Court wrestles with OxyContin maker’s bankruptcy deal, with billions of dollars at stake

WASHINGTON (AP) — The Supreme Court on Monday wrestled with a nationwide settlement with OxyContin maker Purdue Pharma that would shield members of the Sackler family who own the company from civil lawsuits over the toll of opioids.

The justices seemed by turns relucant to break up an exhaustively negotiated agreement, but also leery of somehow rewarding the Sacklers.

The agreement hammered out with state and local governments and victims would provide billions of dollars to combat the opioid epidemic. The Sacklers would contribute up to $6 billion and give up ownership of the company, but retain billions more. The company would emerge from bankruptcy as a different entity, with its profits used for treatment and prevention.

The high court put the settlement on hold during the summer, in response to objections from the Biden administration.

"It seems as though the federal government is standing in the way of that as against the huge, huge, huge majority of claimants," Justice Elena Kagan said.

But later, Kagan also said that in bankruptcies, protection against lawsuits has a price.

"You get a discharge when you put all your assets on the table," she said. "The Sacklers didn't come anywhere close to doing that."

The issue for the justices is whether the legal shield that bankruptcy provides can be extended to people such as the Sacklers, who have not declared bankruptcy themselves. Lower courts have issued conflicting decisions over that issue, which also has implications for other major product liability lawsuits settled through the bankruptcy system.

The U.S. Bankruptcy Trustee, an arm of the Justice Department, contends that the bankruptcy law does not permit protecting the Sackler family from being sued. During the Trump administration, the government supported the settlement.

Justice Department lawyer Curtis Gannon told the court

Monday that negotiations could resume, and perhaps lead to a better deal, if the court were to stop the current agreement.

Proponents of the plan said third-party releases are sometimes necessary to forge an agreement, and federal law imposes no prohibition against them.