A federal court ruling cleared the way Tuesday for OxyContin maker Purdue Pharma’s settlement of thousands of legal claims over the toll of opioids.
Under the plan approved by the 2nd U.S. Circuit Court of Appeals in New York, members of the wealthy Sackler family would give up ownership of Stamford, Connecticut-based Purdue, which would become a new company known as Knoa, with its profits being sent to a fund to prevent and treat addiction.
The exact details of how the money is to be used will be largely up to state and local governments including in Massachusetts.
Family members would also contribute $5.5 billion to $6 billion in cash over time, or around half of what the court found to be their collective fortune, much of it held offshore. A chunk of that money — at least $750 million — is to go to individual victims of the opioid crisis and their survivors. Payments are expected to range from about $3,500 to $48,000.
Tuesday’s decision also protects members of the Sackler family from lawsuits over the toll of opioids, even though they did not file for bankruptcy.
The court’s ruling reversed a 2021 ruling that found bankruptcy court judges did not have the authority to approve a settlement that would offer bankruptcy protections for those who have not filed for bankruptcy.
Those protections are at the heart of the proposed deal that would end claims filed by thousands of state, local and Native American tribal governments and other entities. Sackler family members have been clear that without the protections, they won’t hold up their part of the deal.
“It’s a great day for victims, some of who desperately need the money and have been waiting for this day for a long time,” said Ed Neiger, a lawyer representing individual victims.
“The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need,” family members who own Purdue said in a statement Tuesday.
Purdue issued its own statement, calling the ruling “a victory for Purdue’s creditors, including the states, local governments, and victims who overwhelmingly support the Plan of Reorganization.” The company said it would focus on delivering “billions of dollars of value for victim compensation, opioid crisis abatement, and overdose rescue medicines.”
Several states had withheld support for the plan, but after a new round of negotiations last year, all of them came on board. That left just one high-profile objector: the Office of the U.S. Bankruptcy Trustee, an arm of the Justice Department.
A lawyer from that office told the 2nd Circuit in April 2022 that it’s a “fundamental inconsistency” that people who do not seek bankruptcy protection and have to give up most of their assets could be exempted from some lawsuits.
The Justice Department did not immediately say whether it would appeal Tuesday’s ruling to the U.S. Supreme Court.