The Supreme Court ruled Thursday that members of the Sackler family cannot be shielded from liability in civil lawsuits related to the opioid epidemic, jeopardizing a bankruptcy plan that offered such protection in exchange for spending billions of dollars to resolve the crisis.
In a 5-4 ruling, the justices found that the deal, 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 potential litigants.
The plan for Purdue Pharma, maker of the prescription painkiller OxyContin, widely seen as the spark that ignited the crisis, was unusual in that it provided the Sackler family, who controlled the company, with broad protections they had long demanded while avoiding bankruptcy.
“The Sacklers are seeking what amounts to a discharge even though they have neither filed for bankruptcy nor put substantially all of their assets on the table for distribution to creditors,” Justice Neil M. Gorsuch wrote, with Justices Clarence Thomas, Samuel A. Alito Jr., Amy Coney Barrett and Ketanji Brown Jackson joining.
While Justice Gorsuch acknowledged that the ruling leaves the plan in limbo, he wrote that the threat of future litigation from opioid victims, states, government agencies and others “may force the Sacklers to negotiate a consensual release on terms more favorable to opioid victims.”
“If the past is prologue to the future, a better deal may be on the horizon,” Justice Gorsuch wrote, citing the U.S. Trustee’s Office, which challenged the deal.
It was not immediately clear how the ruling would affect other settlements of mass injury claims, including a lawsuit involving the Boy Scouts of America and sexual abuse victims.
Justice Brett M. Kavanaugh, joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor and Elena Kagan, wrote a strong dissent, warning of the impact on tens of thousands of families seeking compensation. “This decision is unjust and devastating for more than 100,000 opioid victims and their families,” he wrote, later adding that rejecting the provision “will only inflict further harm on opioid victims.”
Members of the Sackler family have expressed hope that a new settlement can be reached.
Without it, a “costly and messy legal process in courts across the country” would almost certainly continue, the Sacklers said in a statement.
The majority’s ruling focused on the tactics the Sacklers used to defend themselves against opioid-related lawsuits, ruling that third parties cannot use the bankruptcy system to protect themselves from lawsuits and bind others without their consent.
Although the bankruptcy system is complex, it is based on a “simple transaction,” Justice Gorsuch wrote, allowing an indebted party to be relieved of financial obligations by “proceeding in good faith and delivering to its creditors substantially all of its assets.”
While Purdue Pharma filed for bankruptcy protection after a wave of opioid-related lawsuits, the Sacklers did not. Instead, they asked the court overseeing Purdue’s bankruptcy for an “order expunging the vast number of existing and potential claims against them.”
Justice Gorsuch wrote that this approach allowed them to win relief “without obtaining the consent of those affected or putting anything approaching their total assets on the table for creditors.”
The Department of Justice’s watchdog, the U.S. Trustee Program, had challenged the liability avoidance mechanisms used by the Sacklers.
The agreement, which called for the Sacklers to pay up to $6 billion over 18 years, highlighted the tricky tightrope walk of ensuring urgently needed funds get to victims, states, tribes and others despite widespread concerns that it could shield the Sacklers from further accountability over the opioid crisis.
Purdue Pharma, and by extension the Sackler family, have long been seen as central players in this crisis because of the popularity of OxyContin.
Justice Gorsuch wrote that between 1999 and 2019, approximately 247,000 people in the United States died from prescription drug-related opioids, and the epidemic cost the country between $53 billion and $72 billion annually. “Purdue is at the center of these events,” he added.
In the mid-1990s, Purdue Pharma began selling OxyContin, a drug that had traditionally been used in limited cases, and the company claimed to have developed a new formulation that reduced the risk of opioid addiction, making the drug available to a wider range of patients.
The drug’s success has catapulted the Sackler family into the wealthiest echelon of American society, with an estimated net worth of $14 billion, and established them as major donors to museums, medical schools and academic institutions.
But by 2007, as opioid overdose deaths began to rise, 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 drugs’ potential for abuse.
The first opioid lawsuits were filed against Purdue Pharma around 2014, sparking a flurry of lawsuits and increased scrutiny of the role of members of the Sackler family.
In 2019, Purdue Pharma filed for bankruptcy reorganization and the litigation was ultimately paused. At the time, the Sacklers were facing roughly 400 related lawsuits.
The move was controversial from the start.
Under the deal approved by a bankruptcy judge in 2021, Purdue Pharma would be broken up, the company would donate billions of dollars to the opioid crisis, end thousands of related lawsuits and guarantee the Sackler family protection from civil liability.
The Sacklers also “proposed to end these lawsuits altogether without the consent of the opioid victims who have brought the lawsuits,” Justice Gorsuch explained. This proposal “would not only prevent lawsuits against the company’s officers and directors, but would also favor hundreds of thousands of Sackler family members and entities they control.”
The deal would turn Purdue Pharma into a “public benefit” corporation focused on opioid education and eradication, and the company offered to make payments to individual victims ranging from a base amount of $3,500 to a maximum of $48,000 with the help of planned contributions from the Sackler family.
While the majority of creditors who voted for the proposed plan supported it, Justice Gorsuch wrote that “fewer than 20 percent of eligible creditors participated” and that “thousands of opioid victims also voted against the plan, many of whom petitioned the bankruptcy court not to write off their claims against the Sacklers without their consent.”
A federal district judge later overturned the deal, saying the plan to give such protections to members of the Sackler family was flawed.
But after the Sacklers increased their offer by about $1.73 billion, many of the parties that had opposed the plan agreed.
Purdue Pharma argued that a ruling against the company would be costly: If the court rejected the deal, it would “harm victims and needlessly delay the distribution of billions of dollars to alleviate the opioid crisis,” it said.
In August, judges agreed to pause the settlement and let the case go on trial.
In its decision, the majority pointed to a provision in the bankruptcy code that focused on settlement plans and said such agreements were not permitted, finding that “the Sacklers have sought to pay less and receive more than the law would ordinarily require and would otherwise be entitled to.”
In his dissent, Justice Kavanaugh wrote that overturning the settlement to prevent the Sacklers from fleeing future litigation would only increase the suffering of opioid victims and their families.
“To be sure, many Americans harbor deep animosity toward the Sackler family,” Justice Kavanaugh wrote, “but allowing that animosity to spill over into this bankruptcy case would be entirely misguided and counterproductive, and would only serve to further harm opioid victims.”
He added, “Opioid victims and future victims of class action lawsuits will be greatly harmed by today’s unfortunate and precarious decision. Only Congress can fix the mess that’s about to ensue.”
Jan Hoffmann Contributed report.
