Ruling clears way for Purdue Pharma to settle opioid claims, protect Sacklers from lawsuits

The 2nd U.S. Circuit Court of Appeals in New York reversed a 2021 ruling that found bankruptcy court judges did not have the authority to shield from civil lawsuits members of the Sackler family who own Purdue and who have not filed for bankruptcy protection themselves.

Those protections are at the heart of the proposed deal that would end claims against Purdue filed by thousands of state, local and Native American tribal governments and other entities.

Under the plan, members of the Sackler family would give up ownership of Stamford, Connecticut-based Purdue, which would become a new company known as Knoa, with its profits being used to fight the opioid crisis. They would also contribute $5.5 billion to $6 billion in cash over time. A chunk of that money — at least $750 million — is to go to individual victims of the opioid crisis and their survivors.

Sackler family members have been clear: If they don’t get the legal protections, they won’t do their part of the deal.

Several states had been withholding support for the plan, but after a new round of negotiations this year, all of them came on board. That left just one high-profile objector: the Office of the U.S. Bankruptcy Trustee, an arm of the Justice Department.

A lawyer from that office told the 2nd Circuit in April 2022 that it’s a “fundamental inconsistency” that people who do not seek bankruptcy protection and have to give up most of their assets could be exempted from some lawsuits.

The settlement must still be approved by a bankruptcy court judge before it can be finalized. There’s also a chance the new ruling could be put on hold, pending an appeal to the U.S. Supreme Court.

Purdue is perhaps the highest-profile player in the opioid industry. But several other drugmakers, distribution companies and pharmacies also have been sued by state and local governments. While a handful of cases have gone to trial, many also are being settled.

The total value of proposed and finalized settlements in recent years is more than $50 billion. Companies that have reached deals include drugmakers Johnson & Johnson and Teva; distribution giants AmerisourceBergen, Cardinal Health and McKesson; and pharmacy chains CVS, Walgreens and Walmart. Most of the money is required to be used to fight the opioid crisis, which has been linked to more than 500,000 deaths in the U.S. over the past two decades.