U.S. Supreme Court

Supreme Court temporarily blocks $6B opioid settlement, agrees to consider Sackler family shield

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The U.S. Supreme Court on Thursday agreed to consider the propriety of a bankruptcy plan for OxyContin maker Purdue Pharma that shielded the company’s current owners from future civil liability in exchange for a $6 billion payout.

The Supreme Court temporarily paused the Chapter 11 reorganization plan and granted cert Thursday, report the New York Times, Reuters and SCOTUSblog.

The 2nd U.S. Circuit Court of Appeals at New York had approved the plan, in which the Sackler family agreed to pay $6 billion to resolve opioid litigation in exchange for future civil liability protection.

It’s not unusual for companies in bankruptcy to seek liability protection, but in this case, a nondebtor—the Sackler family—was shielded without filing for bankruptcy, the New York Times explains. The 2nd Circuit held that the Bankruptcy Code permits a release of claims against nondebtors by third-party litigants who did not consent to it.

Federal appeals courts are split on the issue. The majority are in agreement with the 2nd Circuit, the appeals court said in its May 30 decision.

The U.S. Department of Justice had argued that allowing the 2nd Circuit decision to stand “would leave in place a roadmap for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability.”

The Supreme Court will hear arguments in December.

The case is Harrington v. Purdue Pharma.

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