The Supreme Court is scheduled to hear arguments Monday for Purdue Pharma on a bankruptcy deal that would pay billions of dollars to victims of the opioid epidemic in exchange for shielding members of the wealthy Sackler family from additional opioid-related lawsuits.
The settlement involved Purdue, the maker of the prescription painkiller OxyContin One of the country’s biggest public health crises. The court took the case into consideration Temporarily suspend the contract Until it issues a rule. Experts say any decision could have important consequences for other areas that use the bankruptcy system to settle mass injury claims.
Here’s what you need to know:
What risk to take?
At issue is whether a bankruptcy plan can be enacted to grant legal immunity to a third party — in this case, members of the Sackler family, which once controlled Purdue Pharma — even though they themselves have not declared bankruptcy.
If the court approves the deal, it could confirm a litigation strategy that has become increasingly popular in resolving cases where many people claim similar injuries from the same entity, whether it’s a drug or a consumer product. By going to bankruptcy court as a tool to resolve these claims, businesses aim to free themselves from civil liability and prevent future lawsuits.
But if the Supreme Court blocks the use of such a procedure, known as a nonconsensual third-party release, the Sackler family will no longer be protected from civil lawsuits. The entire Purdue Pharma bankruptcy settlement agreement, years in the making, will likely be in jeopardy.
Such a decision may ignore several similar agreements Revlon is bankrupt.
Why has the Supreme Court jumped?
It’s rare for the Supreme Court to agree to hear a bankruptcy court dispute, experts say, especially one that addresses a settlement agreement known as a mass tort case.
Very few such cases go to court because all parties are under pressure to settle. Litigation in the highest court of the land is expensive and time-consuming. In the Purdue case, US Trustee ProgramA Watchdog Office of the Department of Justice, Appealed to the Supreme Court To review the contract.
Several other aspects of the case make it more likely that the Supreme Court will grant review, legal experts said. For one, the opioid crisis is a matter of national importance. And such agreements allow third parties to shield themselves from most liabilities without declaring bankruptcy themselves, which are increasingly popular and have divided lower courts.
How will the Supreme Court see this case?
Legal experts say the matter is not clear. On the one hand, the court’s conservative majority tends to look favorably on business interests. However, Chief Justice John G. Several conservative members, including Roberts Jr. and Justice Clarence Thomas, were wary of aggressive litigation tactics. Overall, this Court is skeptical of lower courts acting without express authorization from Congress.
It’s also unclear how the Liberal Party will vote, experts say. Some experts say it could be procedural cases that end in split votes, but not necessarily along political or ideological lines.
Why does the US government object to the Purdue plan?
A battle between money and policy is at the heart of the Purdue case.
Thousands of Purdue plaintiffs, including states, local governments, tribes and individuals, have waited years for settlement funds, the value of which increases in litigation costs and declines as time passes. As the Sacklers advanced their offers, even the last handful of states that held onto the treaty fell silent. Bankruptcy courts are ultimately a marketplace of blunt pragmatism.
By the time the US Court of Appeals for the Second Circuit heard, $6 billion from the Sacklers was on the table, and most of the parties had signed on. One notable objector: the US trustee program.
Its objection was that if the deal was approved, the Sacklers would receive bankruptcy benefits, such as the dismissal of all Purdue opioid-related lawsuits without his costs. Those who still want to pursue individual family members in civil court will be barred from doing so, without an opportunity to weigh in. The US trustees argued that their constitutional due process rights would be summarily waived.
At this point in the Purdue case, the Justice Department, along with a handful of other plaintiffs, is largely alone in pressing these principles. Tribes, states, local governments and individuals suffering from the opioid crisis must address the emergency costs.
What does the plan offer states, local governments and tribes?
Under the agreement, Purdue will pay $1.2 billion in settlements as it emerges from bankruptcy, with several million more expected in the coming years. The Sacklers will pay up to $6 billion over 18 years, with about $4.5 billion due over the first nine years.
According to an agreement with the tribal plaintiffs, all 574 federally recognized Native American tribes are eligible for payments from a trust worth about $161 million.
Each state has developed a formula with local governments to distribute Purdue money. But all must follow guidelines for its use: It will be widely applied in initiatives intended to ease the opioid crisis, including addiction treatment and prevention.
What about personal hunting?
Under current plans, a trust of $700 million to $750 million would be set up for the families of those who have died of an overdose or addiction to OxyContin.
About 138,000 plaintiffs filed claims; Payments are expected to range from about $3,500 to $48,000. Parents of about 6,550 children who experienced withdrawal symptoms from drug exposure in the womb could each receive about $7,000. Although the payouts are small, the Purdue plan is one of only a handful of opioid settlements nationwide that allocates money to individuals.
If the plan is approved, what will happen to Purdue?
Purdue Pharma, which introduced OxyContin in the late 1990s and aggressively marketed the drug, will cease to exist. Its assets will be transferred to a new company called Nova Pharma. That company, which will be owned by creditors, will make addiction treatment and opioid reversal drugs for no profit. Knoa will continue to make opioid like OxyContin as well as nonopioid drugs with profits going towards the settlement fund.
Purdue, which no longer markets manufactured opioids, is being overseen by an independent monitor. Sackler has been off its board since 2018.
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