Not So Fast, Sacklers

A bankruptcy settlement reached earlier this year shielding the owners of the company responsible for making and marketing OxyContin was overturned by a federal judge.

Senior U.S. District Judge Colleen McMahon said in a written opinion that the New York bankruptcy court did not have authority to grant the Sackler family, owners of Purdue Pharma LLC, the legal protection from future opioid litigation that formed the linchpin of Purdue’s bankruptcy reorganization. Purdue said it would appeal the decision.

The ruling overturns a $4.5 billion settlement that legally shielded members of the Sackler family who stand accused of playing a paramount role in causing the U.S. opioid epidemic.

Purdue filed for bankruptcy in September 2019 in the face of more than 3,000 lawsuits accusing the company and Sackler family members of contributing to a public health crisis that has claimed the lives of about 500,000 people.

The litigation accused the company and family members of aggressively marketing OxyContin while downplaying its addiction and overdose risks. The company and family members have denied the allegations.

Judge McMahon also previously raised questions about the more than $10 billion the drugmaker distributed to the Sackler family in the decade leading up to its bankruptcy filing, asking if it represented a larger abuse of the bankruptcy system. The Sacklers have faced allegations, which they deny, that they authorized the financial transfers to prevent the money from being drained in future litigation against Purdue and said much of the money went toward taxes and investments.

During the bankruptcy proceedings the Sacklers insisted on the legal shields, known as non-debtor releases, and continually threatened to walk away from the negotiations absent those protections. In exchange for these legal shields the family agreed to contribute $4.5 billion toward resolving widespread opioid litigation.

Even Attorney General Merrick Garland issued a statement about the ruling, saying he was pleased with the ruling.

“The bankruptcy court did not have the authority to deprive victims of the opioid crisis of their right to sue the Sackler family,” he said.

The Stamford, Connecticut, drugmaker last year pleaded guilty to criminal charges stemming from its handling of opioids and U.S. Bankruptcy Judge Robert Drain in White Plains, New York, said during the proceedings that it was clear the wrongful marketing of the company’s opioid products contributed to the addiction crisis that spread across the entire country.

Eight states, Washington, D.C., the city of Seattle and more than 2,600 personal injury claimants voted against Purdue’s reorganization, McMahon said. The U.S. Justice Department’s bankruptcy watchdog and the Manhattan U.S. attorney’s office also objected.

But Judge Drain overruled objections to the legal releases shielding the Sacklers and said that denying the releases would unravel Purdue’s reorganization and would prevent communities reeling from the opioid epidemic from addressing the long-lasting issues remaining.

Washington State Attorney General Bob Ferguson, who objected to Purdue’s reorganization as well, also praised McMahon’s decision.

“There cannot be two forms of justice – one for ordinary Americans and a different one for billionaires,” Ferguson said. “I’m prepared to take this fight all the way to the Supreme Court, if necessary, to ensure true accountability for the Sackler family.”