A divided Supreme Court considered Monday whether the family that made its fortune on drugs fueling the nation's opioid epidemic could be shielded from civil litigation by agreeing to a $6 billion bankruptcy settlement for victims and recovery programs.
The nine justices appeared conflicted about whether U.S. Bankruptcy Code allows the reorganization of the Sackler family-owned opioid maker Purdue Pharma, which includes protections for the family from liability in future lawsuits.
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Half of the high court appeared skeptical that a bankruptcy court could release the Sacklers from legal claims. The other side also showed hesitancy to table the $6 billion deal that intends to offer immediate relief to opioid abuse victims.
The U.S. Trustee Program, a watchdog within the Justice Department that keeps tabs on bankruptcy proceedings, is questioning whether courts can absolve the affluent family from future lawsuits because fewer than 5% of creditors disagree with the settlement's terms.
“This release goes beyond what the statute authorizes,” Deputy U.S. Solicitor General Curtis Gannon told the high court. The DOJ watchdog contends the Bankruptcy Code does not permit immunizing third parties, such as the Sacklers, who didn't file for bankruptcy themselves, if not all creditors agree.
Justice Brett Kavanaugh appeared to be the most supportive about seeking to uphold the terms of the settlement and appeared more concerned about upending precedent, saying that "bankruptcy courts for 30 years have been approving plans like this."
"The opioid victims and their families overwhelmingly approve of this plan because they think it will ensure prompt payment," Kavanaugh said, citing the more than 95% of creditors who voted to agree with the terms of the settlement.
Oxycontin manufacturer Purdue Pharma filed for bankruptcy in 2019 due to a sea of lawsuits alleging that aggressive marketing of the addictive painkillers fueled the opioid epidemic. No Sackler family member has been involved in the company since that year.
Justice Neil Gorsuch was another jurist who appeared sympathetic to upholding the settlement, but he also scrutinized how it would block victims' ability to bring future civil suits, including fraud claims, against the Sacklers.
"We don't normally say that a non-consenting party can have its claim ... eliminated in this fashion without consent" or court review, Gorsuch said. "This would defy what we do" on other matters, he said, adding it would "raise serious due process concerns."
While thousands of opioid abuse victims and their settlements were on the line on Monday, the implications for the case reach far and wide, including into ongoing disputes over the Boy Scouts of America settlement and, potentially, into future cryptocurrency lawsuits.
"If the Court declares a blanket prohibition on nonconsensual nondebtor releases, it could overturn settlements in pending cases like the one involving the Boy Scouts of America and prevent global settlement in future cases," Anthony Casey, a professor at the University of Chicago Law School, noted in an American Bar Association overview of the case.
Purdue is supported by several groups representing plaintiffs, including one that includes 1,300 cities and other municipalities and another representing 60,000 people who say the settlement could be their only means of obtaining funds that are desperately needed by victims.
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The Biden administration agrees with the DOJ's attempts to stall the settlement after it stepped into the case in 2021, saying it would be unfair to potential future plaintiffs. Some advocates against opioid abuse rallied at the high court Monday expressing similar sentiments.
Justices halted the settlement in August, teeing up the oral arguments that took place Monday, with an eventual decision by late June.