Dangerous Drugs

Owners of largest OxyContin manufacturer may be released from opioid crisis liability

October 1, 2021

Last week, after months of legal maneuvering, a New York bankruptcy judge approved Purdue Pharma's Chapter 11 bankruptcy plan, including contentious opioid liability releases for the Sackler family, the owners of Purdue. Numerous state attorneys and other parties generally oppose the deal, arguing that the court does not have the authority to release the Sacklers from liability without state consent.

The United States has endured an opioid crisis that has destroyed hundreds of thousands of lives and financially burdened families as well as state and local governments. The facts are staggering: over 100 people die every day from opioid overdose; about one third of those prescribed opioids will misuse them; and, about 10% of those people will become addicted. All the while, Purdue Pharma, creator of OxyContin, as well as other opioid manufacturers, have made billions.

In a previous post, we reported that Purdue Pharma has agreed to plead guilty to charges that the company conspired to defraud the United States and violated the Food, Drug and Cosmetic Act, as well as anti-kickback laws. The deal includes a guilty plea of three felony counts, the dissolution of the company, and over $8 billion in penalties.

Last week, after months of legal maneuvering, a New York bankruptcy judge approved Purdue Pharma's Chapter 11 bankruptcy plan, including contentious opioid liability releases for the Sackler family, the owners of Purdue. As part of the plan, the Sackler family has agreed to give up their stake in Purdue and pay a $225 million civil penalty.  

Numerous state attorneys and other parties generally oppose the deal. Specifically, the U.S. Trustee, nine states, the District of Columbia, and the U.S. Department of Justice are contesting the plan, arguing that the court does not have the authority to release the Sacklers from liability without state consent. They argue that the deal would leave them unable to hold the Sackler family members accountable for their alleged role in Purdue's marketing practices. Other parties are concerned that the plan would fall apart without the Sacklers' $4.5 billion contribution and releases. They counter that the amount of potential claims far exceeds the combined net worth of Purdue and the Sackler family, making this the best way to fairly compensate victims.

Bankruptcy Court Judge Drain noted that “Additional recovery from the Sacklers would be uncertain given that the family's reported $11 billion fortune is split among "scores" of individuals — most of whom did not serve as Purdue officers or directors — and that much of it is held in so-called spendthrift trusts that could be difficult or impossible to collect from.”

Objecting parties began filing notices of appeal immediately after Judge Drain’s ruling. Authorities in the District of Columbia, the states of Washington, Maryland and Connecticut, and the U.S Trustee's Office have already announced their intention to file appeals. The Trustee's Office argued that the Sackler family releases included in the bankruptcy plan are unconstitutional. The trustee is asking the judge to wait until a higher court rules on its challenge to the releases. The Trustee argued that “while claimants would be irreparably harmed by the plan releases going into effect, Purdue would not incur such harm... nor would "possibly thousands of Sackler family members and associated parties, all of whom will be released without a full accounting of their role in and liability for the opioid disaster in a court of law in which their victims are entitled to be heard."

Purdue countered that the plan had received broad support from 43 states and 95% of personal injury claimants. Purdue representatives further stated:

"The bankruptcy court's ruling confirms this belief, and appeals will only further hurt the states, victims and creditors by delaying and eroding their recoveries. After two years of collaborative efforts in an inclusive process, governments, creditors, and representatives of individual victims came together to forge a solution that serves the public interest. Now is the time for the remaining objectors to join the overwhelming majority of creditors so that billions of dollars can begin to flow as quickly as possible."

Main Street Law Firm will continue to keep its clients and friends apprised of developments in this case.

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