Supreme Court’s Sackler Ruling Upends Bankruptcy Settlements

Lawsuits over toxic products. Compensation for survivors of sexual abuse. Deals to shield executives of companies driven to bankruptcy.

In one fell swoop, the US Supreme Court upended how they may all play out.

The court’s 5-4 decision to scuttle Purdue Pharma LP’s $6 billion opioid settlement, ruling that it improperly protected the OxyContin maker’s billionaire owners, is set to have ripple effects that stretch far beyond the company and the victims of the drug crisis. It stands to change the way troubled organizations have used Chapter 11 for decades to survive onslaughts of lawsuits.

“Bankruptcy lawyers don’t prosecute holy ...