US supreme court blocks Purdue Pharma’s bankruptcy settlement that would shield Sacklers from lawsuits

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Conservative bloc

• Alito – Majority

• Barrett – Majority

• Gorsuch – Majority

• Kavanaugh – Minority

• Roberts – Minority

• Thomas – Majority

Liberal bloc

• Jackson – Majority

• Kagan – Minority

• Sotomayor – Minority

The US supreme court has rejected painkiller maker Purdue Pharma’s bankruptcy settlement plan that included an extraordinary measure to protect its Sackler family owners from further liability over the American opioid epidemic, in exchange for providing funds for compensation and rehabilitation treatment.

The 5-4 decision, written by Justice Neil M Gorsuch, was backed by Justices Clarence Thomas, Samuel A Alito Jr, Amy Coney Barrett and Ketanji Brown Jackson.

“The Sacklers seek greater relief than a bankruptcy discharge normally affords, for they hope to extinguish even claims for wrongful death and fraud, and they seek to do so without putting anything close to all their assets on the table,” Gorsuch wrote in the opinion. “Describe the relief the Sacklers seek how you will, nothing in the bankruptcy code contemplates (much less authorizes) it.”

Justice Brett M Kavanaugh, Chief Justice John G Roberts Jr and Justices Sonia Sotomayor and Elena Kagan dissented.

Kavanaugh wrote in his dissent that he felt the “decision is wrong on the law and devastating for more than 100,000 opioid victims and their families”.

The ruling in the case of Harrington v Purdue Pharma blocks a controversial deal approved by a federal bankruptcy court in New York that was first knocked down by a district court, then upheld on appeal before being put on hold while the US Department of Justice challenged it at the supreme court. Oral arguments were heard last December.

The deal was constructed to allow Purdue, the Connecticut company behind the prescription opioid OxyContin, to restructure and also shield the relevant Sackler billionaires without them having to declare personal bankruptcy. The family agreed to contribute $6bn to the settlement from the vast fortune they made from OxyContin and give up ownership.

The company wanted to use the bankruptcy agreement to resolve thousands of lawsuits, many filed by state and local governments across the US, alleging that Purdue Pharma fueled a crisis that ultimately killed half a million Americans by claiming its flagship drug was non-addictive while incentivizing massive over-prescribing.

US solicitor general Elizabeth Prelogar had argued that the release of the Sacklers from future liability is not authorized by the bankruptcy code and constitutes an “abuse of the bankruptcy system.”

After years of litigation and scandal, court filings showed that 95% of creditors in the Purdue bankruptcy case had agreed to sign on to the plan, although many reluctantly, partly seeing it as the only way to finally get some recompense. But several states, Canadian municipalities and Indigenous tribes, and more than 2,600 individuals, including high-profile activists, were opposed.

The US government argued that a settlement could be forged without resorting to the protections of chapter 11 bankruptcy law or releasing the billionaire Sacklers behind the company from liability.

The supreme court ruling now leaves matters between the company and plaintiffs unresolved. The case is seen as having consequences for other corporate bankruptcies where company owners or officials want immunity from liability.

“This is a victory for all Americans – a victory for everybody that wealthy wrong-doers don’t have the right to receive liability and write the law, that anybody can stand up against them and protect their rights under the constitution,” said Mike Quinn, who represents Ellen Isaacs, whose son Ryan died after becoming dependent on Oxycontin and who filed a brief in support of the plaintiffs in the supreme court case. “And it shows us that Miss Isaacs’s son didn’t die in vain.”

Quinn has also been closely involved in opposing the Purdue-Sackler bankruptcy deal with PAIN, an activist group fronted by photographer Nan Goldin that conducted public protests at international art museums that were financially supported by the Sackler family. His clients, he said, were now “considering their options” as the bankruptcy deal is likely to be sent back to the court.