Supreme Court Raises Concerns About Sackler Protection in Purdue Opioid Settlement

The US Supreme Court indicated a potential division over Purdue Pharma LP’s $6 billion opioid settlement, as the justices considered contentions from the Biden administration that the agreement improperly protects the Sackler family members who own the company.

During a Monday argument, which diverged from the court’s typical ideological divisions, some justices questioned whether the Sacklers should receive the benefit of a legal shield when they have not filed for bankruptcy themselves.

“Why should they get the discharge that usually goes to a bankrupt person once they’ve put all their assets on the table, without having put all their assets on the table?” Justice Elena Kagan asked.

The case jeopardizes a bankruptcy reorganization plan that would resolve a large number of lawsuits against the OxyContin maker and allocate funds toward addressing the opioid crisis. As part of the agreement, family members have consented to relinquish ownership of the company and contribute as much as $6 billion.

Purdue Pharma is urging the Supreme Court to allow the agreement to proceed, as are advocates for tens of thousands of opioid victims, who argue that the funds are urgently required to address the nation’s opioid crisis.

A ruling against the plan could disrupt a vital tool, known as non-consensual third-party releases, used in almost every major settlement. Purdue Pharma’s lawyer, Greg Garre, stated that a ruling against the plan would have a detrimental effect on the bankruptcy code.

He received support from Justice Brett Kavanaugh, who noted that “bankruptcy courts for 30 years have been approving plans like this.”

Sex-Abuse Cases

Congress authorized similar maneuvers decades ago in bankruptcies related to asbestos lawsuits, and over time lawyers and judges have used the approach to address an array of corporate wrongdoing. Similar deals have ended mass litigation over dangerous products and waves of sex abuse claims against Catholic dioceses, the Boy Scouts of America, and USA Gymnastics.

However, other justices indicated that they concurred with arguments by the Justice Department and US Trustee William Harrington that federal bankruptcy courts lack the authority to protect the Sacklers from legal actions.

“We don’t normally say a non-consenting party can have its claim for property eliminated in this fashion without consent or any process of court,” Justice Neil Gorsuch said, alluding to the Constitution’s Seventh Amendment, which guarantees the right to a jury trial in civil cases.

Justice Ketanji Brown Jackson also expressed skepticism, pointing to the billions of dollars the Sacklers collected in dividends before Purdue Pharma filed for bankruptcy.

Another Deal?

The victims’ lawyer, Pratik Shah, told the justices the settlement will collapse unless the court upholds it. “There is no better deal,” he said.

Justice Department lawyer Curtis Gannon had a different view, stating, “I do think that there’s a very good chance that there’s a deal on the other side of this.”

Kagan was among several justices who asked probing questions of both sides. She said there was “overwhelming” support for this deal, “and among people who have no love for the Sacklers, among people who think that the Sacklers are pretty much the worst people on Earth.”

In a statement after the argument, Purdue Pharma said the accord “is the only way to deliver billions of dollars toward lifesaving opioid abatement programs and victim compensation.”

The case, which the court will resolve by the middle of next year, is Harrington v. Purdue Pharma, 23-124.

(Updates with comments from Gannon, Kagan starting in 14th paragraph.)

To contact the reporters on this story:
Greg Stohr in Washington at gstohr@bloomberg.net;
Jonathan Randles in New York at jrandles5@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

Anthony Aarons

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