Sacklers may be protected from opioid liability, appellate court rules

Members of the Sackler family, the billionaire owners of Purdue Pharma, will receive full immunity from all present and future civil legal claims over their role in the company\’s prescription opioid business, a federal appellate panel ruled Tuesday.

The ruling gives the family the sweeping protection it has asked for for years, in exchange for paying a family estate up to $6 billion to help deal with the continuing ravages of the opioid crisis.

It removes a major hurdle to that money, plus the company\’s initial outlay of $500 million, to be given to states and communities for addiction treatment and prevention programs, needs that have soared during an epidemic that has grown far beyond the abuse of Purdue\’s prescription pain medication. , OxyContin.

Unless a successful appeal to the Supreme Court is filed, an unlikely prospect, legal experts said the new ruling will close the door on Purdue\’s bankruptcy restructuring, which began nearly four years ago. The bankruptcy is at the heart of a plan intended to settle thousands of opioid cases against the company nationwide, plus about 400 against individual members of the Sackler family.

Under the plan, Purdue would be restructured into a new entity called Knoa Pharma that would produce drugs for reversal and addiction treatment, as well as continue to produce other drugs, including OxyContin. It will be supervised by a public council. Over time, Knoa Pharma is expected to contribute at least many hundreds of millions of dollars more to the plaintiffs.

Some close observers of the Purdue case applauded the ruling, calling it a pragmatic reading that could now unlock billions of dollars for states, local governments, tribes and individuals who sued Purdue over its early and aggressive role in marketing OxyContin as a pain relief treatment. which is not addictive. .

It\’s time to put this failure behind us. Victims have waited too long to recover, said Ryan Hampton, an opioid victim advocate who served as co-chair of Purdue\’s creditors\’ committee.

He added: The system is far from perfect, but the real injustice will be if this victims\’ deal is held up any longer.

But others said the Sacklers had received a significant pass. Bankruptcy was not meant to be an alternative judicial system for powerful corporations and their super-rich owners. But that is the effect and perception when courts read the law to provide extraordinary protections far beyond what Congress has authorized, said Melissa B. Jacoby, a law professor at the University of North Carolina at Chapel Hill.

A bankruptcy filing typically places a temporary halt on a business\’s creditors, including lawsuits. The main problem in this case was that even though Purdue had filed for bankruptcy, the Sacklers, as individuals, had not. As a result, the plaintiffs who fought the plan argued that the Sacklers should not receive the benefit of their company\’s liability protection.

The Sacklers stepped down from the Purdues board in 2018 and have had no direct involvement in the company since.

Judge Eunice C. Lee of the US Court of Appeals for the Second Circuit, who wrote Tuesday\’s opinion for a three-judge panel, found that the bankruptcy code allows company owners who have failed to file for personal failure to receive liability protection under certain circumstances.

Failure is inherently a creature of competing interests, compromises, and less-than-perfect outcomes, he wrote. Because of these distinctive characteristics, total satisfaction of all that is owed, whether in money or in justice, rarely occurs.

Citing a bankruptcy ruling in a 2019 case that didn\’t involve Purdue, Judge Lee also emphasized that the releases granted to the Sacklers are not a badge of merit someone gets in exchange for making a positive contribution to a restructuring, nor are they a participation trophy or a gold star for doing a good job.

Sacklers\’ liability protection does not extend to criminal prosecutions, should they ever be brought.

Purdue filed for bankruptcy in September 2019, as mounting opioid cases against the company turned into a torrent.

Tuesday\’s ruling came more than a year after oral arguments before the Second Circuit panel. As the months wore on, thousands of litigants expressed growing frustration that the case remained unsolved, with promised payments suspended even as the opioid epidemic itself, now marked by fentanyl use, continued to grow. .

The ruling was a victory for Purdue, which appealed a decision by a federal district judge that reversed a deal that was originally approved by a bankruptcy court judge in 2021. their objections, after the Sacklers increased their payment offer of approximately $1.73 billion.

The only objectors who remain include several Canadian municipalities, a few individuals, and the United States Trustee, a Justice Department program that is the watchdog of the bankruptcy system. Ms. Jacoby, a North Carolina law professor, said that since the last opposing states had accepted Purdue\’s plan, the US trustees\’ argument to pursue the case would not be solid.

The US trustee declined to comment on Tuesday\’s ruling.

In a statement after issuing the ruling, Purdue called the decision a victory for Purdue\’s creditors, including states, local governments and victims who overwhelmingly support the reorganization plan.

Our goal for the future is to provide billions of dollars of value for victim compensation, opioid crisis abatement and overdose relief medication, the statement continued. Our creditors understand that the plan is the best option to help those who need it most, the fairest and fastest way to resolve litigation, and the only way to provide billions of dollars of value specifically to fund reduction efforts. of the opioid crisis.

The families of two of Purdue\’s founding brothers, Dr. Mortimer Sackler and Dr. Raymond Sackler, both deceased, said in a joint statement: The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources to the people and to communities in need. We are pleased with the Court\’s decision to allow the agreement to advance and look forward to it entering into force as soon as possible.

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