Supreme Court rejects Purdue Pharma bankruptcy deal, impacting opioid crisis litigation

WASHINGTON D.C. — In a closely watched decision, the U.S. Supreme Court on Thursday invalidated a controversial bankruptcy deal involving Purdue Pharma, the maker of the highly addictive painkiller OxyContin, and members of the Sackler family, who owned the scandal-plagued drug firm.

By a vote of 5-4, the justices overturned the bankruptcy settlement, which had been valued between $6 billion and $10 billion. Writing for the court majority, Justice Neil Gorsuch stated that U.S. bankruptcy law does not grant bankruptcy courts the power to block lawsuits against parties who have not filed for bankruptcy. “The bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a non-debtor without the consent of affected claimants,” Gorsuch wrote.

Gorsuch further noted that if Congress intended to grant such power to bankruptcy courts, it would have done so explicitly. “Had Congress meant to reshape traditional practice so profoundly in the present bankruptcy code, extending to courts the capacious new power the plan proponents claim, one might have expected it to say so expressly,” he added.

In a dissenting opinion, Justice Brett Kavanaugh argued that the ruling disrupted a deal that would have provided financial relief to communities and victims of the opioid crisis. “Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families,” Kavanaugh wrote.

The Supreme Court’s decision means that members of the Sackler family cannot be shielded from liability for civil claims related to the opioid epidemic. The deal, which had been negotiated over years with states, tribes, local governments, and individuals, had sought to protect the Sackler family from lawsuits in exchange for channeling billions of dollars toward addressing the crisis.

“The Sacklers have not filed for bankruptcy and have not placed virtually all their assets on the table for distribution to creditors, yet they seek what essentially amounts to a discharge,” Justice Gorsuch wrote, joined by Justices Clarence Thomas, Samuel Alito Jr., Amy Coney Barrett, and Ketanji Brown Jackson.

Purdue issued a statement expressing disappointment in the court’s decision.

“Today’s ruling is heart-crushing because it invalidates a settlement supported by nearly all of our creditors – including states, local governments, personal injury victims, schools, and hospitals – that would have delivered billions of dollars for victim compensation, opioid crisis abatement, and overdose rescue and addiction treatment medicines,” it said.

Ed Bisch, founder of Relatives Against Purdue Pharma and a guest on Grieving Out Loud, responded to the ruling. Bisch, who is also a member of the Opioid Industry Documents Archive’s National Advisory Committee, criticized the Sackler family’s claims about the decision’s impact on victims.

“The Sacklers claim today’s SCOTUS decision rejecting third-party releases hurts the victims they care about and are trying to help… Think hard on the Sackler statement, which some are falling for, including some media outlets and even SCOTUS justices,” Bisch stated.

Bisch pointed out that over $55 billion in signed deals for opioid abatement have already been signed, suggesting that the Sackler money, spread over 18 years, would not significantly impact the success of these efforts. “Only 7.5% of the Purdue plan was going to the victims, with most people going to receive $3,500 minus lawyer fees,” Bisch explained.

Bisch emphasized that the SCOTUS decision prevents future criminal companies from hiding behind bankruptcy and opens the door for class action suits and depositions, which could reveal more evidence. “We call for the DOJ criminal division to act on the evidence they already possess,” he urged.

This landmark decision marks a significant turning point in the ongoing battle against the opioid crisis, setting a precedent for how bankruptcy law is applied in cases involving significant public health impacts.