- The US Supreme Court will decide whether Purdue Pharma’s bankruptcy settlement will stand.
- The company, built by the billionaire Sackler family, declared bankruptcy in 2019 amid countless lawsuits.
- The decision could have wide-ranging effects on how companies and organizations use bankruptcy court.
The US Supreme Court is set to hear a case that could have extraordinary consequences for companies that claim bankruptcy when faced with personal injury lawsuits – namely the Sackler family of billionaires who have been widely tied to America’s spiraling opioid epidemic.
The Sacklers’ company, Purdue Pharma, manufactured and aggressively marketed the highly addictive painkiller OxyContin. After becoming one of America’s richest families, the Sacklers have faced countless civil lawsuits on top of widespread contempt from families who have lost loved ones to opioid addiction.
The thousands of civil suits prompted Purdue Pharma to file for bankruptcy in 2019.
By 2022, Purdue Pharma reached a settlement that would exempt the Sacklers from civil lawsuits while funneling up to $6 billion towards fighting the drug epidemic they are accused of instigating, Reuters reported.
The Supreme Court will hear arguments on Monday to assess whether that settlement violates federal law. The case could have wide-ranging impacts on whether companies can continue to declare bankruptcy to dodge more severe financial consequences.
Officially referred to as third-party nonconsensual releases, the legal maneuver allows organizations to settle personal injury claims in bankruptcy court instead of civil court. The former can protect them from future litigation, making it the more cost-effective option for a company trying to avoid paying for its accused wrongs and keep its doors open.
Legal experts say companies are more often relying on bankruptcy court than civil court to settle claims, The New York Times reported. Opponents of the practice say it robs regular people of their day in civil court.
The Sacklers’ settlement deal did not require the Sacklers themselves to declare bankruptcy, just Purdue Pharma, according to the Times. In effect, it shields their billions of dollars accrued from OxyContin sales and grants them a unique level of immunity.
Purdue Pharma told Reuters in a statement that the legal challenge to their settlement will “single-handedly delay billions of dollars in value that should be put to use for victim compensation, opioid crisis abatement for communities across the country and overdose rescue medicines.”
“We are confident in the legality of our nearly universally supported plan of reorganization, and optimistic that the Supreme Court will agree,” Purdue’s statement said.
