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The Economist
The Economist
5 Dec 2023


NextImg:The Supreme Court is torn over Purdue Pharma’s opioid settlement
United States | Weal and deal

The Supreme Court is torn over Purdue Pharma’s opioid settlement

The bankruptcy case may turn on the justices’ sense of justice

| NEW YORK

SOME CASES that reach the Supreme Court thrust the nine justices into an uncomfortable role. Harrington v Purdue Pharma seems to be one of those disputes. It centres on the $6bn bankruptcy settlement agreed upon by Purdue, the company that precipitated America’s opioid crisis. It may turn less on interpretations of law and precedent than on considered judgments of what is fair.

The case’s oral arguments were presented on December 4th. One thing seems clear: the justices want to do right by the victims of the opioid epidemic. They have little sympathy for the Sacklers, the family who owned Purdue when it launched OxyContin in 1996 and profited immensely from the painkiller—despite evidence that it was highly addictive and destroying lives. When lawsuits started piling up, the Sacklers drained about $11bn in profits out of the company, with around half going to the tax collector. In 2019 a denuded Purdue worth an estimated $1.8bn declared bankruptcy.

The Supreme Court’s task is to decide whether the bankruptcy agreement—which was voided by a district court before being revived by the Second Circuit Court of Appeals—should stand. According to the plan, the Sacklers would put $6bn (97% of their profits, after taxes) into an estate to be divided among states, victims and others in return for immunity from further civil lawsuits, including claims of fraud.

Nearly 96% of the 138,000 plaintiffs who voted on the settlement opted for the deal. However, thousands rejected it and tens of thousands did not vote at all. According to Curtis Gannon, the deputy solicitor-general arguing on behalf of the US Trustee Programme (a division of the Department of Justice), which objected to the arrangement, releasing the Sacklers from all future civil lawsuits “extinguishes personal property rights” of the holdouts and “raises significant constitutional questions”.

Whether the dissenters should be free to sue the Sacklers on their own was the central question of the hearing. Chief Justice John Roberts asked Mr Gannon if it is consequential enough to trigger the court’s new “major-questions doctrine”, which requires Congress to clearly authorise an agency’s policies with big political or economic implications. Justice Elena Kagan asked if Mr Gannon would be making the same argument with a still smaller pool of objectors—0.1%, say, or even “one-nutcase holdout”. Support for the deal is “overwhelming”, she pointed out, even “among people who think that the Sacklers are pretty much the worst people on Earth”. The vast majority have “negotiated a deal which they think is the best that they can get”.

Mr Gannon, in reply, noted that the Sacklers characterised their first offer of $4.2bn as the “best possible deal” before somehow coming up with nearly $2bn more. He suggested a still larger pot might be available if the Supreme Court scuttled this deal and sent the parties back to the drawing board.

That argument does not convince the claimants who want the deal to move forward. Their lawyer argued that without the release for the Sacklers, Purdue is likely to be liquidated, potentially leaving victims bereft of any compensation at all. With no bankruptcy settlement, he said, it would only take one plaintiff to “jump the line”, and hit “the jackpot” of a huge judgment from the Sacklers, to “wipe it out for everyone else”.

Purdue, for its part, is banking on a catch-all line in the bankruptcy code that it reckons authorises the deal: a settlement may include any “appropriate provision not inconsistent with the applicable provisions of this title”. As statutes go, these 11 words are a rather thin reed for the justices to grasp as they decide whether to rip up the deal or let it go into effect. Determining what counts as “appropriate” is not a matter of precision. It might come down to a question Justice Amy Coney Barrett identified as the justices’ main worry: “is this the best that we can do for the victims?”

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