In a significant 5-4 decision, the Supreme Court has rejected a nationwide settlement with Purdue Pharma, the manufacturer of OxyContin, that would have shielded members of the Sackler family from civil lawsuits while allocating billions of dollars to combat the opioid epidemic.
This ruling, delivered after more than six months of deliberation, has far-reaching implications for both the opioid crisis and the broader landscape of bankruptcy law.
Justice Neil Gorsuch, writing for the majority, asserted that current law does not authorize the protection sought by the Sacklers. The proposed settlement would have allowed the Sacklers to contribute up to $6 billion and relinquish ownership of Purdue Pharma while retaining a significant portion of their wealth. The plan envisioned the company emerging from bankruptcy as a new entity, with profits directed towards treatment and prevention efforts.
The decision has elicited mixed reactions. Opponents of the settlement, including some victims’ families, hailed it as a step towards justice, while proponents, including many state and local governments, view it as a setback in addressing the opioid crisis. Edward Neiger, representing over 60,000 overdose victims, characterized the ruling as potentially leading to more overdose deaths due to delayed funding for treatment and prevention.
This ruling also raises questions about other major bankruptcies involving third-party releases, such as the $2.4 billion plan for the Boy Scouts of America. The court’s decision may cause reevaluation of similar settlements that seek to protect non-bankrupt parties from liability.
The core legal issue revolved around whether bankruptcy protection can extend to individuals like the Sacklers, who have not personally declared bankruptcy. The U.S. Bankruptcy Trustee argued against this extension, while proponents of the plan contended that such third-party releases are sometimes necessary to forge agreements.
The dissenting justices, including Chief Justice John Roberts and Justices Brett Kavanaugh, Elena Kagan, and Sonia Sotomayor, expressed concerns about the destabilizing effect of this decision on future mass tort cases. Kavanaugh urged Congress to address the issue legislatively, warning of potential chaos in the wake of this ruling.
This decision occurs against the backdrop of the ongoing opioid epidemic, with OxyContin’s aggressive marketing often cited as a catalyst. While Purdue Pharma has become synonymous with the crisis, the majority of prescribed opioids are generic drugs. Opioid-related overdose deaths continue to rise, reaching 80,000 in recent years, primarily due to fentanyl and other synthetic drugs.
The rejected settlement would have ranked among the largest in the pharmaceutical industry related to the opioid crisis, which has seen settlements totaling over $50 billion. It would have been one of the few to include direct payments to victims, ranging from $3,500 to $48,000.