Purdue Pharma bankruptcy plan that shields Sackler family faces Supreme Court arguments
The following story was published before the Supreme Court heard arguments in the case of Harrington v. Purdue Pharma L.P. Read a recap of those arguments here.
Washington — Long before Purdue Pharma filed for bankruptcy, before the series' "Dopesick" and "Painkiller" brought the Sackler family and devastation of the opioid crisis into Americans' living rooms, and before her son died of a drug overdose at the age of 33, Ellen Isaacs was sounding the alarm about the opioid epidemic.
Isaacs herself was prescribed OxyContin, the powerful pain killer manufactured by Purdue and promoted as "non-addictive," after undergoing surgery in the late 90s. That was around the same time her son, Ryan Wroblewski, got a prescription for the drug after injuring his back in a fall from a bridge.
Isaacs weaned herself off the drug in 2001 and became passionate about raising awareness about the dangers of opioids, all while trying to secure help for her son amid his own addiction.
Wroblewski, though, lost his battle five years ago. Isaacs said she began "vehemently" giving out Narcan, a nasal spray used to treat people experiencing an opioid overdose, and appearing on the news to demonstrate how it works.
During the course of her advocacy, Isaacs has protested outside the Justice Department. She wrote a letter to the late Queen Elizabeth II urging her to strip Theresa Sackler, who was married to Purdue co-owner Mortimer Sackler, of her "dame" title. She rallied in White Plains, New York, where a federal bankruptcy judge oversaw Purdue's bankruptcy and approved legal protections for the Sackler family.
On Monday, Isaacs returned to Washington as part of her efforts to fight the bankruptcy plan and, specifically, the decision to release the Sacklers from civil liability for the opioid epidemic. The matter is under review by the Supreme Court, which held oral arguments in the case, known as Harrington v. Purdue Pharma L.P., on Monday morning.
"It's really important to me that these people get held accountable for all the people that they've murdered," Isaacs told CBS News. "They're criminals and they needed to be treated as such."
The Purdue Pharma bankruptcy
Purdue filed for Chapter 11 bankruptcy protection in September 2019. Scores of states, local governments, Native American tribes and victims had filed lawsuits against the company seeking damages arising from its manufacture and sale of OxyContin, which helped fuel the opioid epidemic. Purdue separately pleaded guilty in 2007 to a felony count of misbranding OxyContin and has paid more than $600 million in fines and other costs.
Though the Sackler family, which owned Purdue, did not enter bankruptcy, they negotiated a settlement with claimants. The Sacklers agreed to contribute more than $4 billion across a decade — an amount that ultimately rose to $6 billion — toward efforts to fight the opioid crisis. The settlement also includes $750 million to compensate victims, who may be eligible to receive between $3,500 and $48,000.
The agreement requires millions of documents to be made public and for Purdue to restructure itself as a public benefit company, with its profits used to make products that combat opioid addiction.
In exchange, and crucially, the plan included a release that shields the Sacklers from civil lawsuits stemming from the opioid crisis. The family would also potentially be able to keep billions of dollars in revenue from Purdue that was distributed between 2008 and 2017, according to court filings.
The bankruptcy plan was approved by 95% of victims. However, several states, Canadian municipalities and indigenous tribes, plus more than 2,600 individuals, voted against it because of the legal protections for the Sackler family, their affiliates and related entities.
A bankruptcy court in New York, though, approved the plan in September 2021. The states and other detractors challenged the approval in a federal district court in New York. They were joined by the U.S. Trustee, an arm of the Justice Department that oversees the administration of bankruptcy cases.
The group focused on the legality of the plan's shield for the Sacklers, since even those who refused to approve the deal cannot pursue claims against them. A federal district court agreed, and in December 2021 it rejected the plan.
Purdue and other plan proponents appealed to the U.S. Court of Appeals for the 2nd Circuit. While their case was pending, the District of Columbia and the eight states that had objected to the deal reached an agreement with Purdue and the Sacklers for them to boost their proposed contribution to the bankruptcy estate by $1.75 billion — bringing their total contributions to between $5.5 billion and $6 billion.
A divided 2nd Circuit panel reversed the district court's decision in May, after which the Justice Department asked the Supreme Court to review the appeals court's ruling and temporarily put the bankruptcy plan on hold. The high court agreed to pause the plan in August and said it would take the case.
A division among victims
The issue before the court is whether detractors from federal bankruptcy agreements can be bound by releases that shield entities that have not declared bankruptcy themselves, like the Sacklers.
"The question will be, does the code need to specifically allow or specifically prohibit these types of releases?" Anthony Casey, a law professor at the University of Chicago, told CBS News. "That's the question the court is asking."
The U.S. Trustee, represented by the Justice Department, has argued that the agreement to exempt the Sacklers, who did not file for bankruptcy, from civil lawsuits violates federal law. The government is urging the Supreme Court to reject the plan.
The case has split victims of the opioid crisis and families who lost loved ones to overdoses. A group of more than 60,000 people affected by Purdue's opioid products said the plan settlement "represents a watershed moment" and offers the "best (and perhaps only path forward)" for those seeking to hold Purdue accountable.
"Save for one personal injury appellant, the actual victims here want this plan, want the releases, and want closure, not the opportunity for endless, damaging, and assumedly futile litigation against the Sacklers," they told the justices in a filing.
Similarly, 15 others who are victims themselves or whose loved ones were, told the justices in a filing that the bankruptcy plan approved by the 2nd Circuit "supplies the only viable mechanism for affording victims the aid they need — and need now," and will help provide increased resources for treatment and prevention to stem the opioid epidemic.
"No amount of money can bring back a beloved family member lost to addiction or undo the traumas routinely caused by opioid addiction," they said. "The confirmed reorganization plan, however, is needed — and needed now — to provide monetary relief to long-suffering victims of the opioid epidemic — and also to prevent more families and communities from suffering the same fate."
But Isaacs, as an opponent of the plan, said she should be able to pursue her own case against the Sacklers in front of a jury of peers.
"Here, we have several family members on the board [of Purdue] and they turn around and they make this product, it turns out to be a drug that is killing now over 1 million people, and there's no accountability," she said.
Isaacs recalled receiving her ballot to vote on the plan, which recommended a "yes" vote. She said it was "ludicrous that someone wants to speak for me."
"It's just all wrong," she said. "I want my day with Richard Sackler."
Michael Quinn, Isaacs' attorney, said the release for the Sacklers amounts to special protection that is not afforded to others.
"The Sacklers have at their availability, because of these releases, an escape hatch from liability, whereas people like you, me and Ellen would never have that ability to escape liability," he said. "We don't have billions of dollars to push a carcass of a company into bankruptcy and then hide behind it."
The third-party releases at issue in the case allow corporate owners and decision-makers to "shirk their responsibility for risky decisions," he said.
"If these nondebtor releases are upheld by the Supreme Court, then suddenly every company can act with impunity and the individuals will always be able to get away with it," Quinn said.
The impacts of a decision
Casey said third-party releases are common in major Chapter 11 bankruptcies and warned that if the court ultimately rejects Purdue's bankruptcy plan and says these protections are not allowed, it would have reverberations across the bankruptcy system. A decision is expected by the summer.
"There's lots of pending mass tort cases which they were planning on and hoping for third-party releases that would have to revisit this," Casey said.
One case involves the Boy Scouts of America, which entered Chapter 11 bankruptcy proceedings in 2020 after it was named in numerous lawsuits alleging sexual abuse. The organization emerged from bankruptcy in April with a reorganization plan that was approved by 85% of voting survivors, and then confirmed by a bankruptcy court followed by a federal district court.
The Boy Scouts' agreement includes a trust with nearly $2.5 billion in cash, as well as releases for nonprofit local councils, chartering organizations and other third parties, and victims have begun receiving payments from the trust. The group warned in a filing that if the Supreme Court finds these third-party releases are not allowed by the bankruptcy code, it would have "devastating consequences for both victims and venerable non-profit institutions in mass-tort situations."
The U.S. Conference of Catholic Bishops also urged the court to uphold the 2nd Circuit's decision, citing the releases from liability that were included in reorganization plans for dozens of dioceses who filed for bankruptcy after facing litigation related to sexual abuse allegations.
"Although the Church deeply regrets abuse and acknowledges the need to compensate victims, the Bankruptcy Code has long been understood to give them a fair, orderly, and lawful pathway out of the thicket of mass tort liability that now envelops them so that they can carry on the Church's mission," the group, whose members are active Catholic bishops, told the justices. "The court should not close off that pathway in this case."