US Supreme Court pauses Purdue Pharma bankruptcy settlement for review.
Supreme Court to Hear Challenge to Purdue Pharma’s Bankruptcy Settlement
By John Kruzel and Andrew Chung
WASHINGTON (Reuters) – The U.S. Supreme Court has agreed to hear a challenge by President Joe Biden’s administration to the legality of OxyContin maker Purdue Pharma’s bankruptcy settlement. This decision puts on hold a deal that would protect the wealthy Sackler family owners from lawsuits related to their involvement in the country’s opioid epidemic.
The justices have paused bankruptcy proceedings concerning Purdue and its affiliates. They have announced that oral arguments will take place in December for the administration’s appeal of a lower court’s ruling that upheld the settlement. The Supreme Court’s new term begins in October.
Under the settlement, Purdue’s owners would receive immunity in exchange for paying up to $6 billion to settle thousands of lawsuits filed against the company. These lawsuits were brought by states, hospitals, individuals who became addicted, and others who have sued Purdue over its misleading marketing of the powerful pain medication OxyContin.
In response to the Supreme Court’s decision, Purdue expressed disappointment with the U.S. Trustee, the Justice Department’s bankruptcy watchdog that filed the challenge. Purdue stated that the delay caused by the challenge prevents billions of dollars from being used for victim compensation and addressing the opioid crisis.
The Justice Department declined to comment on the matter.
The key issue at hand is whether U.S. bankruptcy law allows Purdue’s restructuring to include legal protections for the Sackler family members, who have not filed for personal bankruptcy.
Purdue filed for Chapter 11 bankruptcy in 2019 to address its debts, which primarily stemmed from lawsuits alleging that OxyContin played a significant role in the opioid epidemic that has resulted in over 500,000 U.S. overdose deaths over the past two decades.
Purdue estimates that its bankruptcy settlement, approved by a U.S. bankruptcy judge in 2021, would provide $10 billion in value to its creditors, including state and local governments, individual victims of addiction, hospitals, and others who have sued the company.
The Biden administration and eight states initially challenged the settlement, but all of the states dropped their opposition after the Sacklers agreed to contribute more to the settlement fund.
In May, the 2nd Circuit upheld the settlement, concluding that federal bankruptcy law allows legal protections for non-bankrupt parties like the Sacklers in extraordinary circumstances.
The 2nd Circuit ruled that the legal claims against Purdue were closely linked to claims against its owners. Allowing lawsuits to continue targeting the Sacklers would undermine Purdue’s efforts to reach a bankruptcy settlement.
Members of the Sackler family have denied wrongdoing but expressed regret that OxyContin “unexpectedly became part of an opioid crisis.” They stated in May that the bankruptcy settlement would provide “substantial resources for people and communities in need.”
In a court filing, the administration told the Supreme Court that Purdue’s settlement is an abuse of bankruptcy protections meant for debtors in “financial distress,” not individuals like the Sacklers. According to the administration, Sackler family members withdrew $11 billion from Purdue before agreeing to contribute $6 billion to its opioid settlement.
Many other stakeholders have responded in opposition to the administration’s request to halt the settlement.
A group comprising more than 60,000 people who have filed personal injury claims stemming from their exposure to Purdue opioid products told the Supreme Court they support the settlement, including legal immunity for members of the Sackler family.
“Regardless of how one feels about the role of the Sackler family in the creation and escalation of the opioid crisis,” the group told the justices, “the fact remains that the billions of dollars in abatement and victim compensation funds hinge on confirmation and consummation of the existing plan.”
(Reporting by John Kruzel in Washington and Andrew Chung in New York; Additional reporting by Dietrich Knauth in New York; Editing by Will Dunham)
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