The Supreme Court ruled Thursday that members of the wealthy Sackler family cannot be protected from lawsuits over their role in the opioid crisis as part of a bankruptcy settlement that would net billions of dollars to victims and their families.
In a 5-4 decision, written by Justice Neil M. Gorsuch, the majority of justices found that the federal bankruptcy code does not authorize a third-party liability shield in bankruptcy settlements. Justice Gorsuch was joined by Justices Clarence Thomas, Samuel A. Alito Jr., Amy Coney Barrett, and Ketanji Brown Jackson.
In a strongly worded dissent, Justice Brett M. Kavanaugh wrote that “the decision is wrong as a matter of law and is devastating for more than 100,000 opioid victims and their families.” He was joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor and Elena Kagan.
The decision jeopardizes a carefully negotiated agreement that Purdue and the Sacklers had reached in which family members promised to give up to $6 billion to states, local governments, tribes and individuals to address a devastating public health crisis.
All of this ensures that members of the Sackler family, which controlled Purdue Pharma, the maker of the prescription painkiller OxyContin, will no longer be subject to a condition of the settlement that had generated significant criticism: immunity from liability in opioid-related lawsuits, even if they had not declared bankruptcy.
The United States Trustee Program, a Justice Department watchdog, had asked the Supreme Court to intervene. The liability shield, which binds potential claimants without their consent and offers broad legal protection for the Sacklers, was a misuse of a bankruptcy system aimed at addressing “genuine financial hardship,” the office said.
The decision has broader implications for other bankruptcy settlements involving mass injury claims, including one between the Boy Scouts of America and sexual abuse victims. The liability shield on which the Purdue settlement is based has become increasingly popular in such settlements.
The settlement, which would have required the Sacklers to pay up to $6 billion over 18 years, with nearly $4.5 billion owed in the first nine years, underscores the difficult balance at play: ensuring that urgently needed money goes to victims, states and tribes, among others, despite broader concerns about whether it will relieve the Sacklers of further liability in the opioid crisis.
Purdue Pharma and the Sacklers have long been seen as helping trigger the crisis because of the popularity of the company's prescription painkiller, OxyContin.
In 2007, as the number of opioid overdose deaths rose, Purdue and three of its top executives pleaded guilty to federal criminal charges, and the company was fined more than $600 million for misleading regulators, doctors, and patients about the potential abuse of the drug.
The first opioid lawsuits were filed against Purdue Pharma around 2014, setting off a wave of litigation and intensifying scrutiny over the role of members of the Sackler family, whose vast fortune has made them major donors to museums, medical schools and academic institutions.
In 2019, Purdue filed for bankruptcy restructuring, which ultimately put the lawsuits on hold. At the time, the Sacklers faced approximately 400 related claims.
The move was controversial from the start.
Under a deal approved by a bankruptcy judge in 2021, Purdue Pharma would be dissolved; the company would contribute billions of dollars to the opioid crisis, ending thousands of related claims; and the Sacklers would be afforded protection from civil liability.
A federal district judge later struck down the settlement, saying the plan had been a mistake in providing such protections to Sackler family members.
But after the Sacklers increased their offer by about $1.73 billion, many of the parties that had opposed the plan signed on.
In May 2023, a federal appeals panel approved the latest version of the agreement. Judge Eunice C. Lee of the U.S. Court of Appeals for the Second Circuit, who wrote the decision, recognized the principles at play.
“Failure is inherently a creature of competing interests, trade-offs, and less-than-perfect outcomes,” Judge Lee wrote. “Because of these distinctive characteristics, total satisfaction of all that is owed – whether in money or justice – rarely occurs.”
In July, the U.S. Trustee Program petitioned the Supreme Court to review the agreement. The plan, his application states, constitutes “an abuse of the bankruptcy system.”
Purdue Pharma argued that a contrary ruling would cause significant harm. If the Court rejects the settlement, he said, “it would harm victims and needlessly delay the distribution of billions of dollars to reduce the opioid crisis.”
In August, the justices suspended the agreement and agreed to hear the case.
The judges' questioning in December reflected tension between the consequences for victims, states, tribes and local governments if the settlement unraveled and their concerns about allowing the Sacklers to be freed from future lawsuits.
Justice Brett M. Kavanaugh weighed in on the complication, asking the government why it would push to end a tactic approved in “30 years of failed judicial practice.”
From the perspective of victims and their families, he said, “the federal government, without any interest in this,” contested the agreement, jeopardizing long-awaited payments to states to fight the crisis, as well as money to victims. and their families. Instead of focusing on a practical solution to securing funding to fight the opioid epidemic, he added, the government seemed intent on promoting “this somewhat theoretical idea that they will be able to recover money in the future from the Sacklers themselves.”
Justice Elena Kagan joined him, pressing a deputy attorney general, Curtis E. Gannon, on why the Justice Department sought to overturn the agreement despite the number of plaintiffs who had signed on.
“There is overwhelming support for this settlement, both among people who have no love for the Sacklers, among people who think the Sacklers are pretty much the worst people on Earth,” Judge Kagan said.
Jan Hoffmann contributed to the reporting.