The Supreme Court on Thursday rejected a nationwide settlement with OxyContin maker Purdue Pharma that would have shielded members of the Sackler family who own the company from civil lawsuits over the toll of opioids but also would have provided billions of dollars to combat the opioid epidemic.
The decision also could affect other major bankruptcies, including the $2.4 billion bankruptcy plan for the Boy Scouts of America that has been approved by a federal judge, lawyers said.
After deliberating more than six months, the justices in a 5-4 vote blocked an agreement hammered out with state and local governments and victims. The Sacklers would have contributed up to $6 billion and given up ownership of the company but retained billions more. The agreement provided that the company would emerge from bankruptcy as a different entity, with its profits used for treatment and prevention.
Justice Neil Gorsuch, writing for the majority, said “nothing in present law authorizes the Sackler discharge.”
Chief Justice John Roberts and Justices Brett Kavanaugh, Elena Kagan and Sonia Sotomayor dissented.
“Opioid victims and other future victims of mass torts will suffer greatly in the wake of today’s unfortunate and destabilizing decision,” Kavanaugh wrote.
The high court had put the settlement on hold last summer, in response to objections from the Biden administration.
It’s unclear what happens next, although lawyers involved in the case expect negotiations to resume.
“Today’s Supreme Court ruling marks a major setback for the families who lost loved ones to overdose and for those still struggling with addiction,” Edward Neiger, a lawyer representing more than 60,000 overdose victims, said in a statement.
“The Purdue plan was a victim-centered plan that would provide billions of dollars to the states to be used exclusively to abate the opioid crisis and $750 million for victims of the crisis, so that they could begin to rebuild their lives. As a result of the senseless three-year crusade by the government against the plan, thousands of people died of overdose, and today’s decision will lead to more needless overdose deaths.”
An opponent of the settlement praised the outcome.
Ed Bisch’s 18-year-old son Eddie, died from an overdose after taking OxyContin in Philadelphia in 2001.
The older Bisch, who lives in New Jersey, has been speaking out against Purdue and Sackler family members ever since and is part of a relatively small but vocal group of victims and family members who opposed the settlement.
“This is a step toward justice. It was outrageous what they were trying to get away with,” he said Thursday. “They have made a mockery of the justice system and then they tried to make a mockery of the bankruptcy system.”
He said he would have accepted the deal if he thought it would have made a dent in the opioid crisis.
He’s now calling on the Department of Justice to seek criminal charges against Sackler family members
Arguments in early December lasted nearly two hours in a packed courtroom as the justices seemed, by turns, unwilling to disrupt a carefully negotiated settlement and reluctant to reward the Sacklers.
The issue for the justices was whether the legal shield that bankruptcy provides can be extended to people such as the Sacklers, who have not declared bankruptcy themselves. Lower courts had issued conflicting decisions over that issue, which also has implications for other major product liability lawsuits settled through the bankruptcy system.
The U.S. Bankruptcy Trustee, an arm of the Justice Department, argued that the bankruptcy law does not permit protecting the Sackler family from being sued. During the Trump administration, the government supported the settlement.
The Biden administration had argued to the court that negotiations could resume, and perhaps lead to a better deal, if the court were to stop the current agreement.
Proponents of the plan said third-party releases are sometimes necessary to forge an agreement, and federal law imposes no prohibition against them.
But the court majority that also included Justices Samuel Alito, Amy Coney Barrett, Ketanji Brown Jackson and Clarence Thomas disagreed.
“The Sacklers seek greater relief than a bankruptcy discharge normally affords, for they hope to extinguish even claims for wrongful death and fraud, and they seek to do so without putting anything close to all their assets on the table,” Gorsuch wrote. “Nor is what the Sacklers seek a traditional release, for they hope to have a court extinguish claims of opioid victims without their consent.”
Congress could write special rules for opioid-related bankruptcies, he wrote.
And Kavanaugh, in dissent, urged lawmakers to do just that. “Only Congress can fix the chaos that will now ensue,” he wrote.
Jason Amala, a lawyer representing more than 1,000 men who allege they were sexually abused as children by Boy Scout leaders and volunteers, said the decision could affect the Boy Scouts plan and others that employ similar releases from liability.
“The Supreme Court’s decision is pretty simple,” Amala said in a statement. “If you hurt someone, you and your insurance company will have to pay fair value to settle their claim. If you want bankruptcy protection, you will have to file your own bankruptcy, disclose your assets and liabilities, and pay whatever amount a bankruptcy judge decides is appropriate.”
OxyContin first hit the market in 1996, and Purdue Pharma’s aggressive marketing of it is often cited as a catalyst of the nationwide opioid epidemic, with doctors persuaded to prescribe painkillers with less regard for addiction dangers.
The drug and the Stamford, Connecticut-based company became synonymous with the crisis, even though the majority of pills being prescribed and used were generic drugs. Opioid-related overdose deaths have continued to climb, hitting 80,000 in recent years. Most of those are from fentanyl and other synthetic drugs.
The Purdue Pharma settlement would have ranked among the largest reached by drug companies, wholesalers and pharmacies to resolve epidemic-related lawsuits filed by state, local and Native American tribal governments and others. Those settlements have totaled more than $50 billion.
But the Purdue Pharma settlement would have been only the second so far to include direct payments to victims from a $750 million pool. Payouts would have ranged from about $3,500 to $48,000.
Sackler family members no longer are on the company’s board, and they have not received payouts from it since before Purdue Pharma entered bankruptcy. In the decade before that, though, they were paid more than $10 billion, about half of which family members said went to pay taxes.
The case is Harrington v. Purdue Pharma, 22-859.