Supreme Court blocks Purdue Pharma bankruptcy deal that shields Sackler family from lawsuits

The US Supreme Court has halted Purdue Pharma’s bankruptcy deal, which aimed to protect the Sackler family, owners of OxyContin, from civil lawsuits. The court responded to a request from the US Department of Justice to temporarily block the deal, arguing that it would provide the Sackler family with unprecedented protection from liability. The Supreme Court will hear the case in December.

The government attorneys argue that the Sackler family should not be allowed to use legal protections intended for debtors in financial distress to avoid liability. The Supreme Court’s order did not provide any additional comment or reasons for the decision. Meanwhile, thousands of local governments and individuals are pursuing litigation against Purdue Pharma for its role in the opioid crisis.

The justices will hear arguments on whether US bankruptcy law allows courts to approve a Chapter 11 arrangement that extinguishes claims held by non-debtors against non-debtor third parties without the claimants’ consent. In May, a federal appeals court approved a $6 billion settlement plan as part of Purdue Pharma’s bankruptcy restructuring. The agreement allowed the company to transition to a new entity, with profits directed towards combatting the crisis. However, it also extended liability protections to the Sackler family, who had insisted on such assurances before agreeing to the settlement.

The US Solicitor General, Elizabeth Prelogar, has argued that the appeals court’s decision would allow wealthy corporations and individuals to abuse the bankruptcy system to evade liability. She described the release from liability as of “exceptional and unprecedented breadth,” raising serious constitutional questions.

Purdue Pharma expressed confidence in the legality of the plan and optimism that the Supreme Court will agree. However, the company expressed disappointment that the Justice Department’s bankruptcy watchdog was able to delay the distribution of billions of dollars intended for victim compensation and addressing the opioid crisis.

A coalition of approximately 60,000 individuals who filed personal injury claims related to the opioid crisis supports the settlement and the immunity promised to the Sackler family. They emphasized that billions of dollars in abatement and victim compensation funds are dependent on the confirmation and consummation of the existing plan.

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