(Reuters) — The U.S. Supreme Court on Thursday blocked OxyContin maker Purdue Pharma’s bankruptcy settlement that would have shielded its wealthy Sackler family owners from lawsuits over their role in the nation’s deadly opioid epidemic.
The 5-4 decision reversed a lower court’s ruling that had upheld the plan to give Purdue’s owners immunity in exchange for paying up to $6 billion to settle thousands of lawsuits accusing the company of unlawful misleading marketing of OxyContin, a powerful pain medication introduced in 1996.
The ruling represents a victory for the Biden administration, which had challenged the settlement as an abuse of bankruptcy protections meant for debtors in financial distress, not people like the Sacklers who have not filed for bankruptcy.
Purdue filed for Chapter 11 bankruptcy in 2019 to address its debts, nearly all of which stemmed from thousands of lawsuits alleging that OxyContin helped kickstart an opioid epidemic that has caused more than half a million U.S. overdose deaths over two decades.
At issue in the case was whether U.S. bankruptcy law lets Purdue’s restructuring include legal protections for the members of the Sackler family, who have not filed for personal bankruptcy. These so-called “non-debtor releases” originally arose in the context of asbestos litigation, but their use has been expanded by companies looking to use such protections as a bargaining chip.
The Stamford, Connecticut-based company estimates that its bankruptcy settlement, approved by a U.S. bankruptcy judge in 2021, would provide $10 billion in value to its creditors, including state and local governments, individual victims of addiction, hospitals and others who have sued the company.
The Biden administration and eight states challenged the settlement. All the states dropped their opposition after the Sacklers agreed to contribute more to the settlement fund, but the U.S. Trustee — the Justice Department’s bankruptcy watchdog — and some individual opioid plaintiffs maintained their opposition.
