Key to the Purdue Pharma Case: Who Can Get Immunity in Settlements?
For years, Purdue Pharma, the maker of the prescription painkiller OxyContin, was embroiled in lawsuits seeking to hold the company accountable for its role in the widening opioid crisis.
A landmark settlement reached last year appeared to spell the end of thousands of those cases, with billions of dollars spent fighting the epidemic in exchange for freeing members of the billionaire Sackler family, which once controlled the company , of civil lawsuits.
But on Monday, the Supreme Court will hear arguments on whether the agreement violates federal law, in a case that could impact not only Purdue but also organizations that turn to bankruptcy court, as the company did, to resolve bankruptcy claims. massive injury.
“There are huge implications for the whole business failure business,” said Anthony J. Casey, a law professor at the University of Chicago. “I think this is probably the most important bankruptcy case before the court in 30, maybe 40 years.”
The question before the justices is whether a legal maneuver in the settlement agreement can give the Sackler family the kind of broad legal protections they have been asking for for years: full immunity from civil lawsuits related to a devastating public health crisis.
The tactic, part of Purdue’s hotly contested bankruptcy restructuring, has been reflected in a variety of settlements involving mass damage claims, such as sex abuse allegations against the Boy Scouts of America and the Catholic Church.
Legal experts said the government had long questioned the validity of the practice, known as non-consensual third-party releases, raising the possibility that a sweeping decision in the case would upend similar agreements.
“Purdue Pharma is exactly the case that they finally looked at,” said Lindsey Simon, a bankruptcy expert who teaches at Emory University School of Law.
Legal experts say that organizations inundated with a large number of lawsuits accusing them of wrongful damages are increasingly relying on the bankruptcy system – rather than the civil legal system, as is customary – to reach settlements. Filing for bankruptcy provides these entities with a path that protects them from future civil lawsuits, in part because bankruptcy is rooted in the idea that someone facing losses should have the opportunity to wipe the slate clean.
The Purdue Pharma deal – and others like it – goes a step further by providing similarly comprehensive protections to members of the wealthy Sackler family. Not only are they shielded from liability without the consent of anyone who could potentially sue them, but the Sacklers themselves don’t have to go personally bankrupt.
The US Trustee Program, a bankruptcy watchdog group within the Justice Department that has urged the Supreme Court to review the Purdue Pharma deal, has described the tactic as an overreach of the bankruptcy system, in part because such non-consensual disclosures “Depriving victims of tort of their day in court without consent.”
The plan exceeds the limits of bankruptcy law, attorneys for the trustee program argue, essentially leaving the Sackler family unscathed: “It allows the Sacklers to protect billions of dollars of their fortune while filing claims for trillions of dollars in debt without payment.” nullify damages. .”
The government also questioned whether the deal allowed the Sacklers to avoid other potential claims, particularly those “based on fraud and other forms of intentional misconduct.” (Lawsuits show that members of the family, aware of OxyContin’s risk of abuse, continued to aggressively market the drug.)
But organizations and companies facing similar lawsuits argue that removing these protections would mean facing endless lawsuits, an outcome that could only have dire consequences.
In submit a statement In support of Purdue Pharma, the U.S. Conference of Catholic Bishops said these types of settlements offered an opportunity to fairly compensate sexual abuse survivors while ensuring the longevity of the Catholic Church.
The release ‘offers the only viable way for the Catholic infrastructure in many communities to survive what has become decades of mission-crippling litigation’ its short said.
The Boy Scouts of America, for its part, warned that if the liability waiver had not applied to the settlement to compensate tens of thousands of sexual abuse victims, it would have meant the end of a group that had tried for more than a century to promote good values in children.
“Most survivors of Scouting-related abuse would receive nothing, and Scouting as an organization would likely be over,” the letter said.
Lawyers for the Boy Scouts declined to comment. Attorneys for the U.S. Conference of Catholic Bishops did not respond to a request for comment.
Legal experts said it was not clear how the court would rule on the case. While the court’s conservative majority is generally seen as friendly to business interests, the question before the court centers on aggressive litigation tactics, which both Chief Justice John G. Roberts Jr. as Judge Clarence Thomas have generally resisted.
The case also hinges on the extent to which the bankruptcy courts are given leeway, especially without explicit approval from Congress – yet another scenario that the conservative majority tends to view skeptically.
Companies are already pursuing other strategies that could help them preserve the benefits of the bankruptcy system — an automatic freeze on other lawsuits, consolidation of claims, a mandatory deal that binds everyone — in mass injury cases, experts say. They said companies would likely look for simple ways to get consent from claimants, such as adding a box to check a claimant’s form, so they can continue to use liability waivers.
“You’re seeing the bankruptcy system being used to address enormous societal problems,” said Stephen W. Sather, head of the bankruptcy practice at law firm Barron & Newburger, who has written about the tactic.
“It’s like Dr. Ian Malcolm says in ‘Jurassic Park’: Nature will find a way,” he added. “In this case, lawyers will find a way.”