Capital Economy, Business and Finance
A $6 billion plan to make the Sackler family pay compensation to victims of the opioid crisis has been dramatically blocked by the US Supreme Court. The 5-to-4 decision by the justices overturns a ruling by a bankruptcy court judge, who had approved the settlement after years of delicate negotiations. If the deal had been allowed, the Sacklers and their company Purdue Pharma would have paid compensation – and for the first time during the opioid crisis, hundreds of millions of dollars would have gone to victims. But in a contentious clause, the Sacklers had demanded protection from ever being sued personally.
Giving its opinion, the court said the bankruptcy code did not allow such a deal. “The Sacklers have not filed for bankruptcy or placed all their assets on the table for distribution to creditors, yet they seek what essentially amounts to a discharge.” The decision means the Sackler family does not get immunity, but families blighted by opioid addiction may never see a penny in compensation. Four of the Supreme Court justices published a fiery dissenting opinion which warned: “Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families.”
What happens next? Bankruptcy lawyers will have to try to negotiate a new deal, but getting to the Sackler fortune will be immensely difficult. The case has been ugly and complex. The Supreme Court notes: “Between 1999 and 2019, approximately 247,000 people in the United States died from prescription-opioid overdoses.”
In 2007, Purdue pleaded guilty to three felony charges over the aggressive and misleading marketing of OxyContin. And at that time, realising they were at risk of being sued, the Sacklers started pulling money out of the company. Internal documents reveal that the family took $11 billion from the company and put it into overseas trusts and family companies. As thousands of lawsuits piled up, the Sacklers offered to pay $6 billion in compensation, but in return wanted immunity from all future lawsuits.
To many observers it felt that the immunity deal was a backdoor for billionaires and that the Sacklers were getting away with it. But families and lawyers close to the case argued that it was more important to take the money, use it to ease the opioid crisis and move on. People close to the case point out that there is still nothing to stop the US Department of Justice mounting a criminal prosecution against the Sacklers over their roles in aggressively marketing OxyContin.
The Supreme Court’s choice was always going to be fraught:
- allow the deal and let the compensation flow, with immunity for the Sacklers; or
- block the deal and remove the Sacklers’ shield, but reduce the chance of reaching their offshore billions.
The politics is a mess. The settlement was first announced in the last days of the Trump administration. Democratic states opposed it. After years of negotiation, the compensation pot grew and every Democratic-run state got on board with the deal. By the time the case reached the Supreme Court last year, a small section of President Biden’s Department of Justice was the only party still fighting against the deal.
Now that the deal has been blocked, it is possible that the only money available through bankruptcy to pay creditors is about $1.8 billion still left in Purdue Pharma. But there is a risk that none of that goes to treatment or prevention of the opioid crisis because a so-called $2 billion “superpriority” claim, means that the United States would be first in line to recover ahead of all of the victims and other creditors. The United States’ claim would wipe out Purdue’s entire $1.8 billion value.
It seems likely that Republicans will claim Biden killed the deal for opioid victims, but the Democrats will say they fought the case to stop billionaires getting immunity. And to add to the confusion, the Supreme Court did not split along the usual conservative/liberal lines. Four conservative justices and one liberal voted to block the deal; while two conservatives and two liberals dissented.
In his opinion blocking the deal, Justice Neil Gorsuch wrote there was nothing in the bankruptcy code to support the deal – and held out hope that facing a renewed risk of being sued, the Sacklers would be encouraged to negotiate a fresh deal.
In the dissenting opinion, Justice Brett Kavanaugh, another conservative judge, condemned his colleagues’ decision and urged Congress to act. “Opioid victims… will suffer greatly in the wake of today’s unfortunate and destabilising decision. Only Congress can fix the chaos that will now ensue.”
