A federal judge on Thursday threw out OxyContin maker Purdue Pharma’s bankruptcy settlement of thousands of lawsuits over the opioid epidemic because of a provision that would protect Sackler family members to deal with their own disputes.
U.S. District Judge Colleen McMahon in New York found that federal bankruptcy law does not give the bankruptcy judge who accepted the plan the power to grant this type of release to people who do not file for themselves. bankruptcy.
In a statement late Thursday, the company said it would appeal the decision and at the same time try to forge another plan that its creditors would agree to.
Purdue said the decision won’t hurt company operations, but it will make it more difficult for company and Sackler money to be used to fight the opioid crisis as the legal fight escalates. continues.
“This will delay, and perhaps end, the ability of creditors, communities and individuals to receive billions in value to alleviate the opioid crisis,” said Steve Miller, chairman of Purdue’s board of directors. “These funds are needed more than ever as overdose rates reach record highs, and we are confident that we can successfully appeal this decision and provide desperately needed funds to communities and individuals who are suffering amid this crisis.”
Representatives of both branches of the family that own the company did not immediately respond to a request for comment.
Connecticut Attorney General William Tong, who was among a handful of state officials seeking to overturn the deal, called the decision “a seismic victory for justice and accountability.” Tong said the decision “will reopen Purdue’s deeply flawed bankruptcy and force the Sackler family to come to terms with the pain and devastation it has caused.”
Purdue filed for bankruptcy protection in 2019 as it faced thousands of lawsuits claiming the company tricked doctors into prescribing OxyContin, helping spark an opioid crisis that has been linked to more than 500,000 deaths in the United States over the past two decades.
Through the bankruptcy court, he reached an agreement with his creditors. Members of the Sackler family would relinquish ownership of the business, which would morph into another type of entity that would continue to sell opioids, but whose profits would be used to fight the crisis. It would also develop new drugs for drug addiction and overdose and provide them at little or no cost.
Members of the Sackler family would also contribute $4.5 billion in cash and charitable assets as part of an overall deal that could be worth $10 billion, including the value of new drugs, if put on the market. the market.
Government entities and corporations have agreed to use all the money they receive to fight the opioid epidemic. The agreement also calls for millions of company documents, including communications with attorneys, to be made public.
In return, members of the wealthy family would be protected from prosecution for their role in the opioid crisis – both the 860 already filed and any others in the future.
Most state and local governments, Native American tribes, individual opioid victims and others who voted said the bankruptcy court-drafted plan should pass.
New York Attorney General Letitia James, like several others, sued the Sackler family members and opposed the settlement before finally agreeing to it this year. She said in a statement that if the settlement does not hold, she is prepared to resume the civil trial: “Purdue Pharma and the Sackler family remain named as defendants in our ongoing litigation and we will hold them accountable for their unlawful conduct, ‘one way or another.”
The United States Office of the Bankruptcy Trustee, eight state attorneys general and other entities opposed the deal. They argue that it fails to properly hold members of the Sackler family accountable and usurps the ability of states to try to do so.
A bankruptcy court judge approved the plan over objections in September. But opponents appealed to McMahon’s court.
The main issue on appeal was the legality of the measures that would extend legal protections to family members.
These “third-party releases” aren’t used in most bankruptcy cases, but they’re common in cases like Purdue’s, in which the companies involved are burdened with lawsuits and are relatively worthless – but their wealthy owners could contribute.
The Purdue deal would not protect family members from any criminal charges. But so far none have been filed, and there are no signs that there will be any, although some activists are asking for charges.
In one audience, McMahon focused on how members of the Sackler family moved $10.4 billion from the private Stamford, Connecticut-based company in the decade before bankruptcy. McMahon wanted to know if the money had been moved in part to secure a role for the Sacklers in the bankruptcy negotiations.
But in his decision Thursday, McMahon did not elaborate on those transfers or the idea of holding members of the Sackler family responsible for the opioid crisis. Instead, she focused on whether bankruptcy law even permits the type of agreement reached by the company and its creditors in the event of an objection.
“The big unresolved question in this case is whether the bankruptcy court – or any other court – is legally authorized to grant such releases. This issue has divided the federal circuits for decades,” she said. writing.
She also noted that other courts would weigh in on the case. The next step is probably in the United States Court of Appeals for the 2nd Circuit.
“This opinion will not be the last word on the subject, nor should it be,” she wrote. “This question has hovered over bankruptcy law for thirty-five years.”
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