The Supreme Court issued a ruling on Thursday that blocks the proposed multi-billion-dollar bankruptcy plan for Purdue Pharma, the manufacturer of the opioid OxyContin. The plan aimed to shield members of the Sackler family, the company’s principal owners, from liability for opioid-related claims without their declaring bankruptcy. The court’s decision, which was a narrow 5-4 ruling, came after the federal government contested the plan, arguing that it improperly protected the Sacklers without the consent of creditors and opioid victims.
Justice Neil Gorsuch, writing for the majority, maintained that federal bankruptcy laws do not permit such liability releases for nondebtors without the agreement of the affected parties. He suggested that issues of this magnitude should be addressed by Congress, not the courts. In a dissent, Justice Brett Kavanaugh argued that disallowing the releases would prevent victims and government bodies from recovering any compensation, undermining the settlement’s intent.
Purdue Pharma’s bankruptcy journey began in September 2019 amid escalating lawsuits and a public health crisis attributed to opioid overdoses. The company initially secured a court-approved plan in 2021, which included a restructuring of Purdue into a nonprofit with a mission to tackle opioid-related public health issues and a provision that protected the Sacklers from further civil claims. In return, the Sackler family was to contribute up to $6 billion.
However, this plan faced legal hurdles. A federal district court struck it down, but the U.S. Court of Appeals for the 2nd Circuit later reinstated the plan, citing a bankruptcy law that allows plans to include appropriate provisions. This led the Department of Justice to intervene, resulting in the Supreme Court’s involvement. The Court has now sent the case back to the 2nd Circuit for further proceedings.
Purdue Pharma expressed its disappointment at the ruling but stated that it remains committed to seeking a resolution with its creditors. For more details, you can read the full article here.