Members of the Sackler family, who own the company, have been accused of fueling the nation's opioid crisis.
Judge Collen McMahon of the Southern District of New York ruled Thursday, Dec. 16, that legal releases cannot shield the owners from civil lawsuits because it is not permitted under the bankruptcy code.
The Sacklers, Purdue and groups representing opioid victims and other company creditors who supported the settlement and reorganization plan are likely to appeal the decision. (Related: Sickening: Billionaire Sackler opioid dynasty granted immunity from lawsuits.)
State attorneys general and the Department of Justice's bankruptcy watchdog have already challenged the releases, which would prevent the potential legal claims of the state against the Sacklers. The Sacklers, in fact, didn't support the deal, which is being used in other corporate bankruptcies.
Congressional Democrats introduced a bill earlier this year in response to the Purdue settlement that would ban these types of releases.
According to McMahon, her ruling won't be the last word on the issue, stressing that prior legal rulings from the Second U.S. Circuit Court of Appeals that Purdue and other bankrupt companies have relied on in advancing the types of legal releases the Sacklers would receive haven't properly analyzed the issue.
"It must be put to rest sometime. At least in this Circuit, it should be put to rest now," McMahon said.
State attorneys general from Washington, Connecticut, Maryland and other states were against the settlement because the Sacklers' contribution was insufficient to prevent other corporate wrongdoings. The settlement will be used by Purdue to fund programs to fight the opioid crisis and compensate people affected by OxyContin.
"This is a seismic victory for justice and accountability that will re-open the deeply flawed Purdue bankruptcy and force the Sackler family to confront the pain and devastation they have caused," Connecticut Attorney General William Tong said. (Related: Ex-opioid addict starts online campaign against billionaire family behind OxyContin; their company, Purdue Pharma, has made billions off opioids)
The Sackler family denied any wrongdoing before McMahon’s decision, and said the deal will pave the way to provide assistance to people and communities in need.
The deal extracted as much as possible from the Sacklers, whose wealth is housed in hard-to-reach offshore trusts. The deal was approved in September and Judge McMahon was the second federal judge to review the Sacklers' settlement.
Purdue and the Sacklers denied fueling the opioid crisis, and the bankruptcy filing was meant to resolve an onslaught of lawsuits. Purdue and major creditor groups have defended the family settlement, claiming it received broad support because it will provide assistance to people in need.
The deal, according to the Sacklers, mirrored similar deals that resolved lawsuits arising from dangerous or defective products.
If its restructuring plans collapse, McMahon said it would result in an outcome in which billions of dollars for abatement and victim compensation will be irretrievably lost.
Last year, Purdue pleaded guilty to three federal felonies related to the marketing and sale of OxyContin. The company admitted that it pushed the opioid painkiller on dozens of doctors it knew were diverting the drug for improper uses, and then failed to report those healthcare providers to the Drug Enforcement Administration.
The Sacklers, who testified in the bankruptcy court, denied that they were responsible for driving opioid addiction.
"Our family has a moral responsibility," said David Sackler. Dr. Richard Sackler also denied that he, his family or the company are responsible for the opioid crisis.
"A forced apology is not really an apology, so we will have to live without one," Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., said in his ruling approving the chapter 11 plan.
Because of what happened, the Metropolitan Museum of Art and descendants of company co-founders Mortimer and Raymond Sackler removed the family's name from seven museum exhibition spaces. The Sacklers are known for their philanthropic, academic and financial contributions.
The Sacklers won't have any involvement in Purdue under the bankruptcy plan when it emerges from chapter 11 under the new name Knoa Pharma. Purdue stressed its decision to file bankruptcy and settle with its owners came from a special committee of directors, free from family influence. The committee, according to a court-appointed examiner, acted independently from the family after Purdue's bankruptcy filing.
The Wuhan coronavirus (COVID-19) pandemic worsened opioid addiction as U.S. drug overdose deaths surged nearly 30 percent in 2020 – driven by the proliferation of fentanyl, a powerful synthetic opioid.
Watch the full video below to learn more about the opioid crisis and the effects of addiction.
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