A federal appeals court cleared the way for the maker of OxyContin to settle thousands of legal claims tied to the opioid epidemic while shielding the wealthy owners of Purdue Pharma, the Sackler family, from future lawsuits.
Under the plan approved Tuesday by the 2nd U.S. Circuit Court of Appeals in New York, members of the wealthy Sackler family would give up ownership of Stamford, Connecticut-based Purdue, which would become a new company known as Knoa, with its profits being sent to a fund to prevent and treat addiction.
Family members would also contribute $5.5 billion to $6 billion in cash over time, or around half of what the court found to be their collective fortune, much of it held offshore. A chunk of that money — at least $750 million — is to go to individual victims of the opioid crisis and their survivors. Payments are expected to range from about $3,500 to $48,000.
Tuesday's decision also protects members of the Sackler family from lawsuits over the toll of opioids, even though they did not file for bankruptcy.
The court's ruling reversed a 2021 ruling that found bankruptcy court judges did not have the authority to approve a settlement that would offer bankruptcy protections for those who have not filed for bankruptcy.
Those protections are at the heart of the proposed deal that would end claims filed by thousands of state, local and Native American tribal governments and other entities. Sackler family members have been clear that without the protections, they won't hold up their part of the deal.
"It's a great day for victims, some of who desperately need the money and have been waiting for this day for a long time," said Ed Neiger, a lawyer representing individual victims.
Cheryl Juaire, a Massachusetts woman who lost two sons to overdoses, said she does not know what size payment to expect. "My children are gone and there's nothing I can do to bring them back," she said, but she said the funds would help her sons' children. "They'll have braces, they'll have glasses, they'll have things they need that they wouldn't have otherwise."
Sackler family members and Purdue also praised the decision.
"The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need," family members who own Purdue said in a statement Tuesday. "We are pleased with the Court's decision to allow the agreement to move forward and look forward to it taking effect as soon as possible."
One non-financial term of their part of the deal is already fulfilled: listening silently, via Zoom, to the stories of some of the people harmed by their company's drug.
Purdue issued its own statement, calling the ruling "a victory for Purdue's creditors, including the states, local governments, and victims who overwhelmingly support the Plan of Reorganization." The company said it would focus on delivering "billions of dollars of value for victim compensation, opioid crisis abatement, and overdose rescue medicines."
Several states had withheld support for the plan, but after a new round of negotiations last year, all of them came on board. That left just one high-profile objector: the Office of the U.S. Bankruptcy Trustee, an arm of the Justice Department.
A lawyer from that office told the 2nd Circuit in April 2022 that it's a "fundamental inconsistency" that people who do not seek bankruptcy protection and have to give up most of their assets could be exempted from some lawsuits.
The Justice Department did not immediately say whether it would appeal Tuesday's ruling to the U.S. Supreme Court, ask the Circuit Court to review its decision or accept the ruling as is. A spokesperson declined comment Tuesday.
Even without an appeal, it could be months before the bankruptcy plan takes effect.
Some activists have also opposed the settlement and called for Sackler family members to be prosecuted for crimes. While the settlement wouldn't block that, there's no indication that charges are forthcoming.
While Sackler family members still technically own Purdue, they stopped receiving money from the company years ago.
All three federal appeals judges who heard the Purdue case last year agreed that the Sackler family can be protected from lawsuits. In her majority opinion, Judge Eunice Lee said that the lawsuit protection is needed to ensure the fair distribution of money in the case.
One judge — Richard Wesley — said in a separate opinion that he had agreed reluctantly, noting that while courts allow such deals they're not explicitly allowed under bankruptcy law.
Wesley noted that the deal is non-consensual: "It binds consenting and objecting parties, without providing an opt-out option to those who object."
Purdue is perhaps the highest-profile player in the opioid industry. But several other drugmakers, distribution companies and pharmacies also have been sued by state and local governments. While a handful of cases have gone to trial, many are being settled.
The total value of proposed and finalized settlements in recent years is more than $50 billion. Companies that have reached deals include drugmakers Johnson & Johnson and Teva; distribution giants AmerisourceBergen, Cardinal Health and McKesson; and pharmacy chains CVS, Walgreens and Walmart.
Only one other major opioid lawsuit settlement included payments for victims.
Most of the money is required to be used to fight the opioid crisis, which has been linked to more than 500,000 deaths in the U.S. over the past two decades, including more than 70,000 a year recently.
In recent years, most of the deaths have been connected to fentanyl and other illicit synthetic opioids, not prescription painkillers.