In a contentious decision, the U.S. Supreme Court has overturned Purdue Pharma’s bankruptcy plan.
Newsweek reported that the Supreme Court ruling invalidated a bankruptcy plan that included financial contributions from the Sackler family to compensate opioid victims and prevent future lawsuits against them.
The case centered around Purdue Pharma, the company linked to the opioid crisis through its aggressive marketing of OxyContin. The court found that the bankruptcy plan wrongly shielded the Sackler family, owners of Purdue, from future litigation.
On Thursday, the Supreme Court delivered its verdict with a 5-4 vote, showing no clear ideological lines among the justices. The court argued that the settlement's inclusion of legal protections for the Sacklers was inappropriate, sparking controversy and discussion across legal and public health arenas.
Justice Brett Kavanaugh, joined by Chief Justice John Roberts and Justices Sonia Sotomayor and Elena Kagan, dissented, emphasizing the detrimental impact the decision could have on victims of the opioid crisis.
The Biden administration had previously expressed opposition to the settlement, specifically the proposed legal immunity for the Sacklers. This stance influenced the proceedings, highlighting the government's commitment to holding opioid crisis contributors accountable.
Without the settlement, the commitment by the Sacklers to provide $6 billion for opioid claims and an additional $750 million directly for victim compensation now stands void. The administration's involvement underscores the complex interplay between governmental oversight and corporate responsibility in bankruptcy cases.
The decision impacts not only Purdue Pharma but also the broader landscape of corporate bankruptcy and public health responsibility. Purdue's aggressive promotion of OxyContin has been widely criticized, with nearly 247,000 deaths from prescription opioid overdoses reported in the U.S. between 1999 and 2009.
Following their company's filing for Chapter 11 bankruptcy in 2019, the Sackler family did not seek personal bankruptcy protection but retained significant revenue from Purdue and negotiated a separate deal amidst the ongoing proceedings.
"Opioid victims and other future victims of mass torts will suffer greatly in the wake of today's unfortunate and destabilizing decision," Justice Kavanaugh stated, urging Congress to address the resulting legal vacuum.
"Only Congress can fix the chaos that will now ensue. The Court's decision will lead to too much harm for too many people for Congress to sit by idly without at least carefully studying the issue," he added.
The dissenting opinion, voiced strongly by Kavanaugh, critiqued the majority for what he viewed as a disregard for the well-established authority of bankruptcy courts. He lamented that the decision effectively rewrote the text of the U.S. Bankruptcy Code.
He warned that as a result of the court's decision, each victim and creditor receives what amounts to "a lottery ticket for a possible future recovery for (at most) a few of them." This stark imagery highlights the precarious financial recovery path that now lies ahead for the victims.
The ruling also casts doubt on the use of non-debtor releases, which Kavanaugh noted had been "a critical tool for bankruptcy courts to manage mass-tort bankruptcies like this one."
The bankruptcy court, he argued, had exercised its discretion admirably by guaranteeing "substantial and equitable compensation" to Purdue's victims and providing significant funding for state and local governments to combat opioid addiction.
In conclusion, the Supreme Court's decision to invalidate Purdue Pharma's bankruptcy plan raises significant questions about future legal strategies in similar corporate bankruptcy cases.
The ruling impacts not only the immediate financial relief available to victims but also the broader use of bankruptcy protections in mass-tort settlements. As the dust settles, all eyes will now turn to Congress to see how it responds to the call to rectify the chaos sparked by this landmark decision.
