Judge Reverses Historic $4.5B Settlement That Shielded Sackler Family From Opioid Epidemic Liability

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Purdue Pharma Opioid Sackler Family Settlement Overview:

• Who: A New York federal judge has overturned a $4 billion settlement Purdue Pharma made in bankruptcy court.
• Why: The judge ruled that the bankruptcy court did not have authority to grant the Sackler family, owners of Purdue Pharma, release from claims that they helped fuel the opioid epidemic as part of the settlement.
• Where: The opinion was filed in a New York federal court.

A New York federal judge has reversed a controversial $4.5 billion settlement with Purdue Pharma that granted the Sacker family, the owners of Purdue, immunity from all future opioid lawsuits. 

Judge Colleen McMahon overturned the confirmation of Purdue Pharma’s Chapter 11 bankruptcy plan Dec. 16, ruling that the bankruptcy court never had the authority to release the Sackler family from legal claims as part of the settlement. 

Purdue Pharma made the drug OxyContin, which has been blamed in part for the opioid crisis, causing millions of Americans to suffer from opioid use disorder. 

The shock move was welcomed by attorneys general across the nation who had vowed to fight the bankruptcy court’s decision to give the Sackler family legal immunity from claims they helped fuel the opioid crisis.

U.S. Attorney General Merrick Garland said the bankruptcy court never had the authority to “deprive victims of the opioid crisis of their right to sue the Sackler family.” 

Original Deal Released Sacklers And Hundreds Of Their Associates From Liability In The Opioid Crisis

The original deal, inked Sept 1, granted release from liability for harm caused by OxyContin and other opioids for not only the Sacklers, but for hundreds of their associates, as well as their remaining empire of companies and trusts. 

In return, the Sacklers agreed to pay $4.5 billion over the next decade, as well as to forfeit ownership of Purdue Pharma, while admitting no wrongdoing. The $10 billion plan also called for turning the pharmaceutical giant into a new company with its profits going toward efforts to combat the opioid crisis.

In her 142-page opinion Dec. 16, Judge McMahon acknowledged she was overturning years of planning that went into the deal. 

However, she said it was necessary to resolve the question of the bankruptcy court’s authority to grant third-party releases against non-debtor parties right away. Judge McMahon said the judge who approved the settlement failed to identify a specific provision of the Bankruptcy Code giving the court authority to allow the releases. 

“I am sure that the last few years would have proceeded in a very different way if the parties had thought otherwise. But that is why the time to resolve this question for once and for all is now — for this bankruptcy, and for the sake of future bankruptcies,” she said. 

Purdue Pharma said it planned to appeal. Chairman of the Purdue Pharma L.P. Board of Directors Steve Miller told CNN the decision would “delay, and perhaps end, the ability of creditors, communities, and individuals to receive billions in value to abate the opioid crisis.” 

Purdue entered bankruptcy in September 2019 after reaching a deal with 24 state governments to settle claims that the company’s sales of OxyContin helped create the U.S. opioid crisis.

What do you think of the judge’s decision? Let us know in the comments. 

The states of Connecticut, Delaware, Rhode Island, Vermont and Washington are represented by Irve J. Goldman of Pullman & Comley LLC and Matthew J. Gold and Robert M. Tuchman of Kleinberg Kaplan Wolff & Cohen PC, as well as by their respective Attorney General’s and Solicitor General’s offices.

The U.S. Trustee’s Office is represented by Ramona D. Elliott, P. Matthew Sutko, Wendy Cox, Beth A. Levene, Melanie D. Hendry and Sumi K. Sakata of the Department of Justice Executive Office for the U.S. Trustee and by Paul K. Schwartzberg, Benjamin J. Higgins, Brain Masumoto and Andrew Velez-Rivera of the U.S. Trustee’s Office.

The District of Columbia is represented by Attorney General Karl A. Racine, Solicitor General Loren L. AliKhan, Deputy Solicitors General Caroline S. Van Zile and Ashwin P. Phatak and Assistant Solicitor General Sonya L. Lebsack.

The Purdue Pharma Consolidated Appeal Case is In re: Purdue Pharma LP, Case No. 7:21-cv-07532, in the U.S. District Court for the Southern District of New York.

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