Settlement Off in Bankruptcy Case Involving Purdue

Let's set the stage with the first paragraph from Thursday's majority opinion in the Purdue Pharma bankruptcy case:

The opioid epidemic represents “one of the largest public health crises in this nation’s history.” In re Purdue Pharma L. P., 69 F. 4th 45, 56 (CA2 2023).  Between 1999 and 2019, approximately 247,000 people in the United States died from prescription-opioid overdoses. In re Purdue Pharma L. P., 635 B. R. 26, 44 (SDNY 2021).  The U. S. Department of Health and Human Services estimates that the opioid epidemic has cost the country between $53 and $72 billion annually. Ibid. 

The history in this case is a little complicated, but the Syllabus's description can be boiled down to this:

Owned and controlled by the Sackler family, Purdue began marketing OxyContin, an opioid prescription pain reliever, in the mid-1990s.  After Purdue earned billions of dollars in sales on the drug, . . .thousands of lawsuits followed.  Fearful that the litigation would eventually impact them directly, the Sacklers initiated a “milking program,” withdrawing from Purdue approximately $11 billion—roughly 75% of the firm’s total assets—over the next decade. Those withdrawals left Purdue in a significantly weakened financial state.  And in 2019, Purdue filed for Chapter 11 bankruptcy.  

During that process, the Sacklers proposed to return approximately $4.3 billion to Purdue’s bankruptcy estate.  In exchange, the Sacklers sought a judicial order releasing the family from all opioid-related claims and enjoining victims from bringing such claims against them in the future.  The bankruptcy court approved Purdue’s proposed reorganization plan, including its provisions concerning the Sackler discharge.

The Court held (5-4) "that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants." Meaning? 

1. The Sackler family's assets aren't protected, which seems only fair since they were plundered from Purdue in the first place. That's the good news. 

2. But that's the only good news, and it's not really good news at all, not if you were one of the claimants who stood to receive compensation pursuant to the settlement agreement. The truly awful news is that the settlement agreement, which was going to pay out billions to the claimants, is now kaput. This is the opening paragraph of Justice Kavanaugh's dissenting opinion:

Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families.  The Court’s decision rewrites the text of the U. S. Bankruptcy Code and restricts the long-established authority of bankruptcy courts to fashion fair and equitable relief for mass-tort victims.  As a result, opioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation.