Supreme Court appears torn during Purdue opioid settlement arguments

The Supreme Court on Monday seemed torn about both the merits and the legality of a proposed Purdue Pharma bankruptcy plan that would allocate billions of dollars to help ease the nation's opioid crisis but also shield the family that owns the company from future lawsuits.

Justices across the ideological spectrum asked tough questions of lawyers from the Justice Department, which opposes the deal, and attorneys for Purdue and the vast number of parties that have an interest in the outcome.

Those parties say unraveling the settlement plan would leave some victims with nothing.

"Forget a better deal - there is no other deal," said Washington lawyer Pratik Shah, who represents the interests of states, hospitals, tribes, insurance companies, individual victims and other creditors who agreed to the settlement.

But Curtis E. Gannon, representing the Justice Department, said that claim already has been proven untrue. After some states and individuals objected to a previous version of the plan, he said, the Sackler family - which owns Purdue - ponied up more cash, increasing their contributions from more than $4 billion to about $6 billion, to be paid over nearly two decades.

Gannon said another settlement could be worked out that doesn't necessarily involve releases or bankruptcy. "We do hope there is another deal at the end of this," he said.

Purdue declared bankruptcy in 2019, as it faced thousands of lawsuits and allegations that the company helped fuel the opioid crisis by the marketing of its blockbuster painkiller OxyContin. But members of the Sackler family did not themselves file for bankruptcy.

The legal issue before the court is whether, according to federal bankruptcy laws, the Sacklers can be spared from future opioid-related litigation.

A panel of the U.S. Court of Appeals for the 2nd Circuit said yes.

The panel found authorization for such an arrangement in two provisions of the code. One says that a bankruptcy court "may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of" the law. The other says that a plan may "include any other appropriate provision not inconsistent with the applicable provisions of" the code.

The appeals court interpreted that to mean a bankruptcy court could approve provisions not expressly forbidden by the code.

On Monday, Justice Brett M. Kavanaugh seemed to agree. He said that "30 years of bankruptcy practice" allows courts broad leeway to determine the best outcome in such complicated reorganization cases. Kavanaugh seemed critical of the decision of the federal government, which he said has "no stake in this at all," to try to stop the plan on the "theoretical idea" there might be ways to get more money from the Sacklers.

Justice Elena Kagan also stressed the pragmatic aspects of the deal, noting that overwhelming majorities of those victims who voted on the plan approved it. They have reason to think the Sacklers are "the worst people on earth," Kagan said, but they still favor the deal.

But others - Justice Neil M. Gorsuch and Ketanji Brown Jackson, for instance - noted that other regional appeals courts do not allow plans that terminate, without their consent, the rights of alleged victims to sue parties who are not technically part of the bankruptcy proceedings.

Jackson said that prohibition should be especially true in a case such as this one, where the Sacklers took money out of Purdue and put it in offshore accounts, reducing the amount to be gained by creditors suing the company. The Justice Department has said that the Sacklers withdrew more than $10 billion from the company; the family has said nearly half of that sum was paid in mandatory taxes.

The high court in August put the deal on hold to consider the 2nd Circuit's ruling.

The closely watched bankruptcy fight is part of a national reckoning over the role of businesses in the unprecedented public health crisis.