Supreme Court pauses Purdue settlement, delaying payments to states

The court agreed to review a provision that shielded the Sackler family from lawsuits. But other opioid settlements are unaffected.

A provision in the settlement shields members of the Sackler family from lawsuits.Seth Wenig/Associated Press

The Supreme Court on Thursday put on hold the nationwide bankruptcy settlement with OxyContin maker Purdue Pharma, agreeing to a request from the Biden administration to review a provision that shielded members of the Sackler family, who own the company, from lawsuits.

Massachusetts was among a dozen states that participated in the settlement struck in 2021, led by Governor Maura Healey when she was attorney general. Purdue’s marketing practices have been blamed for triggering the opioid crisis that continues to claim 2,000 lives a year in Massachusetts.

Under the settlement, the Sackler family would have paid up to $6 billion, of which $90 million would flow to Massachusetts.

Healey declined to comment on the Supreme Court ruling Thursday. But a spokesperson for Attorney General Andrea Campbell lamented the delay caused by the court review.

“The much-needed funds must be returned to our communities for prevention, harm reduction, treatment, and recovery efforts,” Campbell’s office said in a statement. “At the same time, we have always believed and continue to believe the Sacklers must be held accountable. This office has made every effort to ensure both, and we will continue to work toward those goals.”

The Supreme Court is expected to hear arguments before the end of the year.

Ed Neiger, a lawyer representing individual victims of the opioid crisis who would be in line for a portion of the settlement, said it was a disappointment they would have to wait longer, but also praised the court for agreeing to hear the case so soon. “They clearly see the urgency of the matter,” he said.

The key aspect of the settlement now being reviewed by the high court is the protection from additional lawsuits the Sackler family would receive in exchange for contributing up to $6 billion to fight the opioid epidemic. Under the agreement, Purdue Pharma would emerge from bankruptcy as a new company.

Importantly, members of the Sackler family are not in bankruptcy themselves.

After the agreement was upheld by a federal appeals court, the Biden administration asked the Supreme Court to intervene. On Thursday the court agreed to put the agreement on hold to consider whether bankruptcy law authorizes a blanket shield from lawsuits filed by all opioid victims.

The US Bankruptcy Trustee, represented by the Justice Department, opposed releasing the Sackler family from legal liability because it would apply to “an untold number of claimants who did not specifically consent to the release’s terms,” Solicitor General Elizabeth Prelogar said in a court filing.

She added that, if left standing, the agreement would provide “a roadmap for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability. And if such abuses are permitted, the gamesmanship that is sure to follow will only amplify the harms to victims.”

Connecticut was also a party to the agreement, but its attorney general, William Tong, took the unusual step of opposing the liability protection for the Sacklers, saying he reserved the right to participate in a court challenge of it.

Those provisions “enable the worst offenders to cram settlements down the mouths of dissenting victims,” Tong said in a statement. “From day one, this has been a fight for justice for the thousands of victims and survivors of Purdue’s misconduct and the Sackler family’s craven pursuit of wealth.”

Francis C. Morrissey, a bankruptcy lawyer and Boston University law professor, said the dispute belongs before the Supreme Court because it involves a controversial practice called “nonconsensual third-party release.” This occurs when parties who are not the debtors before the bankruptcy court, such as the individual Sackler family members, are released from liability without the consent of all those who potentially have a claim against them.

Appellate courts have differing views on the question, making it perfect fodder for the high court, Morrissey said.

The Purdue case hinges on getting “the most money possible to people injured by opioids” while also weighing whether “we let these third parties who are getting a release off the hook too easily,” Morrissey said in an interview. “The third parties are purchasing the release by funding victims of the opioid epidemic. Some people argue that if you want a release in bankruptcy, you should have to file for bankruptcy yourself.”

Currently, there is “no uniform law” on the matter, he said, adding, “This issue cries out for a legislative resolution. Congress hasn’t expressly addressed it, and the court of appeal has taken different views.”

The Purdue settlement is separate from $1 billion that Massachusetts expects to receive from other opioid makers, distributors, and pharmacies over 18 years. The state has already begun spending some of those funds on initiatives such as naloxone distribution and opioid treatment programs, as well as allocating money to individual cities and towns to address opioid addiction locally.

That program and the municipal allocations are not affected by the Supreme Court decision Thursday.

But it does mean that the state will have to wait longer for the additional $90 million.

Massachusetts was the first state to sue Purdue executives. In the 2018 suit, Healey accused them of aggressively marketing their powerful pills and misleading physicians and patients about the risks, contributing to the overdose-related deaths of more than 670 Massachusetts residents who were prescribed the company’s drugs since 2009.

Material from the Associated Press was used in this report. Matt Stout of the Globe staff contributed reporting.