Supreme Court rejects multibillion-dollar Purdue Pharma opioid settlement that shielded Sackler family

CNN

By John Fritze and Devan Cole, CNN

Washington (CNN) — The Supreme Court on Thursday rejected a controversial settlement that would have sent billions of dollars to treatment programs and victims of the nation’s opioid epidemic but also shielded the Sackler family from future lawsuits despite the fact that it made its fortune selling prescription opioids.

Justice Neil Gorsuch wrote the opinion for a 5-4 majority.

“The Sacklers seek greater relief than a bankruptcy discharge normally affords, for they hope to extinguish even claims for wrongful death and fraud, and they seek to do so without putting anything close to all their assets on the table,” Gorsuch wrote. “Describe the relief the Sacklers seek how you will, nothing in the bankruptcy code contemplates (much less authorizes) it.”

Justice Brett Kavanaugh, a fellow conservative, said in dissent that the court’s decision will have a “devastating” impact on thousands of victims of the opioid epidemic.

“As a result, opioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation,” he wrote in the dissent, which was joined by Chief Justice John Roberts and liberal Justices Sonia Sotomayor and Elena Kagan.

Kavanaugh went on to implore Congress to amend US bankruptcy law to “fix the chaos that will now ensue” from the court’s ruling.

“The court’s decision will lead to too much harm for too many people for Congress to sit by idly without at least carefully studying the issue,” Kavanaugh wrote.

On a court that often focuses first and foremost on the text of the law, Gorsuch noted that the bankruptcy law didn’t specifically give authority to courts to allow third parties like the Sacklers to avoid future liability. And while he acknowledged that the decision Thursday “may cause Purdue’s current reorganization plan to unravel,” Gorsuch wrote that outcome would considerably increase legal exposure for the Sacklers and may force the family to negotiate better terms.

“If past is prologue,” Gorsuch wrote, citing an argument from the Justice Department, “there may be a better deal on the horizon.”

The case dealt with the fate of a company and its leaders who produced and promoted a highly addictive drug, OxyContin, in the early days of an opioid crisis that has claimed the lives of hundreds of thousands of Americans and shattered many more.

As the nation continues to grapple with the opioid epidemic, the Sackler family had agreed to pay $6 billion to families and states as part of an agreement to wind down Purdue Pharma, the maker of OxyContin. In exchange, the Sackler family would be immunized from future civil liability claims.

Purdue marketed OxyContin as a safer and less addictive painkiller, encouraging doctors to prescribe the drug over longer periods of time and for more routine injuries. The drug’s success fueled the Sackler fortune, and the family became known for philanthropy.

But a series of lawsuits and news accounts alleged the family continued to promote OxyContin even after it learned of the drug’s addictive properties. Not only did many Americans become addicted, but some turned to heroin and other opioids when they could no longer fill their prescriptions.

From 1999 to 2021, nearly 645,000 people died from an opioid overdose, according to the Centers for Disease Control and Prevention.

“Both sides of this policy debate may have their points,” Gorsuch wrote. “But, in the end, we are the wrong audience for them.”

Congress, he said, should resolve the issue of whether third parties can be shielded from future lawsuits.

“Our only proper task is to interpret and apply the law as we find it,” Gorsuch added, “and nothing in present law authorizes the Sackler discharge.”

Purdue Pharma: ‘Ruling is heart-crushing’

In a statement, Purdue said the ruling will require the company to renew efforts to “reach back out to the same creditors who have already proven they can unite to forge a settlement in the public interest, and renew our pursuit of a resolution that delivers billions of dollars of value for opioid abatement and allows the Company to emerge from bankruptcy as a public benefit company.”

“Today’s ruling is heart-crushing because it invalidates a settlement supported by nearly all of our creditors – including states, local governments, personal injury victims, schools, and hospitals – that would have delivered billions of dollars for victim compensation, opioid crisis abatement, and overdose rescue and addiction treatment medicines,” Purdue said. “Critically, the ruling is limited to the narrow legal issue regarding the scope of the third-party releases conferred by the plan. The decision does nothing to deter us from the twin goals of using settlement dollars for opioid abatement and turning the company into an engine for good.”

In a separate statement, the families of the late Mortimer Sackler and the late Raymond Sackler also said they were disappointed by the decision.

“The Sackler families remain hopeful about reaching a resolution that provides substantial resources to help combat a complex public health crisis,” the statement read. “The unfortunate reality is that the alternative is 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.”

Those supporting the bankruptcy argued the yearslong process had gone on long enough and was unlikely to yield additional money from the Sackler family. The vast majority of known current opioid victims and their families supported the agreement.

But the Justice Department said it was a raw deal for victims – particularly potential future victims. While such third-party “release” arrangements are not uncommon in bankruptcies, the department argued that nothing in the law explicitly authorizes a court to bar future lawsuits forever.

A federal appeals court in New York approved the deal last year but the Supreme Court paused the arrangement in August so it could review the case.

The bankruptcy plan was opposed by the US Trustee, a part of the Justice Department that serves as a watchdog over bankruptcy cases. Calling it an “abuse,” the office said that barring individual victims from pursuing their own lawsuits against the Sackler family “raises serious constitutional questions.”

Under the agreement, Purdue Pharma would cease to exist and a new company, Knoa Pharma, would be created in its place. Knoa would distribute opioid addiction treatments and overdose reversal medicines, while continuing to produce opioids.

CNN’s Samantha Delouya contributed to this report.

This story has been updated with additional details and reaction.

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