US Supreme Court scrutinizes controversial opioid crisis settlement that would give Sackler family immunity

By Samantha Delouya and Devan Cole, CNN

(CNN) — The Supreme Court spent nearly two hours Monday morning grappling with whether federal bankruptcy code permits a controversial agreement that would give billions of dollars to victims of the opioid epidemic while protecting members of the Sackler family, who owned the company Purdue Pharma, from current and future opioid-related civil lawsuits.

Though much of the oral arguments in the case centered on the dry legal debate around whether a bankruptcy court judge erred when he approved the plan, justices from both sides of the ideological spectrum pushed the Justice Department, which is challenging the plan, on the fact that an overwhelming majority of people who would bring civil suits against the Sacklers have backed the agreement, raising questions about why the justices should second guess it.

“It’s overwhelming, the support for this deal – and among people who have no love for the Sacklers,” liberal Justice Elena Kagan said at one point. “Among people who think that the Sacklers are pretty much the worst people on Earth. They’ve negotiated a deal which they think is the best that they can get.”

Justice Brett Kavanaugh similarly zeroed in on victims of the opioid epidemic, with the conservative jurist at one point chastising the Justice Department attorney for not immediately bringing them up when he presented his opening argument.

“Your opening never mentioned the opioid victims. The opioid victims and their families overwhelmingly approve this plan, because they think it will ensure prompt payment. So in those circumstances, those narrow circumstances, bankruptcy courts for 30 years have been approving plans like this,” he said.

Later, conservative Justice Clarence Thomas questioned why the US Trustee, which serves as a watchdog over bankruptcy cases, even had the authority to challenge the plan.

“Why is it that you’re able to come in and undo something that has such overwhelming agreement?” he asked.

The DOJ attorney, Curtis Gannon, said that federal law gave the Trustee that power. “The trustee cannot initiate a Chapter 11 proceeding, but is expressly authorized to raise issues in a Chapter 11 proceeding and the Trustee does this in hundreds of cases a year,” he said.

Monday’s arguments unfolded as scores of demonstrators protested outside the Supreme Court building, with some of them holding signs that said things like: “Deadliest white collar criminals: The Sackler cartel,” and “My dead son does not release Sacklers.”

The justices appeared especially wracked later Monday morning when an attorney representing some of the victims of the epidemic, stressed in dramatic fashion that if the court ultimately rejects the agreement, an onslaught of civil suits against the Sacklers from states and individual victims would result in very little compensation for any party.

“Whatever is available from the Sacklers – whether that’s $3 billion, $5 billion, $6 billion, $10 billion – there are about $40 trillion in estimated claims. As soon as one plaintiff is successful, that wipes out the recovery for every other victim,” the attorney, Pratik Shah, said in response to a question from Kavanaugh.

“That is why 97% of the victims agreed to this non-consensual release. They have no love lost for the Sacklers. There is no body of victims, no one who would more like to have retribution against the Sacklers,” he added.

While the up-to-$6 billion deal was initially approved by a New York court in May, it was blocked from moving forward after the US Trustee Program, a division of the US Justice Department, requested that the highest court review the settlement.

Purdue Pharma, which was owned and operated by the families of the late brothers Mortimer and Raymond Sackler, has said there will be no $6 billion settlement without releasing family members from liability, but the US Trustee has argued that such an arrangement is unprecedented.

At its core, the issue facing the Supreme Court is one of grave national importance: the fate of a company and its leaders who produced and promoted a highly addictive drug, OxyContin, in the early days of an opioid crisis that has claimed the lives of hundreds of thousands of Americans and shattered many more – and whether victims could ever again hold the Sacklers accountable in court.

What is in Purdue Pharma’s settlement?

The bankruptcy deal in question would have the Sackler family personally pay out between $5.5 billion to $6 billion over 18 years to help fight the ongoing opioid epidemic. Most of the money would go to states, local governments and Native American tribes.

The deal also sets aside $700 million to $750 million to pay individual victims and families of victims. The fund would pay out between $3,500 to $48,000, with payments to some victims spread out over 10 years. Purdue has said its bankruptcy deal is the only major opioid settlement to provide “meaningful recoveries” to victims.

If the deal were to be approved by the Supreme Court, Purdue Pharma would cease to exist and a new company, Knoa Pharma, would be created in its place. Knoa Pharma would develop and distribute opioid addiction treatments and overdose reversal medicines, while continuing to produce Purdue Pharma products, including OxyContin. The company would be governed by a new independent board, and would have a “public-minded mission,” according to Purdue Pharma.

In exchange for the deal, members of the Sackler family would be granted immunity from all other civil (though, not criminal) lawsuits.

In a brief submitted to the Supreme Court, Purdue Pharma argued that it was necessary to release members of the Sackler family from other claims, so as not to deplete the assets set aside for the agreed-upon bankruptcy settlement.

A historic case for the Supreme Court

All 50 US states either supported or no longer opposed Purdue Pharma’s bankruptcy plan by its initial approval in May, the company said.

At the time, the families of Mortimer and Raymond Sackler said they were satisfied with the court’s decision.

“The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need,” the families said.

But the US Trustee petitioned the Supreme Court to review the deal, calling it an “abuse” of the bankruptcy system. Barring individual victims from pursuing their own lawsuits against the Sackler family “raises serious constitutional questions,” the department argued.

“The plan’s release ‘absolutely, unconditionally, irrevocably, fully, finally, forever and permanently releases’ the Sacklers from every conceivable type of opioid-related civil claim – even claims based on fraud and other forms of willful misconduct that could not be discharged if the Sacklers filed for bankruptcy in their individual capacities,” Solicitor General Elizabeth Prelogar wrote in court papers, adding that the families “withdrew approximately $11 billion from Purdue in the eleven years before the company filed for bankruptcy.” A representative for the family of Raymond Sackler told CNN on Monday that more than 40% of the money referenced was paid in mandatory taxes on behalf of the company. (Large earners pay high taxes on their income.)

Experts say it’s unclear how the Supreme Court will rule in this case. They say it is one of the biggest bankruptcy cases the court has taken on in years, not only because of the national interest in the opioid crisis but also because of the question of whether a bankruptcy judge was allowed to shield the individual members of the Sackler family from future lawsuits in a bankruptcy proceeding for the company they once owned.

“My take is that it’s the biggest bankruptcy case to go to the Supreme Court in 30 or 40 years. It’s huge,” Anthony Casey, a law professor at the University of Chicago and director of the school’s Center on Law and Finance, said.

An ongoing epidemic

Purdue Pharma first introduced the opioid drug OxyContin in the 1990s as a painkiller. The company ­– and its founders ­– have been accused of helping to fuel the opioid epidemic in the United States by aggressively marketing the drug as safer and less addictive, encouraging doctors to prescribe the drug over longer periods of time. OxyContin’s commercial success helped the Sackler family earn billions of dollars and the family became known for philanthropy around the world. The Sackler name appeared on university buildings and museums like the Guggenheim in New York and the Louvre in Paris. Many institutions have since removed it.

As the country’s opioid crisis worsened, attention shifted to the role played by Purdue Pharma and the Sackler family. In 2007, an affiliate company, Purdue Frederick, pleaded guilty to misbranding the drug and paid a fine of $600 million, but additional lawsuits began to pile up. Many of the suits allege that the Sackler family knew of OxyContin’s addictive properties but, nevertheless, continued to promote the drug.

The Supreme Court hearing comes at a time of devastating losses due to drug overdoses in the US. From 1999 to 2021, nearly 645,000 people died from an opioid overdose, according to the Centers for Disease Control and Prevention.

“In Purdue Pharma, you have a court system that’s not designed to solve societal problems dealing with the aftermath of a societal crisis,” Lindsey Simon, a bankruptcy law associate professor at Emory University, said. “But bankruptcy isn’t intended to please everyone. Its rules and procedures are made to help the parties find the fairest possible outcome in an inherently bad situation.”

This story has been updated with additional developments and context.

The-CNN-Wire
™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.