Purdue Pharma can protect Sackler owners in opioid bankruptcy

(Reuters) — Bankrupt OxyContin maker Purdue Pharma can shield its owners, members of the wealthy Sackler family, from opioid lawsuits in exchange for a $6 billion contribution to the company’s broader bankruptcy settlement, a U.S. appeals court ruled Tuesday.

The New York-based 2nd U.S. Circuit Court of Appeals said U.S. bankruptcy law allows legal protections for non-bankrupt parties, like the Sacklers, in extraordinary circumstances.

In a majority opinion written by 2nd Circuit Judge Eunice Lee, the court ruled that the legal claims against Purdue were inextricably linked to claims against its owners and that allowing lawsuits to continue targeting the Sacklers would undermine Purdue’s efforts to reach a bankruptcy settlement.

Judge Richard Wesley wrote a separate opinion “reluctantly” agreeing that protections for the Sacklers were legal, based on the court’s past decisions. But U.S. bankruptcy law does not explicitly allow courts to wipe away lawsuits against non-debtors like the Sacklers, and Congress or the U.S. Supreme Court should step in to clarify an issue that has divided courts across the U.S., Wesley wrote.    

Purdue has sought to use its bankruptcy case to resolve thousands of lawsuits, many filed by state and local governments, alleging that OxyContin helped kickstart an opioid epidemic that caused more than 500,000 U.S. overdose deaths over two decades.

Purdue has pleaded guilty to charges related to its opioid marketing, while its owners have expressed regret but denied wrongdoing.

The Sackler family members have agreed to contribute up to $6 billion to a trust that will be used to pay the claims of states, victims of addiction, hospitals and others who have sued Purdue over its misleading marketing of OxyContin.

In exchange, the Sacklers will receive broad legal protection from lawsuits related to the opioid crisis.

The families of the late Mortimer Sackler and the late Raymond Sackler said in a joint statement that they looked forward to moving ahead after the lengthy wait for a 2nd Circuit decision.

“The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need,” the families said.

The Sackler contribution accounts for most of the cash payment in a broader bankruptcy settlement that Purdue values at more than $10 billion.