Supreme Court leans in favor of Purdue Pharma deal with $6 billion from Sacklers

The Supreme Court justices sounded Monday as if they will uphold a huge bankruptcy deal that includes $6 billion from the Sackler family to help the nation and tens of thousands of victims recover from the opioid crisis.

Most of the justices said the deal looked to be the best possible outcome, even though it gave the Sacklers a shield from future lawsuits.

Most of their questions were critical of the Biden administration’s claim that the deal should not go forward because the Sacklers are not bankrupt.

Tens of thousands of families directly affected by OxyContin “overwhelmingly approve of this settlement,” Justice Brett M. Kavanaugh told a Justice Department lawyer. “The federal government, with no stake in this at all, is telling the families we will not give you a prompt payment and to allow this money to go to the states for programs to prevent future overdoses and future victims. And all in exchange for this somewhat theoretical idea that they’ll be able to recover money down the road from the Sacklers themselves.”

Justice Elena Kagan agreed.

“It’s overwhelming, the support for this deal, and among people who have no love for the Sacklers. Your position rests on a lot of highfalutin principles of bankruptcy law ... that you can come in here and blow up the deal,” she told Deputy Solicitor Gen. Curtis Gannon. “The federal government is standing in the way against a huge, huge majority of claimants who have decided that if this provision goes under, they’re going to end up with nothing.”

State attorneys from all 50 states agreed to the deal on the grounds it would provide money for addiction treatment programs. If finally approved, the deal includes smaller payments for the tens of thousands of victims of the opioid crisis. About 97% of the individuals claimants who cast votes said they approved the deal.

But the Justice Department raised a last-minute objection and argued that wealthy people like the Sacklers should not be allowed to use the bankruptcy system to shield themselves from future lawsuits. While their company Purdue Pharma has filed for bankruptcy, the same is not true for the members of the Sackler family.

They originally offered about $4 billion to settle all the claims and later raised the total to $6 billion.

Justice Samuel A. Alito Jr. said it may not be realistic to obtain more. Their assets may not be “reachable,” he said, because they are held outside the United States.

The Purdue Pharma case highlighted the difficulty of resolving “mass torts,” when hundreds or thousands of lawsuits are filed over a dangerous and defective product or a pattern of misconduct, such as sexual abuse in the Catholic Church or the Boy Scouts of America. In recent years, bankruptcy courts have taken on the task of devising settlements that seek to fairly compensate the victims.

But appeals courts have split over whether the law authorizes a bankruptcy judge to shield one of the parties from future liability in exchange for funding the settlement.

In July, U.S. Solicitor Gen. Elizabeth Prelogar urged the Supreme Court to block the pending settlement of the Purdue Pharma bankruptcy because it shielded the Sacklers from future liability. She said members of the Sackler family “withdrew approximately $11 billion from Purdue in the 11 years before the company filed for bankruptcy,” and she argued that it was “an abuse of the bankruptcy system” to shield them from further lawsuits.

The justices agreed to temporarily block the settlement and to hear arguments on the legal issue.

It made for an usual bankruptcy argument since the lawyers for the debtors and the creditors — Purdue Pharma and the victims of the opioid epidemic—were on the same side. Both urged the justices to uphold the deal as the best possible under the circumstances.

Not all the justices were in agreement, however. Justices Neil M. Gorsuch and Ketanji Brown Jackson focused on the bankruptcy law and questioned how it can be extended to people who are not bankrupt.

“It would raise serious due process claims,” Gorsuch said, to tell victims of OxyContin that they may not sue the Sacklers for the damage done by the opioids that were aggressively marketed by Purdue Pharma.