Politics

Supreme Court Hears Biden Administration’s Challenge to Purdue Pharma’s Opioid Settlement, Potentially Shielding Sackler Family

WASHINGTON (Reuters) -The U.S. Supreme Court heard arguments on Monday regarding the challenge brought by President Joe Biden’s administration against the legality of Purdue Pharma’s bankruptcy settlement, which aims to shield the wealthy Sackler family, owners of OxyContin maker Purdue, from lawsuits related to their alleged role in the country’s opioid epidemic.

Under the proposed settlement, Purdue’s owners would gain immunity while agreeing to pay up to $6 billion to settle numerous lawsuits filed by states, hospitals, individuals affected by addiction, and others who sued the company for deceptive marketing practices of OxyContin.

During the court proceedings, some justices raised questions that indicated skepticism toward the administration’s objection to the bankruptcy plan. Justice Brett Kavanaugh, a conservative, questioned why the court should consider such plans “categorically inappropriate” when bankruptcy courts have been approving similar plans for three decades.

The Supreme Court had previously paused bankruptcy proceedings involving Purdue and its affiliates in August when it agreed to hear the administration’s appeal challenging a ruling by the 2nd U.S. Circuit of Appeals, which upheld the settlement.

Around 50 people, including family members of opioid victims, protested the settlement outside the court, with chants and signs expressing dissatisfaction with the Sackler family’s role.

The Biden administration argued in court papers that allowing the 2nd Circuit’s decision to stand would set a precedent for corporations and wealthy individuals to exploit the bankruptcy system to evade mass-tort liability.

The central question is whether U.S. bankruptcy law permits Purdue’s restructuring to provide legal protections for the Sackler family members who have not filed for personal bankruptcy. Purdue filed for Chapter 11 bankruptcy in 2019 to address its debts arising from lawsuits alleging OxyContin’s role in sparking an opioid epidemic that led to over half a million overdose deaths in the U.S. over two decades.

Purdue’s bankruptcy settlement, approved by a U.S. bankruptcy judge in 2021, is estimated to provide $10 billion in value to creditors, including governments, individual victims, and hospitals. The Biden administration and eight states initially opposed the settlement but withdrew their objections after the Sacklers agreed to contribute more to the settlement fund.

In May, the 2nd Circuit upheld the settlement, stating that federal bankruptcy law allows legal protections for non-bankrupt parties in exceptional circumstances. It argued that claims against Purdue were intertwined with claims against its owners, and allowing lawsuits against the Sacklers would undermine Purdue’s bankruptcy settlement efforts.

Members of the Sackler family deny wrongdoing but acknowledge the unexpected role OxyContin played in the opioid crisis. They contend that the bankruptcy settlement will offer substantial resources for affected communities. The administration asserts that Purdue’s settlement misuses bankruptcy protections and alleges that the Sackler family withdrew $11 billion from Purdue before committing $6 billion to the opioid settlement.

Numerous stakeholders, including a group representing over 60,000 individuals with personal injury claims related to Purdue’s opioids, have opposed the administration’s request to halt the settlement, expressing support for legal immunity for the Sackler family.

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