The Supreme Court ruled Thursday that members of the billionaire Sackler family cannot be shielded from lawsuits over their role in the opioid crisis as part of a bankruptcy settlement that will see billions of dollars paid out to victims and their families.
In a 5-4 opinion written by Justice Neil M. Gorsuch, the majority held that federal bankruptcy law does not permit third-party liability exemptions in bankruptcy agreements. Justices Clarence Thomas, Samuel A. Alito Jr., Amy Coney Barrett and Ketanji Brown Jackson joined Gorsuch in deciding that bankruptcy law does not provide for third-party liability exemptions in bankruptcy agreements.
“This sentence is unjust and devastating for the more than 100,000 opioid victims and their families,” Justice Brett M. Kavanaugh said in a strong dissenting opinion. Chief Justice John G. Roberts Jr., Justices Sonia Sotomayor and Elena Kagan joined in the dissenting opinion.
The decision jeopardizes the carefully negotiated settlement between Purdue and the Sackler family, in which members of the Sackler family committed to donating up to $6 billion to state and local governments, tribes and individuals to address the devastating public health crisis.
The deal means that the Sackler family, who controlled Purdue Pharma, maker of the prescription painkiller OxyContin, will no longer be subject to the highly criticized terms of the acquisition that gave them immunity from opioid-related lawsuits even though the company had not declared bankruptcy.
The U.S. Trustee Program, a Justice Department watchdog, had asked the Supreme Court to intervene, arguing that liability protection provisions that bind potential claimants without their consent and give broad legal protections to the Sackler family are an abuse of a bankruptcy system designed to address “genuine financial distress.”
The ruling has broad implications for other bankruptcy settlements involving mass injury lawsuits, including those between the Boy Scouts of America and sexual abuse victims. The liability waivers on which the Purdue deal is based have become increasingly popular in such settlements.
The agreement, which would have required the Sacklers to pay up to $6 billion over 18 years, with nearly $4.5 billion in the first nine years, highlights the tricky tightrope walk of ensuring urgently needed funds get to victims, states, tribes and others despite widespread concerns that the Sacklers could be shielded from further accountability over the opioid crisis.
Purdue Pharma and the Sackler family have long been seen as fueling the crisis through the popularity of the company's prescription painkiller OxyContin.
By 2007, as opioid overdose deaths were rising, Purdue and its three top executives pleaded guilty to federal criminal charges for misleading regulators, doctors and patients about the drugs' abuse potential and were fined more than $600 million.
The first opioid lawsuits were filed against Purdue Pharma around 2014, sparking a flurry of lawsuits and increasing scrutiny of the role of members of the Sackler family, whose vast fortunes have established them as major donors to museums, medical schools and academic institutions.
In 2019, Purdue filed for bankruptcy reorganization and the litigation was ultimately paused. At the time, the Sacklers were facing roughly 400 related lawsuits.
The move was controversial from the start.
Under the deal approved by a bankruptcy judge in 2021, Purdue Pharma would be broken up, the company would donate billions of dollars to the opioid crisis, end thousands of related lawsuits and guarantee the Sackler family protection from civil liability.
A federal district judge later overturned the deal, saying the plan to give such protections to members of the Sackler family was flawed.
But after the Sacklers increased their offer by about $1.73 billion, many of the plan's opponents agreed.
A federal appeals panel approved an updated version of the agreement in May 2023. Judge Eunice C. Lee of the U.S. Court of Appeals for the Second Circuit, who wrote the decision, acknowledged the principles at issue.
“Bankruptcy is, by its very nature, the product of conflicting interests, compromise, and less-than-perfect results,” Judge Lee wrote. “Because of these defining characteristics, debts, whether financial or just, are rarely paid in full.”
In July, the U.S. Trustee Program petitioned the Supreme Court to review the deal, calling the plan an “abuse of the bankruptcy system.”
Purdue Pharma argued that a ruling against the company would be costly: If the court rejected the deal, it would “harm victims and needlessly delay the distribution of billions of dollars to alleviate the opioid crisis,” it said.
In August, judges agreed to pause the settlement and let the case go to trial.
The justices' questioning in December reflected the tension between the impact on victims, state, tribal and local governments if the settlement agreement were to collapse and concerns about the Sacklers being spared from future litigation.
Justice Brett M. Kavanaugh focused on this complex situation, questioning why the government was seeking to end a tactic approved by “30 years of bankruptcy court practice.”
From the perspective of victims and their families, “the federal government, which has absolutely no vested interest in this,” is challenging the agreement, putting much-needed payments to states to fight the crisis and funds for victims and their families at risk, he said. Instead of focusing on practical solutions to secure funds to fight the opioid epidemic, he added, the administration seems intent on promoting “a somewhat theoretical idea that we can recover funds from the Sacklers in the future.”
Justice Elena Kagan joined in, pressing Deputy Attorney General Curtis E. Gannon about why the Department of Justice was trying to overturn the agreement given the number of plaintiffs who had signed on.
“Support for this deal is overwhelming. It is supported even by people who have no good feelings toward the Sacklers, who think they are the worst people on the planet,” Justice Kagan said.
Jan Hoffmann Contributed report.