WASHINGTON (CN) — The Supreme Court on Thursday halted Purdue Pharma’s multibillion-dollar bankruptcy plan that would shield its owners, the Sackler family, from future lawsuits.
The government asked the high court for emergency intervention to block the plan that would resolve 3,000 lawsuits filed against the company for its role in the opioid epidemic that killed a half-million Americans over the past two decades. The Second Circuit revived the plan in May and the government wanted to halt any movement by Purdue until it could appeal the ruling.
Not only did the justices grant the government’s application, the high court also agreed to add the dispute to its docket for it upcoming term. Thursday’s order specifies that the case will be heard in December.
The high court did not provide an explanation for granting the stay or certiorari petition.
Lawsuits against Purdue cite the company’s aggressive and misleading marketing of OxyContin to doctors and pain patients that led to prescription-opioid addiction and overdoses. The flood of litigation led Purdue to file for bankruptcy, but its wealthy owners did not. The Sackler family instead came to an agreement that would force them to hand over about $5 billion and get out of the opioid business altogether.
The settlement also turns Purdue into a public-benefit company focused on abating the opioid crisis. However, the government claims the bankruptcy estate will not be able to fulfill its mission because of efforts taken by the Sacklers prior to filing for bankruptcy. The Sackler family withdrew $11 billion before Purdue filed for bankruptcy, protecting their wealth from potential future litigation.
A federal bankruptcy judge conditionally approved the settlement removing the Sackler family from Purdue’s ownership in September 2021, but U.S. District Judge Colleen McMahon rejected the deal. The Second Circuit then sided with Purdue in May, clearing the way for the settlement to move forward.
The government has asked the Supreme Court to move in to block the ruling while it files a full petition for the justices’ review. U.S. Solicitor General Elizabeth Prelogar said the appeals court ruling presents substantial legal problems and a serious threat to the public interest.
“Allowing the court of appeals’ decision to stand would leave in place a roadmap for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability,” Prelogar wrote in the government’s emergency application.
The government argues releasing the Sacklers from liability violates the Bankruptcy Code.
“The Sackler release is not authorized by the Bankruptcy Code, constitutes an abuse of the bankruptcy system, and raises serious constitutional questions by extinguishing without consent the property rights of nondebtors against individuals or entities not themselves debtors in bankruptcy,” Prelogar wrote. “The Bankruptcy Code grants courts unusual powers specifically authorized by the Constitution for addressing true financial distress.”
Purdue characterized the government’s appeal as baseless and built on the assumption that the settlement would moot an appeal before it could be made. The opioid maker claims this is false and the earliest this could happen would be next year, well after the court would have acted on a certiorari petition from the government.
Purdue says the billions of dollars the settlement will provide victims should not be halted by the government’s appeal. A stay would delay that money from being distributed, according to the company.
“This is a baseless stay application that, if granted, would harm victims and needlessly delay the distribution of billions of dollars to abate the opioid crisis,” Gregory Garre, an attorney with Latham & Watkins representing the opioid maker, wrote in a brief before the court.
Attorneys for Purdue and the Department of Justice did not immediately respond to requests for comment on the court’s order.
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