The Supreme Court on Thursday rejected Purdue Pharma’s proposed $6 billion bankruptcy settlement, holding that U.S. bankruptcy law did not allow the Sackler family to be released from additional liability.
A 5-4 majority opinion by Justice Neil Gorsuch sided with the Biden administration‘s argument that Purdue Pharma’s settlement is an abuse of bankruptcy protections meant for debtors in financial distress, not for the wealthy family owners of the multibillion-dollar opioid company, who withdrew $11 billion from Purdue Pharma before agreeing to contribute $6 billion to its opioid settlement.
Gorsuch held that “nothing in present law authorized the Sackler discharge,” according to his narrow majority opinion in the case Harrington v. Purdue Pharma.
Justices Brett Kavanaugh, Ketanji Brown Jackson, Elena Kagan, and Sonia Sotomayor dissented.
THESE ARE THE RULES TRUMP AND BIDEN AGREED TO FOLLOW IN CNN PRESIDENTIAL DEBATE
The Sackler family’s plan to settle lawsuits and transform Purdue Pharma into a nonprofit organization dedicated to addiction treatment was initially approved by a bankruptcy judge in 2011.
Families of the late Mortimer Sackler and the late Raymond Sackler released a statement saying they remain “hopeful about reaching a resolution that provides substantial resources to help combat a complex public health crisis.”
The family members said in their statement that they felt the “unfortunate” reality of the narrow majority decision would lead to “costly and chaotic legal proceedings in courtrooms across the country.”
“While we are confident that we would prevail in any future litigation given the profound misrepresentations about our families and the opioid crisis, we continue to believe that a swift negotiated agreement to provide billions of dollars for people and communities in need is the best way forward,” the family statement added.
The U.S. Trustee Program, a Justice Department watchdog, intervened and claimed settlement terms required unanimous consent by the roughly 60,000 people who have filed personal injury claims, despite the plan’s approval by over 95% of the voting claimants.
Kavanaugh wrote that current opioid victims and other future victims of mass torts “will suffer greatly in the wake of today’s unfortunate and destabilizing decision.”
After years of litigation, the Supreme Court in August temporarily barred the pharmaceutical company from moving forward with bankruptcy proceedings and agreed to hear the Justice Department’s challenge to the plan on the merits.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Liz Janczak, a partner in Smith, Gambrell & Russell’s bankruptcy practice in Chicago, said the decision on Thursday marked a “pivotal” moment in bankruptcy case law, noting that the narrow decision indicated that the court struggled to balance the plain text of the Bankruptcy Code “against the policy purpose of maximizing recoveries for creditors.”
“The ball is now in Congress’s court to consider a legislative solution to address the collective-action problems identified in Justice Kavanaugh’s dissent,” Janczak added.
