Supreme Court blocks Purdue Pharma opioid settlement that shields Sackler family of liability

A narrowly divided Supreme Court in a 5-4 decision struck down a hard-fought bankruptcy plan for OxyContin manufacturer Purdue Pharma that would have awarded $6 billion to state and local governments to fight opioid addiction and payouts to more than 100,000 victims of opioid overdoses while also extending immunity to Purdue's owners, the Sackler family.

Justice Neil Gorsuch, writing for the majority that included Justices Clarence Thomas, Samuel Alito, Amy Coney Barrett and Ketanji Brown Jackson, said the text of the bankruptcy code does not allow discharging a third party -- in this case, the Sacklers -- from any legal liability when they are not themselves declaring bankruptcy.

The discharge was the heart of the case, challenged by the U.S. government as unlawful and unfair to a small number of victims in the class-action suit who wanted to preserve a chance to sue the Sacklers for damages in civil court. More than 95% of victims and creditors who voted on the plan during the proceedings approved of it.

"As the people's elected representatives, Members of Congress enjoy the power, consistent with the Constitution, to make policy judgments about the proper scope of a bankruptcy discharge. 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. Either way, if a policy decision like that is to be made, it is for Congress to make," Gorsuch wrote.

Justice Brett Kavanaugh, in a dissent joined by Chief Justice John Roberts and Justices Sonia Sotomayor and Elena Kagan, blasted the decision as "wrong on the law and devastating for more than 100,000 opioid victims and their families."

"Opioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation," he wrote.

"The consequences will be severe," Kavanaugh continued. "There will be no $5.5 to $6 billion settlement payment to the estate and there will be no viable path to any victim recovery. And without the plan's substantial funding to prevent and treat opioid addiction, the victims and creditors bluntly described further repercussions: 'more people will die without this plan.'"

The nationwide settlement would have forced the Sacklers to give up Purdue and transform the business into a nonprofit manufacturer of opioid addiction treatments. It would also have awarded millions of dollars to state and local governments to respond to the epidemic and more than $750 million to individuals in payments ranging from $3,800 to $45,000.

OxyContin, which hit the market in 1996, was a key driver of the nation's opioid epidemic after an aggressive marketing campaign by the company downplayed the dangers of the drug and its addictiveness.

While Gorsuch explicitly disclaimed any impact of his opinion on preexisting bankruptcy settlements, some legal analysts had worried that it could overturn other long-fought deals, including the Boy Scouts of America's bankruptcy and payout to victims of sexual abuse.

Ed Neiger, an attorney representing 60,000 victims in the Purdue Pharma bankruptcy, called Thursday's ruling a "major setback" for opioid victims and their families.

"As a result of the senseless three-year crusade by the government against the plan, thousands of people died of overdose, and today's decision will lead to more needless overdose deaths," Neiger said in a statement. "The addiction crisis is the largest health crisis of our time, with hundreds of people dying of overdose every day, yet the victims have been abandoned by every branch of the government: the legislative, the executive, and now the judicial."

In a statement, Purdue called the ruling "heart-crushing because it invalidates a settlement supported by nearly all of our creditors -- including states, local governments, personal injury victims, schools, and hospitals -- that would have delivered billions of dollars for victim compensation, opioid crisis abatement, and overdose rescue and addiction treatment medicines."

"Critically, the ruling is limited to the narrow legal issue regarding the scope of the third-party releases conferred by the Plan," the statement continued, in part. "The decision does nothing to deter us from the twin goals of using settlement dollars for opioid abatement and turning the company into an engine for good."