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The Supreme Court on Thursday blocked, for now, a multi-billion-dollar bankruptcy settlement by Purdue Pharma that would protect its Sackler family owners from civil lawsuits related to the opioid crisis.
The Supreme Court also said it will hear a U.S. Bankruptcy trustee’s challenge to the settlement by Purdue, the maker of the opioid OxyContin, with all 50 U.S. states, and other parties.
The order Thursday directed parties to file briefs on a question of whether bankruptcy courts can approve a Chapter 11 reorganization that releases claims by non-debtors against non-debtor third parties “without the claimants’ consent.”
There were no dissents by any of the court’s justices in the order granting the requested hold, which was sought by the Department of Justice.
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The DOJ had argued in a court filing that the release of the Sacklers from civil liability “is not authorized by the Bankruptcy Code, constitutes an abuse of the bankruptcy system, and raises serious
constitutional questions.”
The Sackler family agreed as part of the settlement to contribute $6 billion to it over the next two decades. The agreement also obligates Purdue to contribute more money after it becomes a different entity whose proceeds will be used to alleviate the opioid abuse crisis.
The case will be argued in December at the high court.
Purdue Pharma, in a statement, said “We are confident in the legality of our nearly universally supported Plan of Reorganization, and optimistic that the Supreme Court will agree.”
“Even so,” the company added, “we are disappointed that the U.S. Trustee, despite having no concrete interest in the outcome of this process, has been able to single-handedly delay billions of dollars in value that should be put to use for victim compensation, opioid crisis abatement for communities across the country, and overdose rescue medicines.”
A spokesman for some of the Sacklers who are parties to the settlement did not immediately respond to a request for comment
Purdue reached the settlement in May with U.S. states and thousands of local governments.
Under the deal, the Sackler family agreed to relinquish control of the company, which is based in Stamford, Connecticut.
In May, the 2nd U.S. Circuit Court of Appeals in New York approved the plan.
Bankruptcy trustee William Harrington then asked the Supreme Court to put the settlement on hold and to hear his challenge to the deal.
Solicitor General Elizabeth Prelogar, who represented Harrington in seeking the stay, wrote in a filing, “Allowing the court of appeals’ decision to stand would leave in place a road map for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability.”
