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Purdue’s Sackler family wins protections on opioid liability

One judge wrote that he must "reluctantly concur" that the family who made billions off highly addictive pain medication is entitled to legal armor.

MANHATTAN (CN) — The Second Circuit cleared the way on Tuesday for former opioid behemoth Purdue Pharma to shield its owners, the Sackler family, from future lawsuits as part of a multibillion-dollar bankruptcy plan. 

Members of the wealthy family will have to give up ownership of the OxyContin manufacturing company under the newly approved deal. In place of Purdue will be a new company known as Knoa Pharma, with profits being used to fight an opioid crisis that has been linked to the deaths of more than 500,000 Americans over the past two decades. 

The Sacklers are also required to contribute $5.5 billion to $6 billion, the exact amount determined by the sale price of their international drug companies. 

A bankruptcy court had approved the deal back in fall 2021, but three months later a district court judge rejected it over concerns of expansive protections for the wealthy Sackler family.

“This Court has recognized that in specific circumstances — such as those presented by this appeal — bankruptcy courts are permitted to approve of restructuring plans that include such releases,” U.S. District Judge Eunice C. Lee, a Biden appointee, wrote in the 83-page opinion

Widely blamed for contributing to the opioid crisis through aggressive and misleading marketing of OxyContin and other opioids, Purdue — but not its owners, individually — filed for bankruptcy in 2019 after having been named in some 2,600 lawsuits, most from state and local governments.

As Purdue appealed U.S. District Judge Colleen McMahon's ruling last year, Justice Department attorney Michael Shih urged the Second Circuit to reject the family's shield. 

“By not declaring bankruptcy, the Sacklers did not have to give up all of their assets, got broader relief — release for claims for fraud — than they would have gotten under bankruptcy all under the umbrella of bankruptcy,” Shih said. 

At the hearing, the judges appeared hesitant of reviving the settlement plan but they ultimately supported the bankruptcy court’s decision under Supreme Court precedent. Senior Judge Richard C. Wesley cited the case In re Drexel Burnham Lambert Grp., Inc. in a 14-page concurring opinion. 

“It is binding. Consequently, although the parties have sacrificed a forest on the matter — and rightly so, weighty as it is — that ship has, for better or worse, sailed,” wrote Wesley, a George W. Bush appointee.

“I therefore reluctantly concur with the majority’s conclusion that a bankruptcy court has the authority to approve a Chapter 11 reorganization plan that includes nonconsensual nondebtor releases. Again: Drexel says so.” 

Rounding out the Second Circuit panel was the Jimmy Carter-appointed Senior U.S. Circuit Judge Jon O. Newman. 

Purdue called the ruling a victory for state and local governments. 

“Our focus going forward is to deliver billions of dollars of value for victim compensation, opioid crisis abatement, and overdose rescue medicines,” the company said in a statement. “Our creditors understand the plan is the best option to help those who need it most, the most fair and expeditious way to resolve the litigation, and the only way to deliver billions of dollars in value specifically to fund opioid crisis abatement efforts.” 

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Categories / Appeals, Business, Financial, National

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