WASHINGTON (Legal Newsline) - A split U.S. Supreme Court has invalidated the bankruptcy plan of OxyContin-maker Purdue Pharma, which hoped to resolve crushing opioid litigation with a multibillion-dollar plan funded partly by former owners the Sackler family.
Finding it lacked the consent of affected claimants, Justice Neil Gorsuch wrote for the 5-4 majority that the Sacklers' plan led to vast numbers of existing and potential claims being wiped away without placing "anything approaching their total assets on the table for their creditors."
Purdue Pharma filed for bankruptcy in 2019 as lawsuits by state and local governments, individuals, Native American tribes, hospitals, unions and others for pushing sales of OxyContin and majorly contributing the nation's addiction crisis.
The plan originally would have had the Sackler family paying $4.5 billion over a decade and relinquishing ownership of the company, which would be reorganized into a new company. The plan also created a fund that would have paid some drug addiction victims anywhere between $3,500 and $48,000.
A discharge in the plan sought to end the growing number of lawsuits against the Sacklers by ending current lawsuits and preventing future ones.
"And it proposed to end all these lawsuits without the consent of the opioid victims who brought them," Gorsuch wrote, in a statement disputed by the four dissenting justices.
In bankruptcy, creditors are invited to vote on reorganization plans. But in the Sacklers' case, less than 20% participated, while thousands of opioid victims voted against it.
Objections came from eight states, D.C., and cities in Canada, among others. The plan was confirmed by the bankruptcy judge, rejected by a district judge, then confirmed again by the Second Circuit. That led to the appeal to the U.S. Supreme Court.
It is noted that SCOTUS's ruling could unravel Purdue Pharma's reorganization plan entirely and send the company and the Sacklers to open court to battle claims.
"As the people’s elected representatives, Members of Congress enjoy the power, consistent with the Constitution, to make policy judgments about the proper scope of a bankruptcy discharge," Gorsuch wrote.
"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. Despite the misimpression left by today’s dissent, our only proper task is to interpret and apply the law as we find it; and nothing in present law authorizes the Sackler discharge."
Clarence Thomas, Amy Coney Barrett, Samuel Alito and Ketanji Brown Jackson voted with Gorsuch.
Justice Brett Kavanaugh wrote a dissenting opinion, joined by John Roberts, Sonia Sotomayor and Elena Kagan. He said the decision was "wrong on the law and devastating for more than 100,000 opioid victims.
Citing additional payments from the Sacklers to get the plan approved, Kavanaugh said the plan guaranteed compensation to more than 100,000 opioid victims while providing funding for treatment programs.
"The plan was a shining example of the bankruptcy system at work," he wrote. "Not surprisingly, therefore, virtually of the opioid victims and creditors in this case fervently support approval of Purdue's bankruptcy plan. And all 50 state attorneys general have signed on to the plan - a rare consensus."
Bankruptcy law allows the release of victims and creditors' claims without their consent against a bankrupt company, he said.
"Yet the Court today says that a plan can never release victims' and creditors' claims against non-debtor officers and directors of the company - here, against the Sacklers," Kavanaugh wrote.