The Supreme Court ruled Thursday that members of the wealthy Sackler family cannot be protected from lawsuits over their role in the opioid crisis as part of a bankruptcy settlement that will channel billions of dollars to victims and their families.
In a 5-to-4 decision, written by Justice Neil M. Gorsuch, the majority of judges held that the Federal bankruptcy code does not authorize the shield of liability for third parties in bankruptcy agreements. Justice Gorsuch was joined by Justices Clarence Thomas, Samuel A. Alito Jr., Amy Coney Barrett and Ketanji Brown Jackson.
In a very worded dissent, Justice Brett M. Kavanaugh wrote that “the decision is wrong in law and devastating for more than 100,000 opioid victims and their families.” He was joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor and Elena Kagan.
The decision jeopardizes a carefully negotiated settlement between Purdue and the Sacklers, in which family members pledged to give $6 billion to states, local governments, tribes and individuals to address the devastating public health crisis.
It all but ensures that members of the Sackler family, which controls Purdue Pharma, the maker of the prescription painkiller OxyContin, will not be subject to a condition of the deal that has sparked significant criticism: immunity from liability in opioid-related lawsuits, even though they have not declare bankruptcy.
The U.S. Trustee Program, an oversight office within the Justice Department, asked the Supreme Court to intervene. The liability shield, which binds potential claimants without their consent and offers broad legal protections to the Sacklers, is a misuse of the bankruptcy system intended to address “genuine financial hardship,” the office said.
The decision has broader implications for other bankruptcy settlements involving mass injury claims, including one between the Boy Scouts of America and a victim of sexual harassment. The liability shield attached to the Purdue deal has become popular with the settlement.
The deal, which requires the Sacklers to pay up to $6 billion over 18 years, with nearly $4.5 billion due in the first nine years, underscores a difficult balancing act: ensuring that the money sought quickly goes to victims, states and tribes, among others. , despite broader concerns about the possibility of absolving the Sacklers of more responsibility for the opioid crisis.
Purdue Pharma and the Sacklers have long been seen helping to deal with the crisis over the popularity of the company’s prescription pain reliever, OxyContin.
In 2007, due to the number of overdose deaths caused by opioids, Purdue and its three top executives pleaded guilty to federal criminal charges, and the company was fined more than $600 million for lying to regulators, doctors and patients about the drug’s abuse potential.
The first opioid lawsuit was filed against Purdue Pharma around 2014, triggering a flood of litigation and intense scrutiny of the role of members of the Sackler family, whose large fortune has been a major donor to museums, medical schools and academic institutions.
In 2019, Purdue filed for bankruptcy restructuring, which finally put the lawsuit to rest. At the time, the Sacklers faced about 400 related claims.
The move was controversial from the start.
In a deal approved by a bankruptcy judge in 2021, Purdue Pharma will be liquidated; the company will give billions of dollars to the opioid crisis, putting an end to thousands of related claims; and Sacklers will be guaranteed protection from civil liability.
A federal district judge later threw out the deal, saying the plan was flawed because it gave the Sackler family members that protection.
But after the Sacklers increased their offer to about $ 1.73 billion, many parties objected to the plan.
In May 2023, a federal appeals panel approved the latest version of the agreement. Judge Eunice C. Lee of the United States Court of Appeals for the Second Circuit, who wrote the decision, recognized the principle at stake.
“Bankruptcy is inherently a product of competing interests, compromises and less than perfect results,” wrote Judge Lee. “Because of this determined characteristic, the total satisfaction of all debtors – whether in money or in justice – rarely happens.”
In July, the US Trust Program petitioned the Supreme Court to review the deal. The plan, it said in the application, was an “abuse of the bankruptcy system.”
Purdue Pharma contends that the decision will result in significant damages. If the court rejects the deal, he said, “it will harm victims and unnecessarily delay the distribution of billions of dollars to alleviate the opioid crisis.”
In August, the judges put the settlement on hold and agreed to hear the case.
Questions by the judges in December reflected the tension between the consequences for victims, state, tribal and local governments if a settlement deal is not reached and concerns about the Sacklers being exempt from future lawsuits.
Justice Brett M. Kavanaugh anticipated the complications, asking the government why it would push for tactics approved in “30 years of bankruptcy court practice.”
In the opinion of the victims and their families, he said, “the federal government, which has no stake,” challenged the deal, putting at risk the long-awaited payments to the states to fight the crisis as well as money for the victims. and his family. Instead of focusing on practical solutions to secure funding to fight the opioid epidemic, he added, the government seems to be promoting “this rather theoretical idea that they’re going to be able to recover money from the Sacklers themselves.”
Justice Elena Kagan joined them, pressing the deputy attorney general, Curtis E. Gannon, about why the Justice Department sought to upend the deal despite the number of prosecutors who had signed it.
“There’s a lot of support for this deal, and among people who don’t love the Sacklers, among people who think the Sacklers are the worst people on Earth,” Justice Kagan said.
John Hoffman contribute reports.