The Supreme Court recently announced its decision to temporarily halt a bankruptcy deal for Purdue Pharma, the maker of OxyContin. The deal would provide billions of dollars to those affected by the opioid epidemic but would shield members of the wealthy Sackler family from further lawsuits related to opioids. This settlement is significant as it addresses one of the largest public health crises in the country.
The Supreme Court’s decision to take up this bankruptcy court dispute is unusual, especially considering it involves a mass-injury case settlement. Typically, all parties involved are under pressure to reach a settlement, as litigating at a national level is expensive and time-consuming. In this case, the U.S. Trustee Program, part of the Justice Department, requested that the Supreme Court review the deal. Several factors within the case, such as the national importance of the opioid crisis and the growing popularity of agreements that shield third parties from liability, made it more likely for the Supreme Court to grant review.
The implications of this decision extend beyond the Purdue Pharma case. If approved, the deal sets a precedent for other businesses and plaintiffs who turn to the bankruptcy courts for mass-injury cases. Conversely, a Supreme Court decision to block nonconsensual third-party releases, which protect the Sackler family from civil lawsuits, could potentially undermine the entire bankruptcy settlement deal. This would include other cases like the Revlon bankruptcy, creating doubt around these settlement agreements.
It remains uncertain how the Supreme Court will approach this case. While the conservative majority typically favors business interests, some conservative justices have expressed caution regarding aggressive litigation tactics. Additionally, this court has shown skepticism towards lower courts acting without explicit authorization from Congress. The liberal justices’ stance is also unclear, making this a case that may result in a split vote among the justices.
The objection to the Purdue plan is primarily rooted in the conflict between money and principle. While thousands of plaintiffs, including states, local governments, tribes, and individuals, have been waiting for settlement funds, the U.S. Trustee Program objects to the deal’s approval. Their concern is that the Sacklers would reap the benefits of bankruptcy, such as avoiding opioid-related lawsuits, without having to face the costs of bankruptcy itself, like the scrutiny of their fortune. This objection raises the issue of constitutional due process rights being compromised.
The settlement plan offers immediate payment of $1.2 billion from Purdue upon emerging from bankruptcy, with additional payments expected over the years. The Sacklers would contribute up to $6 billion over 18 years, with a significant portion due in the first nine years. The agreement also includes a trust of approximately $161 million for federally recognized Native American tribes, and each state has devised a formula for distributing the funds among local governments. The money must primarily be used for initiatives aimed at addressing the opioid crisis, such as addiction treatment and prevention.
Individual victims are also considered in the plan, with a trust of $700 million to $750 million being established for them and families affected by OxyContin addiction or overdoses. It is estimated that around 138,000 plaintiffs filed claims, with payouts ranging from $3,500 to $48,000. Additionally, guardians of approximately 6,550 children who experienced drug exposure in the womb and withdrawal symptoms may each receive approximately $7,000. While the payouts may be relatively small, this settlement is one of the few nationwide opioid settlements that allocate funds specifically for individuals.
If the plan is approved, Purdue Pharma would cease to exist, and its assets would be transferred to a new company called Knoa Pharma. This company, owned by creditors, would produce addiction treatment and opioid reversal medications at no profit. Knoa would continue manufacturing opioids like OxyContin and non-opioid drugs, with profits contributing to the settlement funds. An independent monitor oversees Purdue, and the Sacklers have not been on its board since 2018.
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