Judge drops Purdue’s bankruptcy protection over members of the Sackler family protection clause.
A federal judge has rejected Purdue Pharma’s (the maker of the addictive opioid drug OxyContin) bankruptcy protection settlement because of a provision in the initial contract that would give members of the Sackler family immunity from future lawsuits regarding their alleged involvement in deceptive opioid marketing practices. The company was previously hit with thousands of lawsuits from plaintiff’s claiming that were harmed by these practices.
Purdue sought bankruptcy protection in 2019 amid the flurry of lawsuits. In September, the company was dissolved into a public benefits trust after the bankruptcy settlement was supposedly reached. The new entity still sells opioids, but all proceeds from these sales are set to be used to fight the addiction epidemic. The company is also intended to develop anti-addiction drugs. Members of the Sackler family were set to contribute $4.5 billion in cash and charitable assets. Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, New York approved the deal.
In November, following a hearing in bankruptcy protection court in White Plains, New York, Judge Drain also authorized the settlement between Purdue Pharma and the Department of Justice (DOJ), which including guilty pleas to “multiple serious felonies” including conspiracy to defraud the United States and violating anti-kickback laws. “The DOJ settlement is a critical building block,” Judge Robert Drain said in making his decision.
Many of the plaintiffs were displeased with the part of the bankruptcy the allowed members of the family to get off so easily, and the pushed back, hoping the court would reject it, even though the deal would not have protected the Sackler family members from criminal charges.
“I don’t think anybody would say that justice has been done because there’s just so much harm that was caused, and so much money that has been retained by the company and by the family,” said Dr. Joshua Sharfstein, a professor at the Johns Hopkins Bloomberg School of Public Health, at the time. “But this is what the legal system is going to produce. So, at this point, the question becomes, how can those resources be used as effectively as possible?”
In the most recent ruling, U.S. District Judge Colleen McMahon in New York found that “federal bankruptcy law does not give the bankruptcy judge who had accepted the plan the authority to grant that kind of release for people who are not declaring bankruptcy themselves.”
Connecticut Attorney General William Tong referred to the bankruptcy rejection as “a seismic victory for justice and accountability.” He said, “The ruling will re-open the deeply flawed Purdue bankruptcy and force the Sackler family to confront the pain and devastation they have caused.” Tong was one of eight state attorneys general fighting the bankruptcy deal, along with the U.S. Bankruptcy Trustee’s office and others.
McMahon’s decision centered around the fact that the Sackler family members transferred more than $10 billion from the privately held Stamford, Connecticut-based Purdue Pharma over ten years prior to the bankruptcy. “This opinion will not be the last word on the subject, nor should it be. This issue has hovered over bankruptcy law for thirty-five years,” she said.