Recently, the U.S. Supreme Court suggested a divide over the $6 Billion opioid settlement of Purdue Pharma LP. The Biden administration contends that this agreement improperly works in favor of the owning Sackler family members, shielding them. It came to light during the argument held on Monday, where the justices seemed divided on whether the Sacklers should be entitled to a legal shield when they haven’t filed 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?” questioned Justice Elena Kagan.
This case poses a threat to a bankruptcy reorganization plan intending to end a large amount of litigation against OxyContin’s maker. The plan would divert funds towards efforts to counteract the opioid crisis. As per the agreement, the family members have agreed to relinquish ownership of the company and pay up to $6 billion. According to Bloomberg Law, the advocates for tens of thousands of opioid victims, including Purdue Pharma, are urging the Supreme Court to endorse the agreement, with the funds deemed urgently needed to address the nation’s opioid crisis.
A verdict opposing the plan could disrupt the key tool, known as non-consensual third-party releases standard in most significant settlements, Purdue Pharma’s lawyer Greg Garre warned. He received support from Justice Brett Kavanaugh, who stated that “bankruptcy courts for 30 years have been approving plans like this”.
However, some justices expressed their agreement with the Justice Department and US Trustee William Harrington that federal bankruptcy courts do not possess the power to insulate the Sacklers from lawsuits. “We don’t usually say a non-consenting party can have its claim for property eliminated in this fashion without consent or any process of court,” said Justice Neil Gorsuch, referring to the Seventh Amendment, which guarantees the right to a jury trial in civil cases.
The case, set for resolution by the middle of next year, raises critical questions on how bankruptcy courts handle major settlements, and its outcome could bring significant changes to the process.