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Purdue Pharma Appeals Judge Strikes Down Opioid Settlement (3)

Dec. 17, 2021, 3:13 AM

Purdue Pharma LP’s multi-billion dollar opioid settlement was dealt a surprising blow on Thursday when a federal judge reversed a bankruptcy court’s earlier approval of the deal.

U.S. District Judge Colleen McMahon on Thursday struck down the OxyContin maker’s sweeping opioid settlement, putting the accord at risk of collapsing. Supporters of the deal have warned that the alternative to a settlement is years of costly -- and potentially fruitless -- litigation.

Purdue Pharma said in a statement that it will appeal. In the meantime, it’s a victory for a handful of state attorneys general and an arm of the U.S. Justice Department, which have been working to overturn the settlement.

Attorneys general from states including Washington, Connecticut and Maryland want to block the deal so they can keep suing Purdue’s owners, members of the billionaire Sackler family, over their role in the opioid crisis. The settlement would prevent that, giving Purdue’s owners broad legal protections from opioid-related civil lawsuits. McMahon said the drugmaker’s bankruptcy judge erred in granting those releases.

U.S. Attorney General Merrick Garland said the Justice Department was pleased with the decision.

“The bankruptcy court did not have the authority to deprive victims of the opioid crisis of their right to sue the Sackler family,” Garland said in a statement.

California’s Attorney General Rob Bonta had also objected to the settlement.

“The Sackler Family must be held accountable for their contribution to the ongoing opioid crisis,” Bonta said in a statement. “The bankruptcy plan would have allowed them to exchange money for lifetime immunity -- falling far short of true accountability,”

Previously: Sacklers to Exit From Complex Purdue Bankruptcy With Billions

The settlement would route billions of dollars to opioid abatement efforts and see Purdue’s assets turned over to the states, cities and counties suing over its role in the crisis. Members of the Sackler family have agreed to contribute more than $4 billion to the deal and leave the opioid business entirely.

The judge’s ruling “will delay, and perhaps end, the ability of creditors, communities, and individuals to receive billions in value to abate the opioid crisis,” said Steve Miller, chairman of the Purdue Pharma Board of Directors.

New York Attorney General Letitia James, whose office took part in negotiating the settlement, said it will be up to an appeals court to determine whether the plan will be confirmed.

“We will get justice for the American people,” James said in a statement.

In her ruling, McMahon said the bankruptcy court lacked authority to grant the kind of releases at issue. So-called third party releases have divided federal courts across the country for decades, she said, adding that her ruling won’t be the last word on the subject.

“This issue has hovered over bankruptcy law for thirty-five years,” McMahon said in her written ruling. “It must be put to rest sometime; at least in this Circuit, it should be put to rest now.”

Read More: Purdue Pharma’s Opioid Deal Hinges on Divisive Legal Maneuver

In September, U.S. Bankruptcy Judge Robert Drain signed off on the deal after a lengthy trial.

During the appeal, McMahon questioned whether Purdue’s owners might have “abused” the bankruptcy system with the settlement. She scrutinized how aggressively members of the Sackler family siphoned money out of the drugmaker in the years following the company’s 2007 guilty plea over how it marketed OxyContin.

Representatives for members of the Sackler family didn’t immediately respond to requests for comment Thursday evening.

(Updates with comments from Purdue, U.S. Attorney General)

--With assistance from Dawn McCarty.

To contact the reporter on this story:
Jeremy Hill in New York at jhill273@bloomberg.net

To contact the editors responsible for this story:
Claire Boston at cboston6@bloomberg.net

Michael B. Marois, Joe Schneider

© 2021 Bloomberg L.P. All rights reserved. Used with permission.