The Supreme Court has decided to pause a bankruptcy deal for Purdue Pharma, the maker of OxyContin, that would provide billions of dollars to victims of the opioid crisis in exchange for shielding the Sackler family from further lawsuits related to opioids. This settlement is significant as it addresses one of the largest public health crises in the United States. The court will hear oral arguments in December and this decision could have far-reaching consequences for other mass-injury cases that utilize the bankruptcy system to settle claims.
It is rare for the Supreme Court to intervene in a bankruptcy court dispute, particularly one involving a settlement agreement in a mass-injury case. One of the main reasons for this is that all parties involved are typically under pressure to reach a settlement. Litigating all the way to the highest court is costly and time-consuming. In this particular case, it was the U.S. Trustee Program, an oversight office within the Justice Department, that petitioned the Supreme Court to review the deal.
Several factors make it more likely for the Supreme Court to grant review in this case. The opioid crisis is a matter of national importance, and these types of agreements that protect third parties from liability without declaring bankruptcy themselves have become increasingly common and have divided lower courts.
If approved, this deal could serve as a precedent for other businesses and plaintiffs who are using the bankruptcy courts to resolve mass-injury cases. However, if the Supreme Court blocks the use of nonconsensual third-party releases, which shield the Sackler family from civil lawsuits, it could jeopardize the entire Purdue Pharma bankruptcy settlement. This court has shown skepticism of lower courts acting without explicit authorization from Congress, so it is unclear how they will view this dispute.
It is uncertain how the liberal justices will vote, as this could be a procedural case that does not align with political or ideological lines. The Justice Department is the only party objecting to the Purdue plan because it believes that the Sacklers would benefit from bankruptcy protection without facing its costs, such as the scrutiny of their fortune. Individuals who still want to pursue civil lawsuits against the family would be barred from doing so without having an opportunity to weigh in, which the U.S. Trustee argues violates their constitutional rights.
Under the proposed deal, Purdue would immediately pay $1.2 billion towards the settlement upon emerging from bankruptcy, with additional payments in the coming years. The Sacklers would pay up to $6 billion over 18 years, with a significant portion due in the first nine years. Native American tribes are also eligible for payouts from a trust worth approximately $161 million. Each state has developed a formula for distributing the money, but it must be primarily used for initiatives that address the opioid crisis.
Individual victims would receive compensation through a trust of $700 million to $750 million. Approximately 138,000 plaintiffs filed claims, and payments are estimated to range from $3,500 to $48,000. Guardians of children who experienced withdrawal symptoms from drug exposure in the womb could receive around $7,000 each. While these payouts may be small, the Purdue plan is one of the few opioid settlements in the country that sets aside funds 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 manufacture addiction treatment and opioid reversal medications at no profit. Knoa would continue producing opioids like OxyContin, as well as non-opioid drugs, with the profits going towards the settlement funds. Purdue is currently supervised by an independent monitor, and the Sacklers have not been on its board since 2018.