The Supreme Court has rejected a bankruptcy plan for OxyContin-maker Purdue Pharma that would have allocated billions from the wealthy Sackler family to combat opioid addiction, and the Sacklers would have been shielded from civil lawsuits related to their alleged role in the opioid crisis.
The 5-4 decision marks a victory for a minority of opioid victims who voted against the settlement to continue pressing lawsuits against the Sackler family.
It is a setback for most victims and state and local governments who have accepted the settlement.
The Wall Street Journal notes the ruling is among the highest-profile bankruptcy decisions ever from the high court, significantly weakening the ability of corporations and their insiders to use bankruptcy to resolve mass litigation.
Purdue Pharma, which introduced OxyContin in the late 1990s and made billions from the prescription painkiller, faced thousands of opioid lawsuits by 2019.
The company filed for Chapter 11 protection, though the Sackler family did not declare bankruptcy and moved much of their wealth to offshore trusts.
They agreed to pay $6 billion to settle civil claims, denying wrongdoing and arguing their settlement was the best way to fund addiction-fighting initiatives.
In 2021, a New York bankruptcy court approved a reorganization plan for Purdue.
The WSJ report added that this plan included funds from the Sacklers' offshore trusts and ceded the company and its assets to creditors.
Most funds would go to state and local governments for opioid-related programs, with $750 million shared among roughly 130,000 individual opioid claimants.
While nearly all claimants accepted the plan, it required dissenters to accept immunity for the Sacklers from ongoing and future litigation, which many viewed as inadequate compensation.
The Justice Department opposed Purdue's plan, arguing it would unlawfully extinguish individuals' rights to pursue civil lawsuits.
The Office of the U.S. Trustee appealed to the Supreme Court, stating that the plan gave the Sacklers an unprecedented release from liability.
Purdue lawyers argued that the third-party release was necessary under U.S. bankruptcy law to secure the Sacklers' $6 billion contribution.
Purdue lawyer Gregory Garre stated that blocking the settlement would result in the evaporation of funds for opioid abatement and compensation, leaving creditors and victims with nothing and potentially costing lives.