Members of the Sackler family who own Purdue Pharma can be shielded from lawsuits linked to the US opioid crisis in exchange for payments worth up to $6bn, appellate judges have ruled in a reversal of a lower court’s decision.
The judgment addresses a controversial provision of US law that released Sackler family owners of Purdue from liability as part of the company’s bankruptcy settlement. The maker of the powerful painkiller OxyContin, Purdue filed for bankruptcy in New York in 2019 amid a wave of litigation over its role in an opioid epidemic that has killed almost 1mn people in the US.
A bankruptcy judge in 2021 approved a settlement that required the family owners to pay $4.5bn and provided them with immunity from future lawsuits. A federal judge overturned that settlement later that year.
The company’s Sackler owners then agreed to increase their financial contribution from $4.5bn to $6bn, winning support from several dissident victims groups and states which had opposed the original deal.
On Tuesday a three-judge panel of the US Court of Appeals for the Second Circuit reversed the lower court’s decision and said that bankruptcy law permitted giving civil liability protection to parties who are not in bankruptcy in certain situations.
“The bankruptcy court’s inclusion of the releases is equitable and appropriate under . . . the specific factual circumstances,” Judge Eunice Lee wrote in a majority opinion.
The announcement paves the way for the bankruptcy court to approve a modified settlement that would protect the Sackler family from lawsuits.
The bankruptcy trustee, a division of the Department of Justice that had opposed the releases, declined to comment on whether it would appeal against the ruling to the Supreme Court.
Such releases have become controversial in US bankruptcy cases, with appeals courts in different regions or legal circuits differing on whether to approve them.
Purdue’s initial $4.5bn settlement was thrown out following a legal appeal by a group of eight US states and the attorney for the Southern District of New York, which had argued that Sackler family owners were benefiting from the bankruptcy process without having personally filed for Chapter 11 protection themselves.
Opponents of the original settlement pointed to analysis presented in the bankruptcy court that showed the Sackler family members who own Purdue had taken more than $10bn out of the company between 2008 and 2017.
Lawyers for Purdue warned that without such a settlement, years of litigation would delay payments to victims and shrink the available pot.
In a statement, the families of the late Mortimer Sackler and the late Raymond Sackler said on Tuesday that they “believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need. We are pleased with the court’s decision to allow the agreement to move forward and look forward to it taking effect as soon as possible.”