Supreme Court justices wrestled Monday with the uncomfortable bargain struck between most victims of the opioid crisis and the Sackler family, whose Purdue Pharma promoted the addictive painkiller OxyContin: providing timely compensation for survivors in exchange for granting the wealthy family immunity from future civil lawsuits.
That settlement was reached before a bankruptcy judge and approved in May by a federal appeals court in New York. It would see the Sacklers pay $6 billion to individual victims and state governments in exchange for eliminating potential liability for additional claims, such as fraud—even though they, unlike Purdue, haven’t sought bankruptcy protection. The deal was made under a catchall provision of federal law authorizing bankruptcy judges to issue orders and judgments that may be “necessary or appropriate” to resolve cases.
Nearly all the victims agreed because the Sacklers said they wouldn’t settle without such protection. But some 2,600 victims—3% of the total—didn’t settle, and at Monday’s arguments, a Justice Department attorney told the court that federal law didn’t permit settlements that forbid creditors from seeking assets that weren’t protected in bankruptcy proceedings.
Justice Brett Kavanaugh summed up the frustration of victims who thought things had been resolved: “You, the federal government, with no stake in this at all, are coming in and telling the families, ‘No, we’re not going to give you prompt payment for what’s happened to your family, and we’re not going to allow this money to go to the states for prevention programs to prevent future overdoses,’” Kavanaugh said, simply because Justice Department lawyers have a “somewhat theoretical idea that they’ll be able to recover money down the road from the Sacklers themselves.”
Justice Elena Kagan suggested the prospect of additional recovery was far-fetched. “It’s overwhelming, the support for this deal,” she said, “among people who think the Sacklers are pretty much the worst people on earth. They’ve negotiated a deal which they think is the best that they can get.”
Deputy Solicitor General Curtis Gannon suggested the Sacklers could be bluffing. An earlier version of the best deal for victims fixed the Sackler contribution at $4.3 billion, he said, but after a legal setback threatened to undo the settlement, the family upped its payout to $6 billion.
Justices bristled when Greg Garre, representing Purdue, cited bankruptcy court findings that without the deal, victims might not see a penny of compensation. “If this settlement doesn’t go forward, then victims would likely, even if they prevailed on their claims, [face] serious issues about being able to collect,” he said.
That is “only because the Sacklers have taken the money offshore, right?” said Justice Ketanji Brown Jackson, referring to the overseas trusts where much of the family’s wealth is held. “The Sacklers have taken the money and are not willing to give it back unless they have this condition.”
Justice Amy Coney Barrett observed that the Sacklers had begun transferring funds from Purdue to their private accounts as the scope of the opioid crisis began to unfold.
It is “all money that they took out of the corporation,” she said.
In recent decades, bankruptcy courts have used the power to wipe out related claims to drive chapter 11 settlements in mass-victim litigation where some parties that aren’t themselves in bankruptcy could face liability.
The Boy Scouts of America agreed to the largest settlement of sex-abuse claims in U.S. history in exchange for extinguishing claims against its volunteer affiliates and religious partners. Private-equity firms, corporate executives and others linked to a bankruptcy case often get immunity from liability as part of such settlements.
But federal appeals courts are divided over whether the bankruptcy code’s “necessary or appropriate” clause permits such broad actions.
Purdue sought bankruptcy protection in 2019 when facing thousands of lawsuits alleging misconduct in marketing OxyContin. Many claims filed by state governments, municipalities and victims of opioid addiction also named the closely held company’s family owners, who have denied wrongdoing.
The Sacklers assert that they didn’t anticipate those suits when taking $10 billion in distributions from Purdue from 2008 to 2017. About half of that sum went toward taxes or was reinvested in the business, court papers say.