Supreme Court blocks Purdue Pharma bankruptcy deal in opioid settlement

The Supreme Court on Thursday blocked Purdue Pharma’s bankruptcy deal that would’ve contributed billions of dollars to pay victims and combat the opioid epidemic in exchange for immunizing the wealthy Sackler family from civil lawsuits. 

In a 5-4 decision authored by Justice Neil Gorsuch, the high court ruled federal law does not permit the Sacklers, who previously controlled Purdue Pharma but did not themselves file for bankruptcy, to be released from liability for contributing up to $6 billion to the settlement. 

The Bankruptcy Code only allows immunity for third parties like the Sacklers if all creditors sign off, the high court ruled, siding with the Biden administration and a relatively small group who objected. 

The decision claws back a key tactic that corporations like the Catholic Church have used to resolve mass injury claims through bankruptcy. 

“Someday, Congress may choose to add to the bankruptcy code special rules for opioid-related bankruptcies as it has for asbestos-related cases. Or it may choose not to do so,” Gorsuch wrote in the majority opinion.  

“Either way, if a policy decision like that is to be made, it is for Congress to make,” Gorsuch continued. “Despite the misimpression left by today’s dissent, our only proper task is to interpret and apply the law as we find it; and nothing in present law authorizes the Sackler discharge.” 

It effectively undoes the years-in-the-making settlement that would’ve had Purdue Pharma transform into a public-benefit company dedicated to opioid abatement, with the multi-billion contribution from the Sacklers funding those efforts and compensating victims. 

The Supreme Court had put the deal on hold as they considered the case. 

About 95 percent of creditors voted to approve Purdue Pharma’s settlement and immunize the Sacklers, but the Supreme Court sided with the objections lodged by a relatively small group, who were backed by the U.S. Trustee, the Justice Department’s bankruptcy watchdog. 

The U.S. Trustee estimated the now-defunct deal would’ve provided opioid victims between $3,500 and $48,000. 

The future for Purdue Pharma’s bankruptcy case remains hazy, with the parties having sparred over whether there another viable path exists for victims to receive payment. 

The U.S. Trustee’s objections to the settlement were joined by a group of Canadian municipalities and an individual victim who found her son dead on the bathroom floor after an overdose. Some of them alleged that Sackler family members had taken assets offshore, portraying the deal as providing special protection for billionaires.