Three New England states claim victory after judge overturns Purdue Pharma’s sweeping opioid settlement

"Pill Mann" made by Frank Huntley of Worcester, Mass., right, from his opioid prescription pill bottles, is displayed during a protest by advocates for opioid victims outside the Department of Justice, Friday, Dec. 3, 2021, in Washington. A federal judge has rejected OxyContin maker Purdue Pharma’s sweeping deal to settle thousands of lawsuits over the toll of opioids. U.S. District Court Judge Colleen McMahon in New York found flaws in the way the bankruptcy settlement protects members of the Sackler family who own the company from lawsuits. Carolyn Kaster/Associated Press

In July, Massachusetts was among 15 states to reach a settlement with Purdue Pharma that required the disgraced drug maker to pay more than $4 billion for its role in the opioid crisis.

But last week, a federal judge overturned the settlement plan, ruling the bankruptcy court that approved the deal didn’t have the authority to release the Sackler family from liability in civil cases related to its company’s production of Oxycontin, a highly addictive prescription painkiller.

In states that challenged the proposed settlement, including Rhode Island, Connecticut, and Vermont, officials hailed the judge’s decision.

“You don’t need a federal judge to tell you when someone has a ton of money and is trying to get out of the claims against them through the bankruptcy process, there’s something very wrong with the process,” Rhode Island Attorney General Peter Neronha said. The state was due to receive $2.4 million a year for nine years under the settlement that was overturned by the court.

“That money is just insufficient,” Neronha said. Last year, a record 384 Rhode Islanders died after accidentally overdosing on drugs.

Massachusetts Attorney General Maura Healey had supported the proposed settlement, which called for Purdue to stop operating or be sold by 2024 and release more than 30 million documents to the public. In a statement, she said her goal “has always been to do right by the families who suffered from the Sacklers’ greed.”

“They are the reason I brought the first lawsuit exposing the Sacklers’ misconduct; the reason I fought for full disclosure, compensation, treatment, and harm reduction; and the reason I testified before Congress against the abuse of our bankruptcy laws,” Healey said. “The test for success in this case is whether we deliver for the people the Sacklers hurt.”

Under the terms of the settlement, Massachusetts was due to receive an estimated $90 million.

Purdue Pharma, which is headquartered in Stamford, Conn., said it plans to appeal the decision, which in exchange for immunity from future opioids claims, required the family to pay $4.325 billion over nine years to help combat the epidemic.

Steve Miller, chairman of the Purdue Pharma board of directors, said in a statement that the ruling jeopardizes those funds.

“These funds are needed now more than ever as overdose rates hit record-highs, and we are confident that we can successfully appeal this decision and deliver desperately needed funds to the communities and individuals suffering in the midst of this crisis,” he said.

But the eight states and others who challenged the settlement alleged that the Sacklers manipulated the legal process by withdrawing billions of dollars from Purdue and relinquishing their roles in the company in the years before the business sought bankruptcy protections in 2019. No family members are debtors in the bankruptcy proceedings.

In her ruling, US District Court judge Colleen McMahon wrote that the plan was put in motion after Purdue and three top executives admitted in 2007 to federal criminal and civil charges brought over marketing practices for OxyContin. Between 2008 and 2017, the Sacklers withdrew about $10.4 billion from Purdue and deposited more than half that sum in off-shore companies or trusts that fall outside the jurisdiction of US bankruptcy courts, she wrote.

When Purdue’s bankruptcy discussions began, the Sacklers offered to contribute to the settlement “if — and only if — every member of the family could ‘achieve global peace’ from all civil (not criminal) litigation, including litigation by Purdue to claw back the money that had been taken out of the corporation,” McMahon wrote.

In 2018, the city of Boston sued Purdue Pharma and others, seeking to be reimbursed for more than $64 million spent fighting the opioid epidemic. The lawsuit is pending in Suffolk Superior Court.

On Friday, Mayor Michelle Wu said McMahon’s decision sends a “powerful message that our courts are not the tools of powerful companies and billionaires.”

“The Sacklers must answer for the harms they have caused to Bostonians and countless Americans impacted by the opioid epidemic,” Wu said in a statement.

Vermont Attorney General TJ Donovan said the ruling allows the state’s legal claims against the Sackler family to proceed. And Connecticut Attorney General William Tong hailed the decision as a “seismic victory for justice and accountability.”

“Connecticut will not allow billionaire wrongdoers to hide behind the bankruptcy code to shield their blood money and escape justice,” Tong said. “The Sacklers must and will be held accountable for the devastation they have caused.”

In Massachusetts, 1,613 Massachusetts residents died of opioid overdoses during the first nine months of the year, a slight percent increase over the same period in 2020. Nancy Paull, chief executive at SSTAR, an addiction treatment provider in Fall River, praised the decision to scrap the settlement plan.

“I hope that there will be a fairer settlement,” she said. “We continue on a daily basis to see the destruction that has been wrought by the Sackler family and their company and, of course, made worse by the pandemic.”

The state’s congressional delegation has enthusiastically backed a bill called “The Sackler Act” that limits a loophole that allows company owners to seek protection from civil liability in bankruptcy cases where they are not named as debtors.

All nine members of the House of Representatives from Massachusetts are co-sponsoring the legislation, which was introduced in March. US Senator Elizabeth Warren of Massachusetts is co-sponsoring the Senate version of the bill.

“The Sacklers, who made billions addicting Americans to deadly opioids, abused the bankruptcy system to avoid accountability,” Warren posted on Twitter. “I applaud the court’s decision to reverse this settlement that was wrong on the law. This is a major step toward justice.”

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