What to know about the Purdue Pharma case before the Supreme Court

The Supreme Court is scheduled to hear arguments Monday on a bankruptcy deal for Purdue Pharma that would give billions of dollars to those harmed by the opioid epidemic in exchange for protecting members of the wealthy Sackler family from additional opioid-related lawsuits.

The settlement involving Purdue, maker of the prescription painkiller OxyContin, touches on one of the nation’s biggest public health crises. In taking over the case, the court temporarily paused work until it makes a decision. Experts say any decision could have important ramifications for other cases that use the bankruptcy system to settle mass injury claims.

Here’s what you need to know:

The question is whether the bankruptcy plan can be designed to give legal immunity to a third party — in this case, members of the Sackler family, who once controlled Purdue Pharma — even though they themselves have not declared bankruptcy.

If the court approves the deal, it could validate a litigation tactic that is becoming increasingly popular in resolving lawsuits in which many people seek similar injuries from the same entity, whether it’s a drug or a consumer product. By turning to bankruptcy courts as a tool to resolve those claims, businesses aim to free themselves from civil liability and prevent future lawsuits.

But if the Supreme Court were to block the use of such a mechanism, known as a third-party release without consent, the Sackler family would no longer be protected from civil lawsuits. Purdue Pharma’s entire bankruptcy deal, which has been years in the making, would also likely be in jeopardy.

Such a decision could invalidate a number of similar agreements, including Revlon bankruptcy.

It’s rare for the Supreme Court to agree to hear a bankruptcy case, experts say, especially one involving a settlement agreement in what’s known as a mass tort case.

Few such cases reach court because all parties are under pressure to settle. Litigation all the way to the highest court in the country is expensive and time-consuming. In Purdue’s case, American Trustee Programsupervision office in the Ministry of Justice, submitted a petition to the Supreme Court to review the deal.

Several other aspects of the case made it more likely that the Supreme Court would grant a review, legal experts said. First, the opioid crisis is an issue of national importance. And such agreements, which allow third parties to be shielded from most liability without declaring bankruptcy, are increasingly popular and have divided lower courts.

Legal experts say that’s unclear. On the one hand, the court’s conservative majority tends to look favorably on business interests. However, several conservative members, including Chief Justice John G. Roberts Jr. and Justice Clarence Thomas, were wary of aggressive litigation tactics. Overall, this Court has been skeptical of lower courts acting without express authorization from Congress.

It is not even clear how the liberal wing will vote, experts say. Some experts say this could be the kind of procedural case that ends up splitting the vote, but not necessarily along political or ideological lines.

A battle between money and principle is at the heart of the Purdue lawsuit.

Thousands of Purdue plaintiffs, who include states, local governments, tribes and individuals, have waited years for settlement funds, the value of which declines as litigation costs rise and time passes. As the Sacklers increased their offers, even the last handful of states that adhered to the deal caved. Bankruptcy court is ultimately a marketplace of blunt pragmatism.

By the time the U.S. Court of Appeals for the Second Circuit heard the appeal, $6 billion from Sackler was on the table, and most of the parties had signed on. Notable Adversary: ​​The US Trustee Program.

His remark was that if the deal were approved, the Sacklers would receive the benefits of bankruptcy, such as divesting all of Purdue’s opioid-related lawsuits, without costs. People who could still prosecute individual family members in civil court would be barred from doing so, without the opportunity to plead. The US commissioner argued that their constitutional rights to due process would be summarily extinguished.

At this point in the Purdue litigation, the Justice Department, along with several other plaintiffs, is mostly just insisting on these principles. Tribes, states, local governments and people suffering from the opioid crisis must address the immediate costs.

Under the deal, Purdue would pay $1.2 billion in a settlement immediately after emerging from bankruptcy, with millions more expected in the years to come. The Sacklers would pay up to $6 billion over 18 years, with nearly $4.5 billion due in the first nine years.

Under the settlement with tribal prosecutors, all 574 federally recognized Native American tribes are eligible for payments from a fund worth about $161 million.

Each state, with their local governments, worked out a formula for distributing Purdue’s money. But all must follow guidelines for its use: that it be applied largely to initiatives aimed at mitigating the opioid crisis, including addiction treatment and prevention.

Under the current plan, a $700 million to $750 million fund would be established for individual victims and families of people who became addicted to OxyContin or died from an overdose.

About 138,000 plaintiffs filed lawsuits; Payouts are expected to range from about $3,500 to $48,000. Guardians of about 6,550 children who experienced withdrawal symptoms from drug exposure in the womb can receive about $7,000. Although the payouts are small, Purdue’s plan is one of the few opioid settlements nationwide that sets aside money for individuals.

Purdue Pharma, which introduced OxyContin in the late 1990s and aggressively marketed the drug, would cease to exist. Its assets would be transferred to a new company called Knoa Pharma. That company, which would be owned by creditors, would make addiction treatment and opioid drugs without profit. Knoa would continue to make opioids like OxyContin as well as non-opioid drugs, with profits going into settlement funds.

Purdue, which no longer sells the opioids it makes, is overseen by an independent monitor. The Sacklers have been off its board since 2018.

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