Federal judges are asked to pave way for Purdue Pharma deal

Lawyers for OxyContin maker Purdue Pharma and many of those who had claims against the company over the toll of opioids joined together Friday to urge a federal judicial panel to allow a plan that would settle lawsuits across the country.

The legal question facing the judges from the 2nd U.S. Circuit Court of Appeals in New York: Does a bankruptcy judge have the authority to grant members of the Sackler family who own the company protection from civil lawsuits over the toll of opioids?

Sackler family members have insisted on the legal shield in exchange for providing the money behind the proposed settlement. And as their offer was boosted over more than two years of negotiations and mediation, most of the parties came to support the deal — including all the states.

But the U.S. Bankruptcy Trustee's Office, an arm of the Justice Department, has continued pushing back, asserting it's improper to provide a legal shield for members of the wealthy family who have not themselves filed for bankruptcy protection.

“A non-debtor says: `I can get the benefit of a discharge but I don't need to comply with any of the rules of the bankruptcy code and I don't need to contribute all of my assets,'” Michael Shih, a lawyer for the office, told a three-judge panel of the 2nd Circuit in a hearing Friday in New York City. “That's the fundamental inconsistency here.”

Lawyers for Purdue and others who support the settlement said that the protections for Sackler family members would be limited to cases involving opioids and are needed to get a fair outcome, rather than seeing the fight continue through many trials all over the country.

“The releases at issue are not only important to the plan, they are absolutely essential,” said Mitchell Hurley, a lawyer for the official committee of unsecured creditors in Purdue's bankruptcy case told the judges.

Purdue lawyer Marshall Huebner pointed out that unlike other parties, the Bankruptcy Trustee's office and federal government are not in line to receive any money from the settlement. He told the judges that allowing lawsuits against the Sacklers to move forward might not result in more money to fight the opioid crisis — in part because most of the family's wealth is in trusts, much of it overseas.

“We are bringing in billions and billions of dollars to save lives,” Huebner told the court.

All three judges asked pointed questions on the positions of both Huebner and Shih.

The 2nd Circuit judges did not indicate when they would rule, but it often takes weeks or months after a hearing.

No matter how the 2nd Circuit rules on the case, an appeal to the U.S. Supreme Court is possible. If Purdue and its allies win, they still must go back to the bankruptcy judge to get the latest version of the deal approved.

Under the planned deal, Sackler family members would contribute $5.5 billion to $6 billion over time, plus give up ownership of the company. Purdue would then become a new entity known as Knoa Pharma that would dedicate its profits to fighting the nation's opioid epidemic.