Ruling paves way for Purdue Pharma to settle opioid claims and shields Sacklers from lawsuits

A federal appeals court cleared the way for the maker of OxyContin to settle thousands of legal claims related to the opioid epidemic while protecting wealthy Purdue Pharma owners, the Sackler family, from future lawsuits.

Under the plan approved by the 2nd U.S. Circuit Court of Appeals in New York on Tuesday, members of the wealthy Sackler family would relinquish ownership of Stamford, Connecticut-based Purdue to a new company known as Knoa, the proceeds of which would be sent to an addiction prevention and treatment fund.

Family members would also contribute $5.5 billion to $6 billion in cash over time, about half of what the court estimated was their collective fortune, much of which was held offshore. Some of that money — at least $750 million — is earmarked for individual victims of the opioid crisis and their survivors. Payments are expected to range from approximately $3,500 to $48,000.

Tuesday’s ruling also protects members of the Sackler family from lawsuits over the opioid record, even though they did not file for bankruptcy.

The court’s decision overturned a Decision 2021 which concluded that bankruptcy court judges lacked the authority to approve a settlement that would provide bankruptcy protections to those who have not filed for bankruptcy.

These protections are central to the proposed agreement that would end claims filed by thousands of state, local and Native American tribal governments and other entities. Members of the Sackler family have made it clear that without the protections, they will not deliver on their end of the deal.

“This is a great day for the victims, some of whom are in desperate need of money and have been waiting for this day for a long time,” said Ed Neiger, a lawyer representing individual victims.

Cheryl Jaire, a Massachusetts woman who lost two sons to an overdose, said she didn’t know how much to expect. “My children are gone and there is nothing I can do to bring them back,” she said, but added that the funds would help her sons’ children. “They’ll have braces, they’ll have glasses, they’ll have things they need that they wouldn’t have otherwise.”

Members of the Sackler and Purdue family also welcomed the decision.

“The Sackler families believe that the long-awaited implementation of this resolution is essential to providing substantial resources to people and communities in need,” the family members who own Purdue said in a statement on Tuesday. “We are satisfied with the Court’s decision to clear the agreement to go forward and hope that it will enter into force as soon as possible.

One non-financial condition on their part of the deal is already met: listen in silence, via Zoom, to the stories of some of their company’s drug-injured people.

Purdue released its own statement, calling the decision “a victory for Purdue’s creditors, including states, local governments and victims who overwhelmingly support the reorganization plan.” The company said it would focus on providing “billions of dollars of value for victim compensation, addressing the opioid crisis and overdose rescue medication.”

Several states had refused to support the plan, but after a new round of negotiations last year, all rallied. That left only one high-level opponent: the US Bankruptcy Trustee’s Office, an arm of the Department of Justice.

A lawyer from this office says the 2nd Circuit in April 2022 that it is a “fundamental inconsistency” that people who do not seek bankruptcy protection and have to give up most of their assets can be exempt from certain lawsuits.

The Justice Department did not immediately say whether it would appeal Tuesday’s ruling to the U.S. Supreme Court, ask the Circuit Court to reconsider its ruling, or accept the ruling as is. A spokesperson declined to comment on Tuesday.

Even without an appeal, it could take months for the bankruptcy plan to take effect.

Some activists also opposed the settlement and called for members of the Sackler family to be prosecuted for crimes. Although the settlement does not block this, there is no indication that charges are forthcoming.

While members of the Sackler family still technically own Purdue, they stopped receiving money from the company years ago.

The three federal appeals judges who heard the Purdue case last year agreed the Sackler family could be protected from lawsuits. In her majority opinion, Judge Eunice Lee said protection from lawsuits is necessary to ensure a fair distribution of money in the case.

One judge – Richard Wesley – said in a separate opinion that he reluctantly agreed, noting that while the courts allow such transactions, they are not explicitly permitted by bankruptcy law.

Wesley noted that the agreement is not consensual: “It is binding on consenting and opposing parties, without providing an opt-out option for those opposing it.”

Purdue is perhaps the most prominent player in the opioid industry. But several other drugmakers, distribution companies and pharmacies have also been sued by state and local governments. While a handful of cases have been tried, many are in the process of being settled.

The total value of regulations proposed and finalized in recent years exceeds $50 billion. Companies that have struck deals include drugmakers Johnson & Johnson and Teva; retail giants AmerisourceBergen, Cardinal Health and McKesson; And pharmacy chains CVS, Walgreens and Walmart.

Most of the money is to be used to tackle the opioid crisis, which has been linked to more than 500,000 deaths in the United States over the past two decades, including more than 70,000 a year recently.

In recent years, most deaths have been linked to fentanyl and other illicit synthetic opioids, not prescription painkillers.

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