An Appeals Court Gave the Sacklers Legal Immunity. Here’s What the Ruling Means.

On Tuesday, a federal appeals court gave the billionaire Sackler family the legal golden keys they’ve been looking for for almost four years. The Sackler family will be insured against all civil opioid claims related to their company, Purdue Pharma, the manufacturer of the opioids. Prescription pain reliever OxyContin. In return, the companies agreed to pay up to $6 billion to thousands of plaintiffs in pending lawsuits.

The ruling was part of the court’s review of the City of Purdue’s bankruptcy recovery plan, which filed for Chapter 11 protection in September 2019. Bankrupt companies are customarily protected from legal claims. Owners who have not filed for bankruptcy generally do not file for bankruptcy.

When the company filed for bankruptcy, Sacklers faced about 400 lawsuits over its role in Purdue’s opioid business. They have long argued that the company’s liability shield should extend to them. Without such protection, they said, there would be no incentive to pay billions of dollars to settle all the opioid cases and help the company resolve bankruptcy.

Legal experts say the US Court of Appeals for the Second Circuit’s ruling will have ramifications for Purdue in particular, and for owners of companies seeking bankruptcy in general.

Is that the end of the matter?

not yet. The ruling will resolve a major hurdle on the winding road. But before funds can be disbursed to states, communities, tribes and individuals, an updated version of the bankruptcy plan must be filed with a federal district judge, who must apply the Court of Appeals’ instructions. . The plan is now in its 12th amendment and will be returned to the US Bankruptcy Court in White Plains, New York for final approval and control.

Given that timing predictions have been wildly out of whack at each stage of the Purdue bankruptcy case, it’s unwise to estimate how long it will take before the first check is mailed.

What does this mean for the Sacklers?

The family has been out of Purdue’s board since 2018. Once the bankruptcy takes effect, the family will no longer be owners of the company and will not receive any compensation. But they will still be very wealthy.

Sackler’s total assets are estimated at $ 11 billion, and the equivalent amount is said to be in offshore accounts. Most of the payments will be made over nine years, mainly because: Investment returns will be enhanced by the eventual sale of our international opioid business.

The Sackler family has long been a philanthropist and has its name engraved on countless buildings, but in recent years many institutions have removed the Sackler name from public view. Under the bankruptcy settlement, U.S. academic, medical and cultural institutions agreed to remove Sackler’s name from their physical facilities so long as the program agreed not to disrespect Sackler.

What does this mean for Purdue?

Purdue Pharma, which had been aggressively marketing OxyContin as a non-addictive, sustained-release pain reliever since its introduction in the 1990s, ceased to exist and transferred its assets to a newly formed company, Knoa. be done. The company will manufacture opioid addiction and opioid recovery drugs at no profit, while continuing to manufacture existing drugs such as OxyContin, with profits to help seed the settlement fund. To mitigate the risk of illegal diversion of our products, Knoa is monitored by independent monitors.

What does that mean for states, counties, cities and towns?

Over time, they will receive a combined $6 billion in cash, plus insurance payouts. Each state has its own way of distributing the Purdue Fund, but the primary mission is that the fund will be used primarily for measures to mitigate the opioid crisis, including treatment and prevention programs.

What does this mean for tribes?

Each of the 574 federally recognized Native American tribes, not all of whom sued Purdue, is entitled to approximately $161 million in payments from tribal trusts established under the settlement.

What happens to individual victims?

A fund of $700 million to $750 million will be distributed to victims and their families of those who have become addicted to OxyContin or died of an overdose. About 138,000 complaints were filed. Payments are expected to range from approximately $3,500 to $48,000. Parents of about 6,550 children with a history of neonatal abstinence syndrome could each receive about $7,000. Although the payout is relatively small, it is one of the few opioid settlements that secure private funding negotiated by pharmaceutical companies.

Will this judgment be appealed?

necessarily. After months of intense arbitration, when the Sacklers increased their offer by about $1.73 billion to the current estimate of $5.5 billion to $6 billion, a number of states were opposed to the plan and the Sacklers’ immunity claims. withdrew its objection.

The strongest candidate to continue to attack the Sacklers’ legal shield, which is the foundation of the settlement itself, is the U.S. Trustees Program, a department within the Justice Department that oversees bankruptcy proceedings. The agency has not officially commented on Tuesday’s ruling.

The larger question at the heart of this case is whether the bankruptcy judge has the power to permanently bar plaintiffs from proceedings against business owners who do not seek personal bankruptcy protection. The US Trustee Program has long argued that doing so would strip plaintiffs of basic due process rights.

A federal appeals court is pending. The Ninth, Tenth, and Fifth Circuits are among the circuits that prohibit the practice of bankruptcy cases filed in their territory.

However, the 6th and 7th Circuits have ruled that owners who have materially contributed to the resolution of their bankruptcy restructuring may benefit from a permanent injunction against them.

The Second Circuit bankruptcy ruling covers cases filed in Connecticut, Vermont and New York, where the Southern District in particular is a popular location for large-scale bankruptcies. The Second Circuit’s opinion on this issue has been mixed.

The ruling in the Purdue case, which now favors the Sacklers, has further cemented the group’s position that the practice can continue if certain criteria are met.

Given the Federal Circuit’s conflicting opinions, would the U.S. Trustee Program still persist in taking the issue to the Supreme Court?

Lindsay Simon, a bankruptcy expert at the University of Georgia Law School, is skeptical, though she doesn’t rule it out. Many people hate the Sacklers and the result, but “states and other claimants want the money,” she said.

She added, “I don’t think it’s in anyone’s interest to expedite the resolution of this case.”