The Supreme Court will hear the Justice Department's claim that Purdue Pharma's bankruptcy plan improperly wipes out potential liability to additional parties for allegedly fueling the opioid addiction crisis, the Wall Street Journal reports. In doing so, the court blocked a $6 billion settlement of opioid lawsuits against the company's Sackler family owners. This ensured that a sizable chunk of tens of billions of dollars pledged by the pharmaceutical industry to combat the opioid crisis will be delayed, or not paid at all. The move could open up the possibility of more compensation for those who balked at the original deal. The court’s review will also extend the litigation alleging that drug manufacturers, distributors and pharmacies oversupplied painkillers as opioid addiction grew into an epidemic.
The case hinges on whether bankruptcy courts have the jurisdiction to approve settlements between a bankrupt company’s creditors and third parties who wouldn’t otherwise be protected from liability. The court’s decision on the proposed deal, which Purdue needs to leave bankruptcy, is expected before July 2024. The justices ordered an expedited schedule for hearing the case. The court said it would consider whether bankruptcy courts can extinguish legal claims against nonbankrupt parties to a chapter 11 case when some claimants don’t agree. The Justice Department has taken the position that the Sacklers, as owners of Purdue, can’t use its bankruptcy case to be released from all opioid-related claims, known and unknown, against them. Chapter 11 plans routinely include releases for private-equity firms, corporate executives and others with connections to a bankruptcy case but not bankrupt themselves.