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Supreme Court suspends $6 billion opioid settlement

By Nithya Bose in US Business & Employment News, posted August 13, 2023

The Supreme Court has temporarily blocked Purdue Pharma's bankruptcy deal, a move deemed "unprecedented" by the Biden administration.

It would have granted the Sackler family extensive protection from opioid-related civil claims.

The court's decision to pause the settlement also entails scheduling hearings and arguments for this December.

The case emanated from Purdue Pharma's bankruptcy reorganization, a response to litigation from allegations of its contribution to the opioid addiction crisis.

Previously, the Sackler family controlled Purdue, having withdrawn billions before the company filed for bankruptcy.

Now, they've agreed to contribute up to $6 billion to Purdue's reorganization fund, contingent on securing a release from civil liability.

Purdue Pharma 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, we are disappointed that the US 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.”

The government, representing the US Trustee, termed the plan "exceptional and unprecedented" in court documents.

The government contends that the plan's release absolves the Sacklers from various opioid-related civil claims.

It includes fraud and willful misconduct claims that aren't dischargeable under individual bankruptcy filings.

Solicitor General Elizabeth Prelogar argued that this release contradicts the bankruptcy code and constitutes an "abuse of the bankruptcy system."

The settlement between the Sacklers and eight states, along with the District of Columbia, was initially reached in March.

Dave Yost, the attorney general of one of these states, Ohio, said he was disappointed at the Supreme Court's decision to halt the settlement, hoping to see it proceed.

Mr. Yost said: “It’s so important to get this money flowing. It’s been – since 2019 – that this bankruptcy proceeding has been going on.

“I guess the best thing I can say about today’s decision to hear the case is at least they set it for December.”

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Gregory Garre, a Purdue Pharma lawyer, conveyed that a stay application was unnecessary, citing the government's intention to request the Supreme Court's involvement by August 28.

Garre assured minimal risk of substantial progress before the Court approves the request.

He stressed updating and re-approving the plan according to recent settlement terms.

After a New York appeals court approved the settlement, Purdue Pharma hailed it as a “victory for Purdue’s creditors, including all 50 states, local governments and victims who overwhelmingly support the Plan of reorganization.”

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