The U.S. Supreme Court has ruled that the Sackler family, controllers of Purdue Pharma, cannot be protected from lawsuits regarding their involvement in the opioid crisis. This decision jeopardizes a bankruptcy settlement in which the family had agreed to contribute at least $6 billion to states, local governments, and other entities to combat the opioid epidemic.
The Purdue Pharma bankruptcy settlement
The first opioid lawsuits were filed against Purdue Pharma in 2014, setting off a flood of litigation and ultimately leading Purdue Pharma to file for bankruptcy in 2019.
At the time, the Sackler family, owners of Purdue Pharma, faced roughly 400 lawsuits for their role in fueling the opioid epidemic.
Ninety-five percent of the claimants accepted the bankruptcy settlement proposal, which would have allocated between $6 and $10 billion to state and local governments for addressing the fallout of opioid addiction and also provided compensation directly to victims. This agreement would have also granted the Sacklers immunity from future lawsuits.
However, the remaining five percent of the claimants opposed the settlement, arguing that the Sacklers should not be shielded from future liability.
The opioid epidemic kills more than 80,000 people in the United States every year, according to the National Institute on Drug Abuse.
The Supreme Court decision
In a 5-to-4 decision, Justice Neil M. Gorsuch, writing for the majority, stated that the federal bankruptcy code does not permit liability shields for third parties in bankruptcy agreements. This ruling directly challenges the previously negotiated Purdue Pharma bankruptcy settlement.
The decision has significant implications for other large-scale bankruptcy settlements and marks a pivotal moment in ongoing efforts to hold the Sacklers accountable. By overturning the provision that would have granted the Sacklers immunity, the Supreme Court has reopened the possibility for more litigation against them, despite the family’s substantial financial contribution to the settlement.
Justice Brett M. Kavanaugh, in a dissenting opinion, expressed concern about the ruling’s impact, arguing it was “devastating for more than 100,000 opioid victims and their families” and criticized it as “wrong on the law.” He was joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor and Elena Kagan.
What happens next?
The ruling effectively strips the Sacklers of the immunity they sought from future lawsuits, opening the door for ongoing litigation directly against family members. This shift could lead to prolonged court battles as victims and governmental bodies seek accountability and compensation for the opioid crisis directly from the Sacklers.
The immediate future will likely see a reevaluation of the bankruptcy settlement. Purdue Pharma and the involved parties may need to negotiate a new agreement that aligns with the legal standards set by the Supreme Court ruling. This process could involve a more direct role for the victims and may potentially increase the financial contributions required from the Sacklers, especially since the initial proposal of shielding them from direct lawsuits is no longer viable.
Moreover, this ruling could set a precedent affecting other large-scale bankruptcy settlements, particularly those involving third-party releases. Companies and wealthy individuals involved in similar mass injury claims may find it more challenging to use bankruptcy as a shield from direct liability.
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