Supreme Court blocks $6 billion opioid settlement that would have given the Sackler family immunity

By Devan Cole and Ariane de Vogue, CNN

(CNN) — The Supreme Court on Thursday blocked Purdue Pharma from going forward with bankruptcy proceedings, which the Biden administration has called an “unprecedented” arrangement that would ultimately offer the Sackler family broad protection from opioid-related civil claims.

In agreeing to pause the settlement, the court also said it would take up the case and hear arguments this December.

The case arose after the reorganization in bankruptcy of OxyContin manufacturer Purdue Pharma – stemming from litigation arising from claims over its role in fueling the opioid addiction crisis.

Until recently, Purdue was controlled by the Sackler family, who withdrew billions of dollars from the company before it filed for bankruptcy. The family has now agreed to contribute up to $6 billion to Purdue’s reorganization fund on the condition that the Sacklers receive a release from civil liability.

“We are confident in the legality of our nearly universally supported Plan of Reorganization, and optimistic that the Supreme Court will agree,” Purdue Pharma said in a statement.

“Even so, we are disappointed that the US Trustee, despite having no concrete interest in the outcome of this process, has been able to single-handedly delay billions of dollars in value that should be put to use for victim compensation, opioid crisis abatement for communities across the country, and overdose rescue medicines,” the company said.

The government, representing the US Trustee, has called the plan “exceptional and unprecedented” in court papers, noting that lower courts have divided on when parties can be released from liability for actions that caused societal harm.

“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 argued in court papers.

Prelogar said that the release of the Sacklers is not authorized by the bankruptcy code and constitutes an “abuse of the bankruptcy system.”

The settlement between the Sacklers and eight states, as well as the District of Columbia, was initially agreed upon in March. Among those states is Ohio, whose attorney general said Thursday that he was disappointed that the justices paused the settlement and agreed to hear the case.

“We wanted the settlement to move forward,” Attorney General Dave Yost told CNN’s Jake Tapper on “The Lead.” “It’s so important to get this money flowing. It’s been – since 2019 – that this bankruptcy proceeding has been going on. I guess the best thing I can say about today’s decision to hear the case is at least they set it for December.”

Gregory Garre, a lawyer for Purdue Pharma, told the justices that a stay application was unnecessary. He noted that the government planned to ask the Supreme Court to take up the case on its own by August 28 and that there is “zero risk that the plan could be substantially consummated before this Court acts” on the request for the justices to take the case.

“That is all the Court needs to know to deny the Trustee’s stay application,” Garre said. He said, for example, that the plan must be “updated and re-approved by the bankruptcy court to reflect the most recent settlement terms.”

After a New York appeals court approved the settlement, Purdue released a statement calling it a “victory for Purdue’s creditors, including all 50 states, local governments and victims who overwhelmingly support the Plan of reorganization.”

“Our creditors understand the Plan is the best option to provide assistance to those who need it most, the most fair and expeditious way to resolve the litigation, and the only way to deliver billions of dollars in value specifically to fund opioid crisis abatement efforts,” Steve Miller, the chairman of Purdue Pharma’s board of directors, said.

This story has been updated with additional details Thursday.

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CNN’s Joan Biskupic contribute to this report.