Tong: Settlement rejection ‘seismic’
Attorney general calls decision a huge win for opioid drug victims
A federal judge ruled Thursday to reject the controversial bankruptcy settlement of Purdue Pharma, the manufacturer behind opioid drug Oxycontin, which would have shielded members of the Sackler family from facing litigation.
The decision by U.S. District Judge Colleen Mcmahon in New York relates to an unanswered question over a technical part of bankruptcy law: whether federal bankruptcy court has the authority to release the Sacklers, who are not declaring bankruptcy themselves, from pending and future litigation.
The case was led by a small group of state attorneys general and spearheaded by Connecticut Attorney General William Tong, who called the decision “a huge win for victims, survivors and their families, and a huge victory for justice and accountability.”
“This is a huge case, a huge deal, and this decision is a seismic, pivotal landmark decision,” Tong said Friday. “It establishes the primacy of states, and that the rich and the powerful can’t hide behind bankruptcy judges, bankruptcy law and bankruptcy courts to shield themselves.”
While Purdue officials said the decision will not affect company operations, “it will delay, and perhaps end, the ability of creditors, communities, and individuals to receive billions in value to abate the opioid crisis,” Steve Miller, chairman of the Purdue Pharma L.P. Board of Directors, said in a statement.
The company plans to appeal the decision, Miller wrote.
Purdue filed for Chapter 11 bankruptcy in 2019 in the wake of thousands of lawsuits that alleged the company ignited the ongoing opioid crisis by encouraging doctors to prescribe their drug Oxycontin.
The opioid crisis continues to ravage Connecticut and communities across the country.
Opioids have reportedly been linked to the deaths of more than 500,000 people across the country over the last 20 years. Connecticut confirmed just under 1,400 drug overdose deaths in 2020, and is on pace for similar numbers this year.
To appease creditors, Purdue negotiated a deal that would see members of the Sackler family give up ownership of the company and pay $4.5 billion to help fight the opioid crisis. The company would be restructured to still sell opioids, but use the profits to fight the crisis and combat addiction.
Tong called this arrangement “absurd and perverse.”
“They make ungodly amounts of money and get extraordinarily wealthy off of this crisis, and now they’re going to get rich again by selling us remedies and therapies and medicine to overcome the addictions that they started?” Tong said.
As a linchpin in the agreement, members of the Sackler family would be released from the 860 lawsuits filed against them and others in the future.
Tong, with a handful of other attorneys general, argued that this kind of release —known as nonconsensual, nondebtor release — shouldn’t be allowed, for multiple reasons.
Members of the Sackler family, though in ownership of a company which has declared bankruptcy, are not bankrupt themselves, Tong argued. For example, the family withdrew over $10 billion from the company between 2008 and 2018, prior to the company’s bankruptcy, according to a court hearing.
Tong also argued that states, which have sovereignty, do not count as typical creditors, and should not be forced to give up their legal claims (in this case, against Purdue Pharma) because of a ruling from a federal bankruptcy court. “We never gave up our rights to let some federal bankruptcy judge tell us ‘No, you can’t prosecute your law enforcement claims against the Sacklers,’ ” Tong said. “On what basis?”
Mcmahon’s ruling Thursday focused on whether federal bankruptcy court has the ability to authorize the kind of release the Sackler family would receive under such an agreement.
She indicated her decision would likely be heard next by the U.S. 2nd Circuit Court of Appeals, but Tong has a “high degree of confidence” Mcmahon’s decision will stand.
“We’ve proven that the Sacklers cannot use the bankruptcy of the company to shield themselves,” Tong said. “They can’t use the bankruptcy of Purdue Pharma to somehow abuse that process to get themselves a shield against liability going forward.”
Tong was joined by attorneys general from California, Delaware, the District of Columbia, Maryland, Oregon, Rhode Island, Vermont and Washington.