,” Justice Kagan said, because “they are protected from allegations of fraud and allegations of willful misconduct.”
Judge Jackson seemed to share these concerns. She described frustrations expressed by the original bankruptcy judge that the Sacklers had moved money from Purdue to offshore accounts. The Sacklers “took the company’s assets, which set off a series of circumstances where the company no longer had enough money to pay creditors,” she said.
Outside the courtroom, dozens of protesters called on judges to overturn the bankruptcy deal, saying it did little for the victims’ families and failed to seek accountability to the Sacklers.
Many wore red T-shirts reading “Sackler v. the people” under an image of the Supreme Court and held signs with photos of family members who died of drug overdoses.
“I don’t want their money,” said Ralph DeRigo, who said one of his sons died of an opioid overdose in 2014 and another struggled with addiction. “They should lose everything or, at least, everything they gained with OxyContin.”
He added that he didn’t believe a cash settlement would do justice: “I think they should be in jail.” »
A decision could be made in June, near the end of the court’s term.
In recent years, bankruptcy court has become a popular venue for handling massive injury settlements.
By agreeing to take up the Harrington v. Purdue Pharma, No. 23-124, the Supreme Court temporarily suspended the agreement, most likely suspending payments to plaintiffs until it issues a decision.
The U.S. trustee had asked the court to intervene after an appeals court upheld the settlement. The agreement allowed the Sacklers to take advantage of protections intended for those who are “financial distress“, the government said, offering “a roadmap for corporations and wealthy individuals to abuse the bankruptcy system.”
Purdue’s lawyers said in court files that the plan “would provide billions of dollars and lifesaving benefits to victims of the opioid crisis.” Canceling the deal, they added, would put that in jeopardy. The suggestion that the plan laid out a strategy for the wealthy seeking to avoid accountability was “unfounded” they added.
Purdue, which is widely considered to have helped spark the opioid crisis, has faced a host of challenges since OxyContin’s addictive qualities and abuse potential became evident.
Still, the company continued to aggressively promote the painkiller. In 2007, a Purdue holding company pleaded guilty to a charge of “misrepresenting” the drug, including its addictiveness, and agreed to pay some $600 million in fines and other costs.
As the number of overdose deaths skyrocketed, municipalities, tribes, families and others sought funds to address the drug’s ravages. Many have placed much of the blame on OxyContin.
Purdue filed for bankruptcy protection in September 2019 as civil lawsuits against the company and, increasingly, the Sacklers themselves mounted.
Under a restructuring plan filed in March 2021, the company would be dissolved and become a public benefit corporation focused on combating the opioid epidemic. In turn, members of the Sackler family would devote billions of their personal fortune to help states, municipalities, tribes and others combat a public health crisis that has claimed hundreds of thousands of lives. More than 90 percent of plaintiffs who voted on the plan approved it.
In September, Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., approved the plan. The American Trustee program was among those appealing the decision.
As an appeal moved through the courts, members of the Sackler family increased their cash offer in February 2022 to settle the thousands of opioid claims up to $6 billion. They continued to insist that they be protected from all opioid-related lawsuits.
The U.S. Court of Appeals for the Second Circuit ruled in favor of the plan more than a year later, handing Purdue victory and prompting the U.S. trustee to appeal.
Jan Hoffmann contributed reporting from New York, and Aishvarya Kavi of Washington.