A federal judge has upended the bankruptcy plan of OxyContin maker Purdue Pharma, saying the members of the Sackler family who own the company could not be released from legal claims over the opioid epidemic.
In a 142-page ruling, U.S. District Judge Colleen McMahon in New York said that the controversial provision to grant the Sackler family members immunity from thousands of lawsuits over the public health crisis is “inconsistent” with the U.S. Bankruptcy Code, disagreeing with the court that had approved the approximately $4.5 billion agreement in the fall.
After the decision, the company announced it would appeal. The chairman of the company’s board, Steve Miller, said in a statement that the ruling would “delay and perhaps end the ability of creditors, communities, and individuals to receive billions in value to abate the opioid crisis.”
Attorney General Merrick Garland said the Justice Department was pleased with Thursday’s ruling, saying in a statement that “the bankruptcy court did not have the authority to deprive victims of the opioid crisis of their right to sue the Sackler family.”
Representatives of the two branches of the family who own the company did not immediately respond to a request for comment. The third branch, descendants of Arthur Sackler, was not involved in the litigation—he sold his shares of the company before OxyContin’s introduction.
The plan, negotiated over several months by the company and the thousands of cities, counties, states and individuals suing the drugmaker, had received overwhelming support during the creditors’ vote. U.S. Bankruptcy Court Judge Robert D. Drain approved the plan, saying the settlement would resolve complex and protracted litigation, granting immediate monetary relief to the creditors. But nine states and a branch of the Justice Department contested it. Critics of the settlement terms argued that it offered the Sackler family members, who took billions from the company, protection without them declaring bankruptcy.
The bankruptcy plan is part of a national reckoning over the devastating opioid epidemic, which has killed more than 500,000 people in the United States over two decades.
The massive public health crisis resulted in sprawling litigation against major drug companies. Plaintiffs in part blamed Purdue’s blockbuster prescription painkiller OxyContin, introduced in 1996, for fueling addiction. Purdue sought bankruptcy protection in 2019. In May, it filed the landmark plan to settle claims, which the company valued at $10 billion.
According to the plan, members of the Sackler family would give up ownership of the company, which would become a public trust company overseen by an independent board that would steer profits to addressing the crisis. The agreement also established the release of a trove of more than 30 million documents, offering a deeper glimpse at Purdue Pharma and the Sackler family’s marketing of OxyContin.
The family also conceded it would not be able to lend its name to future charitable gifts for nine years. The Sackler name has appeared on the walls of museums and art exhibits despite growing outrage at the wealthy family.
But the concessions did not appease those who argued that the family should contribute more, pointing to the $10 billion transferred from Purdue to Sackler family members during a decade before the company filed for bankruptcy.
Victims of the opioid epidemic, including those who became addicted to OxyContin, also argued for their day in court against the Sackler family.
Ryan Hampton, an author and activist who had represented victims during the bankruptcy, said he felt surprised and more hopeful that people would be able to hold the Sacklers accountable in court if the decision is upheld. But he noted it could “flip on a dime” in the U.S. Court of Appeals for the 2nd Circuit.
“It’s given everyone a ‘wow’ moment,” Hampton said.
Still, Hampton expressed concern that a possible loss of $4.5 billion from the Sacklers as part of the settlement would mean less money for the fund set aside for victims.
“There’s going to be an attempt for the states and all creditors to protect their piece of the pie,” he said.