Supreme Court wrestles with Purdue Pharma settlement and legal shield for Sackler family

A historic multibillion-dollar settlement with OxyContin-maker Purdue Pharma hung in the balance at the Supreme Court on Monday as victims of the nation's opioid epidemic urged the justices to approve the deal over opposition from the Biden administration, which warned it would let the company's owners -- the Sackler family -- evade greater financial responsibility.

During oral argument in the case, Harrington v. Purdue Pharma, most of the justices appeared inclined to uphold the arrangement, which was forged after years of painstaking negotiations as part of the drugmaker's bankruptcy proceedings and is endorsed by a large majority of victims.

"I'm wondering why one nutcase holdout should hold up something like this," said Justice Elena Kagan, referring to several individual claimants who said they believe the deal is too lenient.

Under the deal, the Sacklers would provide roughly $6 billion to redress harm from opioid addiction and related deaths and give up ownership of the company -- a sum that would be paid out to 138,000 individual victims, state governments and Native American tribes over a number of years.

In exchange, the family -- which has not declared bankruptcy itself -- would receive immunity from all future opioid-related lawsuits and retain billions in past profits earned from sales of the drug.

More than 80,000 Americans have suffered opioid-related deaths since OxyContin and similar painkillers hit the market in 1996. Purdue's aggressive marketing and disregard for addiction concerns played a major role in the rise of the epidemic, according to public health experts and several legal findings.

"Let me be crystal clear," said attorney Pratik Shah, who was defending the deal on behalf of the supportive victims. "Without the release [of liability for the Sacklers], the plan will unravel, Chapter 7 liquidation will follow, and there will be no viable path to any victim recovery."

"Forget a better deal," Shah said. "There is no other deal."

A federal district court blocked the plan, saying federal law did not allow such a sweeping legal shield for the Sacklers without unanimous consent of all the claimants. A federal appeals court later reversed that ruling, saying the plan could go forward because of leeway in the law.

The deal has remained on hold as the Supreme Court reviews the case.

Deputy Solicitor General Curtis Gannon said there could be a better deal in the making for victims, arguing that immunity for the Sacklers "conflicts with the basic nuts and bolts" of bankruptcy law.

"It permits the Sacklers to decide how much they're going to contribute. It grants the Sacklers the functional equivalent of a discharge, what they might get if they themselves were in bankruptcy," Gannon said. "It raises significant constitutional questions that should be avoided in the absence of a clear command from Congress."

Several justices seemed to share the government's view.

"We don't normally say that a nonconsenting party can have its claim for property eliminated in this fashion without consent or any process of court other than the procedure here," said Justice Neil Gorsuch. "This would defy what we do in class-action contexts. It would raise serious due process concerns and seventh amendment concerns."

Justice Ketanji Brown Jackson suggested she had concerns the Sacklers could be seen as benefiting from the deal, while Chief Justice John Roberts raised the possibility that Congress never contemplated such a sweeping third-party immunity arrangement when it wrote the bankruptcy code.

It seems to be a "fairly clear case for the application of what is called our major questions doctrine," Roberts said.

Justice Brett Kavanaugh, frequently a deciding vote in close cases, repeatedly indicated that precedent should weigh heavily in favor of approving the deal.

"Bankruptcy courts for 30 years have been approving plans like this, and I guess I'm trying to figure out, with all that practice under the judiciary's belt, why we would say it's categorically inappropriate," he said.

"The opioid victims and their families overwhelmingly approve this plan because they think it will ensure prompt payment," he said.

If approved, the deal is expected to issue payments of between $3,500 and $48,000 to individual victims and their survivors. This is in addition to funding abatement programs through state health offices.

If the deal is blocked, legal experts say it could upend the nation's bankruptcy system and the process for resolving cases of mass injury, and potential force the reopening of deals like the one that resolved thousands of claims against the Boy Scouts of America for sexual abuse.

A decision in the case is expected to be handed down by the end of June 2024.

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