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 U.S. District Judge Colleen McMahon said in a written opinion on
Thursday the New York bankruptcy court that approved the settlement
did not have authority to grant the Sacklers the legal protection
from future opioid litigation that formed the linchpin of Purdue’s
reorganization.
Purdue said it would appeal the decision.
"While the district court decision does not affect Purdue’s
rock-solid operational stability or its ability to produce its many
medications safely and effectively, it will delay, and perhaps end,
the ability of creditors, communities, and individuals to receive
billions in value to abate the opioid crisis," Purdue Chairman Steve
Miller said in a statement.
The Sacklers had insisted on the legal shields, known as nondebtor
releases because they protect parties that have not filed for
bankruptcy themselves, in exchange for contributing $4.5 billion
toward resolving widespread opioid litigation.
The Sacklers threatened to walk away from the settlement absent the
guaranteed legal protections.
Representatives for the Sacklers did not immediately respond to a
request for comment late on Thursday.
Attorney General Merrick Garland said in a statement he was pleased
with the ruling.
"The bankruptcy court did not have the authority to deprive victims
of the opioid crisis of their right to sue the Sackler family,"
Garland said.
Washington State Attorney General Bob Ferguson, who had objected to
Purdue's reorganization, also praised McMahon's decision.
“There cannot be two forms of justice – one for ordinary Americans
and a different one for billionaires,” Ferguson said. “I’m prepared
to take this fight all the way to the Supreme Court, if necessary,
to ensure true accountability for the Sackler family.”
More than 95% of creditors – in this case predominantly plaintiffs
suing Purdue and the Sacklers – voted to approve the drugmaker’s
reorganization.
But eight states, Washington, D.C., Seattle and more than 2,600
personal injury claimants voted against Purdue’s reorganization,
McMahon said. The U.S. Justice Department’s bankruptcy watchdog and
the Manhattan U.S. attorney’s office also objected.
McMahon raised questions about more than $10 billion Purdue
distributed to the Sacklers spanning a roughly decade-long period
that preceded the company’s bankruptcy filing.
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 The Sacklers have faced
allegations, which they deny, that they
authorized the financial transfers to prevent
the money from being drained in future
litigation against Purdue. The Sacklers have
said much of the money went toward taxes and
investments, as opposed to their pockets.
McMahon's ruling came a week after the
Metropolitan Museum of Art and the Sacklers,
long known for their philanthropy, announced an
agreement to remove Sackler name from seven
exhibition spaces.
Purdue filed for bankruptcy in September 2019 in
the face of 3,000 lawsuits accusing the company
and Sackler family members of contributing to a
public health crisis that has claimed the lives
of about 500,000 people since 1999.
The litigation accused the company and family
members of aggressively marketing OxyContin
while downplaying its addiction and overdose
risks. The company and family members have
denied the allegations.
U.S. Bankruptcy Judge Robert Drain in White
Plains, New York, agreed early in Purdue's court
restructuring to halt litigation against the
company and Sackler family members, who had not
filed for Chapter 11 protection themselves.
The Stamford, Connecticut, drugmaker last year
pleaded guilty to criminal charges stemming from
its handling of opioids. At the outset of its
bankruptcy case, Purdue said there were a number
of legal defenses it could mount in response to
lawsuits alleging improper conduct.
Drain said it was clear the wrongful marketing
of the company's opioid products contributed to
the addiction crisis that touched every corner
of the country.
But he overruled objections to the legal
releases shielding the Sacklers. Drain predicted
that denying the releases would unravel Purdue’s
reorganization – settlement aimed at steering
funds toward communities reeling from the opioid
epidemic – and result in the company’s
liquidation, leaving little to nothing for
victims.
McMahon, though, found that the Bankruptcy Code
“does not authorize” granting such nonconsensual
third-party releases.
(Reporting by Brendan Pierson, Mike Spector and
Maria Chutchian in New York; editing by Diane
Craft, Lincoln Feast and Grant McCool)
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