MANHATTAN (CN) — Federal appeals court judges appeared hesitant Friday to revive a settlement plan with drugmaker Purdue Pharma that would shield individual members of the wealthy Sackler family from all current and future civil lawsuits over their roles in promoting the opioid epidemic.
The owners of OxyContin maker Purdue Pharma filed for bankruptcy in September 2019 while facing some 2,600 lawsuits — most from state and local governments — but a sweeping nationwide settlement was scuttled last December when a federal judge in New York rejected the deal for including generous individual liability releases for the Sacklers.
During a two-hour hearing on Friday, lawyers for the embattled drugmaker insisted that U.S. Bankruptcy Judge Robert Drain, who approved the earlier settlement last year, had tailored the releases “verbatim lifting words from Second Circuit case law” to ensure that the deal was up to snuff.
“The releases are not broad,” insisted Purdue attorney Marshall Huebner. “The reason they’re two-pages long is because they’re narrower,” said Huebner, of the firm Davis Polk & Wardwell.
U.S. Circuit Judge Lee responded that the proposed Purdue settlement includes “a broader release than prior cases have really addressed.”
The Biden-appointed judge also pressed Purdue’s attorney on the heightened risk of abuse with this type of release. “In a situation like this, where the parties being released are the ones determining the contribution and kind of driving the plan,” she said, “that suggests concerns about abuse, or even in future cases, the idea that the parties getting the benefit of this release are determining how much they give, how essential it’s going to be to the plan.”
Senior U.S. Circuit Judge Richard Wesley, a George W. Bush appointee, called some of that case law cited by Purdue’s appeal “kind of a flimsy ship” with which to steer their case.
Huebner insisted that the alternative to the settlement deal that includes the releases for the Sacklers would instead be a “firestorm” of the company’s liquidation and endless litigation that would not provide the promised addiction-abatement resources that are on the table with the current deal.
“Four years of my life have been devoted to doing the best I can for the victims of Purdue to get them the most money for abatement and victims to save lives,” he said during his brief rebuttal on Friday. “The notion that we should gamble, that an alternative that two estate fiduciaries and 11 groups spent years exploring every pathway — because they think it sort of might violate their vision of a gestalt of the code, because they have some generic cases that say normally bankruptcy is about the debtor — is an insult to 34 years of Second Circuit precedent and the victims of this case.”
Justice Department attorney Michael Shih spoke about the challenge from the U.S. Trustee to the bankruptcy court’s authority to bless the releases in the settlement.
“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. “And that’s the sort of assertion by the bankruptcy court that evades specific restrictions on what a discharge could do that the Supreme Court found so problematic in [Czyzewski v. Jevic Holding Corp.]”
In all, the plan could be worth more than $10 billion over time. It calls for members of the Sackler family to give up control of the Stamford, Connecticut-based company so it can be turned into a new entity with profits used to fight opioid abuse. The deal would not shield members of the family from criminal charges, although there’s no indication any are forthcoming.