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June 28, 2024
Health Law Weekly

U.S. Supreme Court Nixes Purdue Pharma’s $6 Billion Opioid Settlement in Bankruptcy Plan

  • June 28, 2024

The U.S. Supreme Court threw out June 27 Purdue Pharma L.P.’s $6 billion opioid settlement agreement as part of a bankruptcy plan that would have shielded the company’s owners from future opioid-related lawsuits.

While the Second Circuit approved the bankruptcy plan, the Department of Justice (DOJ) asked the Court to stay the ruling and review the case—specifically, whether Chapter 11 of the Bankruptcy Code allows courts to approve reorganization plans that include third-party releases. DOJ argued that allowing the Second Circuit decision to stand “would leave in place a roadmap for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability.”

In a 5-4 decision, Justice Gorsuch, writing for the majority, said the bankruptcy code did not authorize courts to extinguish “vast numbers of existing and potential claims” without “securing the consent of those affected or placing anything approaching their total assets on the table” through bankruptcy proceedings.

“Someday, Congress may choose to add to the bankruptcy code special rules for opioid-related bankruptcies as it has for asbestos-related cases. Or it may choose not to do so. Either way, if a policy decision like that is to be made, it is for Congress to make,” Gorsuch wrote.

Gorsuch stressed that the opinion did not apply to consensual third-party releases offered in connection with a bankruptcy reorganization plan, which he said posed different questions and could involve different legal grounds.

Justice Kavanaugh, joined by Chief Justice Roberts and Justices Sotomayor and Kagan, dissented. “Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families,” Kavanaugh wrote. “The Court’s decision rewrites the text of the U. S. Bankruptcy Code and restricts the long-established authority of bankruptcy courts to fashion fair and equitable relief for mass-tort victims. As a result, opioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation.”

The Sackler family, which owns Purdue Pharma, the manufacturer of OxyContin, reached the deal to resolve claims over the company’s role in fueling the opioid epidemic.

Harrington v. Purdue Pharma, L.P., No. 23–124 (U.S. June 27, 2024).