Law [Purdue Pharma's Opioid Lawsuit] Supreme Court Hears Arguments Against $6 Billion Settlement That Grants The Sackler Family Civil Immunity

OxyContin maker’s settlement plan divides victims of opioid crisis. Now it’s up to the Supreme Court​

By GEOFF MULVIHILL and MARK SHERMAN | November 23, 2023

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WASHINGTON (AP) — The agreement by the maker of OxyContin to settle thousands of lawsuits over the harm done by opioids could help combat the overdose epidemic that the painkiller helped spark. But that does not mean all the victims are satisfied.

In exchange for giving up ownership of drug manufacturer Purdue Pharma and for contributing up to $6 billion to fight the crisis, members of the wealthy Sackler family would be exempt from any civil lawsuits. At the same time, they could potentially keep billions of dollars from their profits on OxyContin sales.

The Supreme Court is set to hear arguments Dec. 4 over whether the agreement, part of the resolution of Purdue Pharma’s bankruptcy, violates federal law.

The issue for the justices is whether the legal shield that bankruptcy provides can be extended to people such as the Sacklers, who have not declared bankruptcy themselves. The legal question has resulted in conflicting lower court decisions. It also has implications for other major product liability lawsuits settled through the bankruptcy system.

But the agreement, even with billions of dollars set aside for opioid abatement and treatment programs, also poses a moral conundrum that has divided people who lost loved ones or lost years of their own lives to opioids.

Ellen Isaacs’ 33-year-old son, Ryan Wroblewski, died in Florida in 2018, about 17 years after he was first prescribed OxyContin for a back injury. When she first heard about a potential settlement that would include some money for people like her, she signed up. But she has changed her mind.

Money might not bring closure, she said. And by allowing the deal, it could lead to more problems.

“Anybody in the future would be able to do the exact same thing that the Sacklers are now able to do,” she said in an interview.

Her lawyer, Mike Quinn, put it this way in a court filing: “The Sackler releases are special protection for billionaires.”

Lynn Wencus, of Wrentham, Massachusetts, also lost a 33-year-old son, Jeff, to overdose in 2017.

She initially opposed the deal with Purdue Pharma but has come around. Even though she does not expect a payout, she wants the settlement to be finalized in hopes it would help her stop thinking about Purdue Pharma and Sackler family members, whom she blames for the opioid crisis.

“I feel like I can’t really move on while this is all hanging out in the court,” Wencus said.

Purdue Pharma’s aggressive marketing of OxyContin, a powerful prescription painkiller that hit the market in 1996, is often cited as a catalyst of a nationwide opioid epidemic, persuading doctors to prescribe painkillers with less regard for addiction dangers.

The company pleaded guilty to misbranding the drug in 2007 and paid more than $600 million in fines and penalties.

The drug and the Stamford, Connecticut-based company became synonymous with the crisis, even though the majority of pills being prescribed and used were generic drugs. Opioid-related overdose deaths have continued to climb, hitting 80,000 in recent years. That’s partly because people with substance abuse disorder found pills harder to get and turned to heroin and, more recently, fentanyl, an even more potent synthetic opioid.

Drug companies, wholesalers and pharmacies have agreed to pay a total of more than $50 billion to settle lawsuits filed by state, local and Native American tribal governments and others that claimed the companies’ marketing, sales and monitoring practices spurred the epidemic. The Purdue Pharma settlement would be among the largest. It’s also one of only two so far with provisions for victims of the crisis to be compensated directly, with payouts from a $750 million pool expected to range from about $3,500 to $48,000.

Lawyers for more than 60,000 victims who support the settlement called it “a watershed moment in the opioid crisis,” while recognizing that “no amount of money could fully compensate” victims for the damage caused by the misleading marketing of OxyContin.

In the fallout, parts of the Sackler family story has been told in multiple books and documentaries and in fictionalized versions in the streaming series “Dopesick” and “Painkiller.”

Museums and universities around the world have removed the family’s name from galleries and buildings.

Family members have remained mostly out of the public eye, and they have stepped off the board of their company and have not received payouts from it since before the company entered bankruptcy. But in the decade before that, they were paid more than $10 billion, about half of which family members said went to pay taxes.

Some testified in a 2021 bankruptcy hearing, telling a judge that the family would not contribute to the proposed legal settlement without being shielded from lawsuits.

Two family members appeared by video and one listened by audio to a 2022 court hearing in which more than two dozen people impacted by opioids told their stories publicly. One told them: “You poisoned our lives and had the audacity to blame us for dying.”

Purdue Pharma reached the deal with the governments suing it — including with some states that initially rejected the plan.

But the U.S. Bankruptcy Trustee, an arm of the Justice Department responsible for promoting the integrity of the bankruptcy system, has objected to the legal protections for Sackler family members. Attorney General Merrick Garland also has criticized the plan.

The opposition marked an about-face for the Justice Department, which supported the settlement during the presidency of Donald Trump, a Republican. The department and Purdue Pharma forged a plea bargain in a criminal and civil case. The deal included $8.3 billion in penalties and forfeitures, but the company would pay the federal government only $225 million so long as it executed the settlement plan.

A federal trial court judge in 2021 ruled the settlement should not be allowed. This year, a federal appeals panel ruled the other way in a unanimous decision in which one judge still expressed major concerns about the deal. The Supreme Court quickly agreed to take the case, at the urging of the administration of President Joe Biden, a Democrat.

Purdue Pharma’s is not the first bankruptcy to include this sort of third-party release, even when not everyone in the case agrees to it. It was specifically allowed by Congress in 1994 for asbestos cases.

They have been used elsewhere, too, including in settlements of sexual abuse claims against the Boy Scouts of America, where groups like regional Boy Scout councils and churches that sponsor troops helped pay, and against Catholic dioceses, where parishes and schools contributed cash.

Proponents of Purdue Pharma’s settlement plan often assert that federal law does not prohibit third-party releases and that they can be necessary to create a settlement that parties will agree to.

“Third-party releases are a recurring feature of bankruptcy practice,” lawyers for one branch of the Sackler family said in a court filing, “and not because anyone is trying to do the released third parties a favor.”

apnews.com

OxyContin maker's settlement plan divides victims of opioid crisis. Now it's up to the Supreme Court

The legality of an agreement by the maker of OxyContin to settle thousands of lawsuits over the harm done by opioids is going before the Supreme Court.
apnews.com apnews.com
 
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Former NYT reporter, “Pain Killer” author Barry Meier on OxyContin, Purdue Pharma, the Sacklers, and America’s opioid epidemic​

WAMC Northeast Public Radio | By Josh Landes | Published November 23, 2023​

Writer Barry Meier is a former New York Times journalist, and author of the book “Pain Killer: A Wonder Drug's Trail of Addiction and Death.” It’s the grim story of OxyContin, the opioid epidemic, the pharmaceutical company Purdue Pharma, and its owners, the Sackler Family. His groundbreaking reporting helped bring the corporate malfeasance that fueled a massive wave of substance misuse to light for the first time.

“The over prescription and the misuse of this drug essentially triggered or planted the seed for the opioid epidemic that we have today. I mean, most of the overdose deaths today involve illegal forms of fentanyl, counterfeit drugs that are made by cartels in Mexico, but 20 years ago, there was a growing number of overdoses starting in the hundreds and going into the thousands – and eventually, into the tens of thousands – that were being caused by prescription narcotics or opioids, as they're sometimes called.”

We sit down with Meier, who discusses the impact of “Pain Killer” – which has been adapted into a Netflix series – after the news.

In 2001, New York Times reporter Barry Meier began reporting a story about an obscure painkiller called OxyContin. Produced by Purdue Pharma under the ownership of the Sackler Family, the opioid was marketed as being safe from possible addiction or misuse. As he found and later published in his groundbreaking 2003 book “Pain Killer: A Wonder Drug's Trail of Addiction and Death,” the drug was in fact wreaking havoc on the streets of America. Meier sat down with WAMC to talk about how his journey with OxyContin, Purdue Pharma, and the Sackler family all began- and how the story has continued in the years since “Pain Killer” – now a drama series on Netflix – was first published.
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www.wamc.org

Former NYT reporter, “Pain Killer” author Barry Meier on OxyContin, Purdue Pharma, the Sacklers, and America’s opioid epidemic

An interview with Barry Meier.
www.wamc.org www.wamc.org
 
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Purdue Confronts Supreme Court Skeptical of Bankruptcy Power​

By Evan Ochsner, Reporter | Nov 29, 2023

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The US Supreme Court’s longstanding skepticism towards bankruptcy courts’ authority poses a potentially debilitating obstacle for Purdue Pharma LP in its quest to grant liability releases to its Sackler family owners.

The key question presented in the Purdue case strikes at an issue the Supreme Court has considered multiple times: the extent of a bankruptcy court’s power. If the high court takes a narrow view of bankruptcy court authority, as it did in cases such as Stern v. Marshall and Czyzewski v. Jevic Holding Corp., it could spell major trouble for a settlement years in the making that stands to deliver billions of dollars to address the opioid crisis.

“Given the court’s existing jurisprudence, I would be personally shocked if they find there is statutory power for what the bankruptcy court approved in the Purdue case,” said University of Illinois College of Law bankruptcy professor Ralph Brubaker, who filed an amicus brief against Purdue in the case.

At stake in the case is whether non-bankrupt people and entities with ties to a corporate debtor can be released from liability without the consent of creditors. The Supreme Court’s ultimate decision could upend corporate bankruptcy practice, as the releases are a central bargaining chip in bankruptcy negotiations.

The Sacklers’ proposed releases, which would shield them against litigation accusing them of helping fuel the opioid crisis through their leadership of Purdue, were approved by a bankruptcy court in 2021 and upheld by the US Court of Appeals for the Second Circuit earlier this year.

But the Justice Department and some bankruptcy experts say the bankruptcy court didn’t have the authority to grant the releases in the first place. A federal district court judge rejected the releases before being overturned by the Second Circuit.

The Justice Department has also raised constitutional questions and said the supposed necessity of the releases doesn’t make them legal. Purdue and most of its creditors have pushed back. In the pharma company’s defense, it points to the same 1990 Supreme Court decision, United States v. Energy Resources Co., the Second Circuit cited when it upheld the Sacklers’ releases, which it says gives bankruptcy judges more leeway.

The Supreme Court will hear oral arguments on the Purdue case on Dec. 4.

“This is the most important bankruptcy case to be taken by the Supreme Court in decades,” Pamela Foohey, a bankruptcy law professor at Cardozo School of Law, said in an email.
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Overly Pragmatic?​

In Jevic, the Supreme Court held that bankruptcy courts can’t approve agreements that wander too far astray from the bankruptcy code. In the 2017 case, the high court determined that bankruptcy courts don’t have authority to sign off on agreements that change the creditor priority structure of the bankruptcy code without the consent of affected creditors.

“What the court is very careful about is letting judges get outside the parameters of the code,” said David Kuney, a former Sidley Austin restructuring partner who now has an appellate practice focusing on bankruptcy. “They’re very worried that judges will be pragmatic,” as opposed to sticking to the law, he added.

Bankruptcy court can became a high stakes game of “Let’s Make a Deal,” where judges are eager approve any deal debtors and creditors come up with in pursuit of a bankruptcy exit, he said.

“You can’t say that the law goes to the highest bidder. There’s got to be a long-term principal that carries forward,” Kuney, who is also an adjunct professor at Georgetown Law, added.

But the high court’s devotion to the bankruptcy code is also a product of the lack of restructuring expertise on the panel, Kuney said.

“The Supreme Court wants to be careful,” he said. “They don’t understand all the dynamics of bankruptcy law and they’re a little afraid of wrecking things, so they want to stay within the code.”

Another key decision, Stern, came in 2011 when the Supreme Court found that Congress impermissibly gave bankruptcy courts powers that belong only to courts that were established by the Constitution. The case involved the estates of former Playboy Playmate Anna Nicole Smith and her husband, oil magnate J. Howard Marshall, both of whom were deceased when the ruling was handed down.

Stern serves as a reminder that even when bankruptcy courts find authority in the bankruptcy code, they face further restraints because they weren’t created by the Constitution.

“That’s a type of reining-in powers,” Georgetown University bankruptcy law professor Adam Levitin said.

Stern is “consistent with this theme that there are hard limits on what the bankruptcy judges can do, not only in the statue but in the Constitution,” Brubaker said.
Click to expand...

Appellate Review​

A Supreme Court case last year hinted at a continued pattern of diminishing bankruptcy courts’ authority.

In MOAC Mall Holdings LLC v. Transform Holdco LLC, the Supreme Court unanimously held that district courts have jurisdiction to review certain sales approved by a bankruptcy court. In doing so, the court checked the finality of bankruptcy court approvals and left open the possibility of appellate review.
The case centered on who owned a $10-a-year lease for what used to be a three-story flagship Sears store in the Mall of America: the mall itself, or the company that purchased Sears when it went bankrupt. After a bankruptcy court ruled in its favor, Transform Holdco, which bought the iconic chain out of bankruptcy, argued Section 363(m) of the bankruptcy code deprived appellate courts from challenging the lease transfer.

The high court rejected that argument, finding that appellate courts have jurisdiction to review certain bankruptcy sales.

“It’s a way of trimming back bankruptcy court authority,” Levitin said.

But recent cases don’t necessarily offer clear guidance on what the court will do with Purdue, Foohey said.

“It’s hard to glean from prior recent cases what it may do with the issue in Purdue or how it may approach the Purdue case,” Foohey said in an email.
Click to expand...

Implicit Powers​

Purdue argues the bankruptcy code allows for the releases it seeks for the Sacklers. It points to a Supreme Court case that the Second Circuit relied on when it backed Purdue’s plan earlier this year.

The high court’s 1990 decision in United States v. Energy Resources Co. focused on part of a bankruptcy plan that required the Internal Revenue Service to apply tax payments to offset some of a debtor’s tax obligations—something not explicitly authorized in the bankruptcy code.

But the Supreme Court’s opinion quoted part of the bankruptcy code that gives courts the power to approve plans, including “any other appropriate provision not inconsistent with the applicable provisions of this title.” The Supreme Court said that amounts to “residual authority to approve reorganization plans.”

“These statutory directives are consistent with the traditional understanding that bankruptcy courts, as courts of equity, have broad authority to modify creditor-debtor relationships,” the court said at the time.

But Brubaker and other bankruptcy professors say Purdue is reading too much into that 1990 decision. Energy Resources upheld a bankruptcy court’s power to compel the IRS to treat tax liabilities in a way that was necessary for plan approval. That actually indicates that the Purdue liability releases are improper, according to the professors’ amicus brief.

Purdue’s reading of the Energy Resources case seeks to turn it “into a vast reservoir of extraordinary and unlimited implicit equitable powers, untethered to any explicit statutory authority,” the brief says.

The dissonance between the two interpretations of the 1990 case points to a broader disagreement.

“In general there’s a disconnect between how the Supreme Court views things, which is you have to stick to the statute, and bankruptcy courts, which is the statute is a starting point,” Levitin said.

The case is William K. Harrington v. Purdue Pharma LP, U.S., No. 23-124, 12/4/23.
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Supreme Court wrestles with Purdue Pharma settlement and legal shield for Sackler family​

ByDevin Dwyer | December 4, 2023


A historic multibillion-dollar settlement with OxyContin-maker Purdue Pharma hung in the balance at the Supreme Court on Monday as victims of the nation's opioid epidemic urged the justices to approve the deal over opposition from the Biden administration, which warned it would let the company's owners -- the Sackler family -- evade greater financial responsibility.

During oral argument in the case, Harrington v. Purdue Pharma, most of the justices appeared inclined to uphold the arrangement, which was forged after years of painstaking negotiations as part of the drugmaker's bankruptcy proceedings and is endorsed by a large majority of victims.

"I'm wondering why one nutcase holdout should hold up something like this," said Justice Elena Kagan, referring to several individual claimants who said they believe the deal is too lenient.

Under the deal, the Sacklers would provide roughly $6 billion to redress harm from opioid addiction and related deaths and give up ownership of the company -- a sum that would be paid out to 138,000 individual victims, state governments and Native American tribes over a number of years.

In exchange, the family -- which has not declared bankruptcy itself -- would receive immunity from all future opioid-related lawsuits and retain billions in past profits earned from sales of the drug.

More than 80,000 Americans have suffered opioid-related deaths since OxyContin and similar painkillers hit the market in 1996. Purdue's aggressive marketing and disregard for addiction concerns played a major role in the rise of the epidemic, according to public health experts and several legal findings.

"Let me be crystal clear," said attorney Pratik Shah, who was defending the deal on behalf of the supportive victims. "Without the release [of liability for the Sacklers], the plan will unravel, Chapter 7 liquidation will follow, and there will be no viable path to any victim recovery."

"Forget a better deal," Shah said. "There is no other deal."

A federal district court blocked the plan, saying federal law did not allow such a sweeping legal shield for the Sacklers without unanimous consent of all the claimants. A federal appeals court later reversed that ruling, saying the plan could go forward because of leeway in the law.

The deal has remained on hold as the Supreme Court reviews the case.

Deputy Solicitor General Curtis Gannon said there could be a better deal in the making for victims, arguing that immunity for the Sacklers "conflicts with the basic nuts and bolts" of bankruptcy law.

"It permits the Sacklers to decide how much they're going to contribute. It grants the Sacklers the functional equivalent of a discharge, what they might get if they themselves were in bankruptcy," Gannon said. "It raises significant constitutional questions that should be avoided in the absence of a clear command from Congress."

Several justices seemed to share the government's view.

"We don't normally say that a nonconsenting party can have its claim for property eliminated in this fashion without consent or any process of court other than the procedure here," said Justice Neil Gorsuch. "This would defy what we do in class-action contexts. It would raise serious due process concerns and seventh amendment concerns."

Justice Ketanji Brown Jackson suggested she had concerns the Sacklers could be seen as benefiting from the deal, while Chief Justice John Roberts raised the possibility that Congress never contemplated such a sweeping third-party immunity arrangement when it wrote the bankruptcy code.

It seems to be a "fairly clear case for the application of what is called our major questions doctrine," Roberts said.

Justice Brett Kavanaugh, frequently a deciding vote in close cases, repeatedly indicated that precedent should weigh heavily in favor of approving the deal.

"Bankruptcy courts for 30 years have been approving plans like this, and I guess I'm trying to figure out, with all that practice under the judiciary's belt, why we would say it's categorically inappropriate," he said.

"The opioid victims and their families overwhelmingly approve this plan because they think it will ensure prompt payment," he said.

If approved, the deal is expected to issue payments of between $3,500 and $48,000 to individual victims and their survivors. This is in addition to funding abatement programs through state health offices.

If the deal is blocked, legal experts say it could upend the nation's bankruptcy system and the process for resolving cases of mass injury, and potential force the reopening of deals like the one that resolved thousands of claims against the Boy Scouts of America for sexual abuse.

A decision in the case is expected to be handed down by the end of June 2024.

abcnews.go.com

Supreme Court wrestles with Purdue Pharma settlement and legal shield for Sackler family

A settlement with Purdue Pharma hung in the balance at the Supreme Court as victims of the opioid epidemic urged justices to approve a deal with the company's owners.
abcnews.go.com abcnews.go.com
 
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