Purdue Urges Justices to Reject DOJ Push to Halt Bankruptcy Plan

Purdue Pharma LP urged the US Supreme Court to reject the Justice Department’s request to block the opioid manufacturer’s bankruptcy plan from taking effect.

“This is a baseless stay application that, if granted, would harm victims and needlessly delay the distribution of billions of dollars to abate the opioid crisis,” the drugmaker told the high court Friday.

Supreme Court Justice Sonia Sotomayor on July 28 asked for responses to a request by Solicitor General Elizabeth Prelogar to stay the Chapter 11 plan. The plan would shield the company’s Sackler family owners from future exposure to opioid victim lawsuits, which Prelogar has called “an abuse of the bankruptcy system” that raises constitutional questions.

The controversial third-party releases would be allowed for the Sackler family members under the plan even though they didn’t file for bankruptcy.

The US government is seeking to pause implementation of the bankruptcy plan as it prepares to ask the justices to take up the case. Pausing now would avoid issues over the “equitable mootness” doctrine, the Justice Department said. The doctrine is a court-made rule that’s sometimes raised to stop parties from disturbing the implementation of court-approved bankruptcy plans.

Sackler family members struck a settlement in which they would pay $6 billion in exchange for being released from legal liability as part of the Chapter 11 plan. The US Court of Appeals for the Second Circuit in May allowed Purdue to implement the plan, overturning a district court finding that releases weren’t allowed. The Second Circuit last week allowed the settlement to go into effect despite the Supreme Court’s pending review.

Prelogar is representing the Justice Department’s bankruptcy watchdog, the US Trustee, in opposing the plan. The solicitor general last week told the Supreme Court that allowing the plan to take effect “would leave in place a roadmap for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability.”

A group of about 60,000 personal injury opioid victims and a committee of unsecured creditors on Friday each urged the justices to reject pausing the plan and to decline taking up the case.

Several states including California, Connecticut, and Delaware told the Supreme Court they would take no position on the pause request because had already settled with Purdue. A group of Canadian municipalities backed the DOJ and urged the justices to pause the plan.

The case is William K. Harrington v. Purdue Pharma LP, U.S., No. 23A87, response 8/4/23.