The Supreme Court seemed concerned Monday that blowing up Purdue Pharma’s bankruptcy settlement — a plan the Biden administration challenged based on the immunity it granted the company’s owners from facing future lawsuits — could mean victims of the opioid crisis never see a cent in compensation.
The settlement requires the Sackler family to provide up to $6 billion to address the opioid crisis in exchange for immunity from future lawsuits. While skeptical of the arrangement, multiple justices voiced concerns during oral arguments Monday in Harrington v. Purdue Pharma that changing it would put victims, who overwhelmingly support the settlement because it would meet their urgent need for compensation, in a worse position.
“You’re implying if you just reject this plan there is going to be more money available from the Sacklers down the road,” Justice Brett Kavanaugh said. “I don’t think you’re accounting for the uncertainty.”
Just 3% of victims oppose the deal, Justice Elena Kagan pointed out, saying that the government’s position could allow “one nutcase holdout” to block the arrangement.
“It’s overwhelming, the support for this deal,” she said. “And among people who have no love for the Sacklers. Among people who think that the Sacklers are pretty much the worst people on earth.”
Purdue Pharma filed for bankruptcy in 2019 in response to thousands of lawsuits over its deceptive marketing that downplayed the addictiveness of OxyContin. The company also pleaded guilty to criminal charges in 2007 and 2020 stemming from its marketing of OxyContin.
Between 1999 and 2019, close to 247,000 people died from overdoses of prescription opioids, according to court documents.
“Why is it you’re able to come in and undo something that has such overwhelming agreement?” Justice Clarence Thomas questioned.
But Kagan also highlighted one strong argument in the government’s favor: the settlement appears to violate a fundamental principle in bankruptcy law.
“You get a discharge when you put all your assets on the table to be divided up among your creditors,” she said. “Everybody thinks that the Sacklers didn’t come anywhere close to doing that. The question is, why should they get the discharge that usually goes to a bankrupt person once they’ve put all their assets on the table, without having put all their assets on the table?”
The Sackler family withdrew close to $11 billion from the company before filing for bankruptcy. The government alleged in its brief that the settlement “allows the Sacklers to shield billions of dollars of their fortune while extinguishing, without payment, claims alleging trillions of dollars in damages” — as well as releasing them from “claims based on fraud and other forms of willful misconduct.”
Justice Neil Gorsuch told the lawyer backing the settlement he has “a lot” running against him.
“When we look at the background structure of bankruptcy code, it has a couple of important provisions: one is you have to put everything on the table…and the other is that, at least with respect to individuals, you don’t get off the hook for fraud,” he said.
The central issue at hand in the case, whether bankruptcy settlements can release non-debtor third parties from liability without the consent of claimants, could have implications for other major bankruptcy cases.
Gorsuch said the release of liability in this case would ordinarily raise “serious due process and seventh Amendment concerns.”
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