Supreme Court to Decide Liability Release for Sacklers in Purdue Bankruptcy Case
The Supreme Court is set to determine whether the Sackler family, owners of Purdue Pharma, should be granted a liability release in the company’s bankruptcy case. Amidst the ongoing opioid crisis, the outcome of this case will have significant implications for the jurisdiction of bankruptcy courts and the ability to absolve creditors’ claims against third parties.
Purdue Pharma filed for bankruptcy in 2019, faced with an overwhelming number of lawsuits alleging that the company contributed to the opioid epidemic through the aggressive marketing and oversupply of its highly addictive painkiller, OxyContin. Not only did the lawsuits target the private-held Purdue Pharma, but they also implicated the Sackler family as owners of the company.
To resolve the bankruptcy and settle the extensive litigation, a proposed settlement was reached between Purdue Pharma, its creditors, and the Sacklers. As part of the settlement, the Sacklers requested a release from liability in all opioid-related claims against them. In exchange, they offered a $6 billion settlement, which would be allocated to funding opioid-abatement programs and compensating those affected by Purdue Pharma’s products, marking one of the largest legal settlements related to the opioid crisis.
However, the Justice Department opposes the Sacklers’ request for a complete release of liability. The department argues that bankruptcy courts lack the authority to force creditors to waive their legal rights if they disagree with the terms of the settlement. The Office of the U.S. Trustee, the department’s bankruptcy watchdog, shares this view. Their position is based on the understanding that any release of claims against nondebtors, such as the Sacklers, must have the consent of the claimants.
The Supreme Court has expedited the schedule for this case, with oral arguments scheduled for December. The central issue at stake is whether bankruptcy courts have the power to extinguish creditors’ claims against third parties like the Sacklers. A decision on the proposed settlement, crucial for Purdue Pharma’s exit from bankruptcy, is expected before July 2024.
This case holds significance as it will shape the future of bankruptcy courts’ jurisdiction and their ability to grant releases of liability, especially concerning claims against nondebtors. The outcome will be closely watched, as it could establish an important precedent for potential future bankruptcy cases involving liability release requests.
In conclusion, the Supreme Court’s ruling in the Purdue bankruptcy case will determine whether the Sacklers, as owners of Purdue Pharma, should be granted a release from liability for opioid-related claims against them. With stakeholders divided on the issue of bankruptcy courts’ jurisdiction and the consent of claimants, this decision will have far-reaching consequences for the ongoing opioid crisis and for the future of bankruptcy law in the United States.
