The Supreme Court has agreed to consider the government’s challenge of a bankruptcy settlement involving Purdue Pharma. This decision has temporarily halted a deal that would have protected members of the wealthy Sackler family from civil opioid lawsuits. The settlement would have required them to make payments of up to $6 billion to thousands of plaintiffs.

The Court’s Action

The Supreme Court has sided with the Justice Department in its request to put the settlement plan on hold while it reviews the agreement. The government argues that the Sackler family should not be allowed to take advantage of legal protections intended for debtors in financial distress.

The Supreme Court’s order did not provide reasons for the decision but specified that arguments in the case will be heard in December.

In May, the U.S. Court of Appeals for the Second Circuit approved the settlement plan as part of Purdue Pharma’s bankruptcy restructuring. This approval came after the company had filed for bankruptcy protections in September 2019, while facing lawsuits related to the opioid crisis.

The Unusual Agreement

The unique aspect of this settlement plan was that it extended liability protection to the company’s owners, the Sackler family. The family insisted on this agreement, stating that they would not agree to a settlement without it.

Government Opposition

The U.S. Trustee Program, part of the Justice Department, has long argued that bankruptcy judges do not have the authority to permanently block lawsuits against company owners who have not filed for personal bankruptcy protection.

The government has contended that different federal appeals courts have conflicting views on this issue, making the settlement agreement a potentially problematic precedent.

The Expert Opinion

The solicitor general, Elizabeth B. Prelogar, stated in a brief that allowing the decision of the appeals court to stand would enable wealthy corporations and individuals to exploit the bankruptcy system as a way to avoid liability.

Elizabeth B. Prelogar further argued that the agreement reached in the bankruptcy case was of exceptional and unprecedented breadth. She emphasized that the release from liability applied to claimants who did not specifically consent to the terms, raising serious constitutional questions and constituting an abuse of the bankruptcy system.

Purdue Pharma’s Response

In response to the Supreme Court’s decision, Purdue Pharma expressed confidence in the legality of the bankruptcy plan.

The Sackler Family’s Situation

The Sackler family members are no longer part of Purdue Pharma’s board, and once the bankruptcy is finalized, they will no longer be owners of the company. The company will be renamed Knoa Pharma and controlled by its creditors. However, the family’s wealth remains substantial, estimated at approximately $11 billion, much of it in offshore holdings.

Victims’ Concerns

Victims’ groups have expressed frustration with the government’s position, as further delays could affect their compensation for harm caused by the opioid crisis.

The Outlook

The review of the Purdue Pharma bankruptcy settlement by the Supreme Court adds another twist to the ongoing legal battle for compensation related to the prescription drug crisis.

Jan Hoffman contributed reporting.