The US Supreme Court will hear arguments on Monday, December 4, 2023 about the legality of a $6 billion bankruptcy settlement involving Purdue Pharma. The settlement would give the owners of Purdue Pharma immunity from further lawsuits.
The settlement is controversial and involves Purdue Pharma, the former manufacturer of the prescription painkiller OxyContin. OxyContin is considered to have played a key role in the country’s opioid epidemic. The Supreme Court will consider the Biden administration’s bid to scuttle the settlement.
The court will also delve into the intricacies of bankruptcy law. The case is known as Harrington v. Purdue Pharma. It’s one of the highest-profile bankruptcies in recent memory.
The Sackler family owned Purdue Pharma and have faced lawsuits regarding overprescription of addictive pharmaceutical drugs
Isaacs weaned herself off the drug in 2001 and became passionate about raising awareness about the dangers of opioids, all while trying to secure help for her son amid his own addiction.
Wroblewski, though, lost his battle five years ago. Isaacs said she began “vehemently” giving out Narcan, a nasal spray used to treat people experiencing an opioid overdose, and appearing on the news to demonstrate how it works.
During the course of her advocacy, Isaacs has protested outside the Justice Department. She wrote a letter to the late Queen Elizabeth II urging her to strip Theresa Sackler, who was married to Purdue co-owner Mortimer Sackler, of her “dame” title.
She rallied in White Plains, New York, where a federal bankruptcy judge oversaw Purdue’s bankruptcy and approved legal protections for the Sackler family.
On Monday, Isaacs is set to return to Washington as part of her efforts to fight the bankruptcy plan and, specifically, the decision to release the Sacklers from civil liability for the opioid epidemic. The matter is under review by the Supreme Court, with oral arguments in the case, known as Harrington v. Purdue Pharma L.P., set for Monday morning.
“It’s really important to me that these people get held accountable for all the people that they’ve murdered,” Isaacs told CBS News. “They’re criminals and they needed to be treated as such.”
Purdue filed for Chapter 11 bankruptcy protection in September 2019. Scores of states, local governments, Native American tribes and victims had filed lawsuits against the company seeking damages arising from its manufacture and sale of OxyContin, which helped fuel the opioid epidemic.
Purdue separately pleaded guilty in 2007 to a felony count of misbranding OxyContin and has paid more than $600 million in fines and other costs. The settlement also includes $750 million to compensate victims, who may be eligible to receive between $3,500 and $48,000.
Though the Sackler family, which owned Purdue, did not enter bankruptcy, they negotiated a settlement with claimants. The Sacklers agreed to contribute more than $4 billion across a decade — an amount that ultimately rose to $6 billion — toward efforts to fight the opioid crisis.
The agreement requires millions of documents to be made public and for Purdue to restructure itself as a public benefit company, with its profits used to make products that combat opioid addiction.
In exchange, and crucially, the plan included a release that shields the Sacklers from civil lawsuits stemming from the opioid crisis. The family would also potentially be able to keep billions of dollars in revenue from Purdue that was distributed between 2008 and 2017, according to court filings.
The bankruptcy plan was approved by 95% of victims. However, several states, Canadian municipalities and indigenous tribes, plus more than 2,600 individuals, voted against it because of the legal protections for the Sackler family, their affiliates and related entities.
A bankruptcy court in New York, though, approved the plan in September 2021. The states and other detractors challenged the approval in a federal district court in New York. They were joined by the U.S. Trustee, an arm of the Justice Department that oversees the administration of bankruptcy cases.
The group focused on the legality of the plan’s shield for the Sacklers, since even those who refused to approve the deal cannot pursue claims against them. A federal district court agreed, and in December 2021 it rejected the plan.
Purdue and other plan proponents appealed to the U.S. Court of Appeals for the 2nd Circuit. While their case was pending, the District of Columbia and the eight states that had objected to the deal reached an agreement with Purdue and the Sacklers for them to boost their proposed contribution to the bankruptcy estate by $1.75 billion — bringing their total contributions to between $5.5 billion and $6 billion.
A divided 2nd Circuit panel reversed the district court’s decision in May, after which the Justice Department asked the Supreme Court to review the appeals court’s ruling and temporarily put the bankruptcy plan on hold. The high court agreed to pause the plan in August and said it would take the case.
Casey said third-party releases are common in major Chapter 11 bankruptcies and warned that if the court ultimately rejects Purdue’s bankruptcy plan and says these protections are not allowed, it would have reverberations across the bankruptcy system. A decision is expected by the summer.
“There’s lots of pending mass tort cases which they were planning on and hoping for third-party releases that would have to revisit this,” Casey said.
One such pending case involves the Boy Scouts of America, which entered Chapter 11 bankruptcy proceedings in 2020 after it was named in numerous lawsuits alleging sexual abuse. The organization emerged from bankruptcy in April with a reorganization plan that was approved by 85% of voting survivors, and then confirmed by a bankruptcy court followed by a federal district court.
The Boy Scouts’ agreement includes a trust with nearly $2.5 billion in cash, as well as releases for nonprofit local councils, chartering organizations and other third parties. The group warned in a filing that if the Supreme Court finds these third-party releases are not allowed by the bankruptcy code, it would have “devastating consequences for both victims and venerable non-profit institutions in mass-tort situations.”
The U.S. Conference of Catholic Bishops also urged the court to uphold the 2nd Circuit’s decision, citing the releases from liability that were included in reorganization plans for dozens of dioceses who filed for bankruptcy after facing litigation related to sexual abuse allegations.
“Although the Church deeply regrets abuse and acknowledges the need to compensate victims, the Bankruptcy Code has long been understood to give them a fair, orderly, and lawful pathway out of the thicket of mass tort liability that now envelops them so that they can carry on the Church’s mission,” the group, whose members are active Catholic bishops, told the justices. “The court should not close off that pathway in this case.”
