The Supreme Court said Thursday that members of the Sackler family cannot be shielded from liability in the event of civil lawsuits related to the opioid epidemic, thereby jeopardizing a bankruptcy plan that would have offered such protection in exchange for injection of billions of dollars to deal with the crisis.
In a 5-4 decision, the justices found that the agreement, carefully negotiated over years with states, tribes, local governments and individuals, violated a fundamental principle of bankruptcy law by shielding members of the Sackler family from lawsuits without the consent of those who might sue.
The plan by Purdue Pharma, the maker of the prescription painkiller OxyContin, the drug widely considered to have triggered the crisis, was unusual because it offered broad protections that the Sackler family, which controlled the company, had been demanding for years, even as the Sacklers avoided declaring bankruptcy themselves.
“The Sacklers have not filed for bankruptcy and have not put substantially all of their assets on the table for distribution to creditors, but they are seeking what essentially amounts to a discharge,” wrote Justice Neil M. Gorsuch, joined by Justices Clarence Thomas, Samuel A. Alito Jr., Amy Coney Barrett and Ketanji Brown Jackson.
While he acknowledged that the decision left the plan open, Justice Gorsuch wrote that the threat of future lawsuits from opioid victims, states, government entities and others could compel the Sacklers “to negotiate consensual releases on terms more favorable to opioid victims.”
“If past is prologue,” Justice Gorsuch wrote, citing the U.S. Trustee Office, which challenged the deal, “there may be a better deal on the horizon.”
It is not immediately clear what this ruling would mean for other settlements involving mass injury claims, including a settlement involving the Boy Scouts of America and victims of sexual abuse.
In a strong dissent, Justice Brett M. Kavanaugh, joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor and Elena Kagan, warned of the consequences for the tens of thousands of families seeking relief. The “decision is wrong as a matter of law and devastating for more than 100,000 opioid victims and their families,” he wrote, later adding that striking down the provision “simply inflicts even more harm on opioid victims.”
Sackler family members have expressed hope that another settlement can be reached.
Absent such a decision, the Sacklers said in a statement, “costly and chaotic litigation in courtrooms across the country” would be almost certain to follow.
The majority focused on the method the Sacklers used to shield themselves from opioid-related lawsuits, holding that a third party could not use the bankruptcy system to shield itself from litigation that coerces others without their consent.
The bankruptcy system, while complex, is based on “a simple agreement,” Justice Gorsuch wrote, allowing an indebted party to be discharged from its financial obligations if the debtor “proceeds honestly and puts substantially all of its assets on the table for its creditors.”
Although Purdue Pharma filed for bankruptcy protection after a wave of opioid-related lawsuits, the Sacklers did not do so. Instead, they asked the court overseeing Purdue’s bankruptcy “for an order terminating a large number of existing and potential claims against them.”
This approach, Justice Gorsuch wrote, allowed them to obtain relief “without obtaining the consent of those affected or putting on the table of their creditors anything approaching the entirety of their assets.”
The US Trustee Program, a Justice Department watchdog, had challenged the mechanism used by the Sacklers, a liability shield.
The settlement, which would have required the Sacklers to pay up to $6 billion over 18 years, underscored the difficult balance at play: ensuring that the urgently sought money goes to victims, states and tribes, among others, despite broader concerns about freeing the Sacklers from further liability over the opioid crisis.
Purdue Pharma — and, by extension, the Sacklers — have long been seen as at the heart of the crisis because of the popularity of OxyContin.
From 1999 to 2019, about 247,000 people died in the United States from prescription opioids, Justice Gorsuch wrote, an epidemic that cost the country between $53 billion and $72 billion a year. He added: “Purdue is at the center of these events. »
In the mid-1990s, Purdue Pharma began marketing OxyContin. Although these drugs have traditionally been used in limited cases, the company claimed to have created a new formulation that reduced the risk of opioid addiction, opening the drug to a much wider range of patients.
The drug’s success propelled the Sacklers to become among the wealthiest people in American society, with an estimated net worth of $14 billion, and established them as major donors to museums, medical schools and academic institutions.
But in 2007, as the number of opioid overdose deaths rose, three of Purdue’s top executives pleaded guilty to federal criminal charges, and the company was fined more than $600 million for misleading regulators, doctors and patients about the drug’s potential for abuse.
The first opioid-related lawsuits were filed against Purdue Pharma around 2014, sparking a flood of litigation and intensifying scrutiny of the Sackler family members’ role.
In 2019, Purdue Pharma filed for restructuring, which ultimately halted the lawsuits. At the time, the Sacklers faced approximately 400 claims related to the case.
This decision was controversial from the start.
Under a deal approved by a bankruptcy judge in 2021, Purdue Pharma would be dissolved; the company would donate billions of dollars to the opioid crisis, ending thousands of related claims; and the Sacklers would be protected from civil liability.
The Sacklers also “proposed to terminate all of these lawsuits without the consent of the opioid victims who brought them,” Judge Gorsuch explained, a move that “would not only prevent prosecution of the company’s officers and directors, but would benefit hundreds, if not thousands, of Sackler family members and entities they control.”
Under the agreement, Purdue Pharma would become a “public benefit” corporation whose mission would be focused on education and opioid reduction. The company, with the help of planned contributions from the Sacklers, offered individual victims compensation ranging from a base amount of $3,500 up to a cap of $48,000.
Although most creditors who voted on the proposed plan supported it, Justice Gorsuch wrote, “less than 20 percent of eligible creditors participated” and “thousands of opioid victims also voted against the plan, and many pleaded with the bankruptcy court not to destroy their claims against the Sacklers without their consent.
A federal judge later overturned the deal, saying the plan erred in granting such protections to Sackler family members.
But after the Sacklers increased their offer by about $1.73 billion, many parties who had opposed the plan signed on.
Purdue Pharma has argued that an adverse ruling against it would cause significant harm. If the court rejects the settlement, it said, it would “harm victims and unnecessarily delay the distribution of billions of dollars to alleviate the opioid crisis.”
In August, the justices suspended the settlement and agreed to hear the case.
In its decision, the majority pointed to a section of the bankruptcy code focused on settlement plans and found that it did not allow this type of agreement, instead finding that “the Sacklers seek to pay less than what the code usually requires and receives more than it requires. normally allows.
Justice Kavanaugh wrote in his dissent that overturning the settlement to prevent the Sacklers from escaping future litigation would only add to the pain of opioid victims and their families.
“It is true that many Americans feel deep hostility toward the Sacklers,” Justice Kavanaugh wrote. “But allowing that animosity to seep into this bankruptcy case is a complete and counterproductive mistake, and only compounds the harm done to opioid victims.”
He added: “Opioid victims and other future victims of mass crime will suffer greatly as a result of today’s unfortunate and destabilizing decision. Only Congress can stop the chaos that will ensue.”
Jan Hoffman contribution to the report.
