Why did the Supreme Court reject the Purdue Pharma settlement?

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Supreme Court Rejects Purdue Pharma Settlement Shielding Sackler Family

The US Supreme Court has rejected a US$6 billion settlement between Purdue Pharma and the Sackler family, which would have protected the family from future litigation related to the opioid epidemic. The court's 5-4 decision determined that the bankruptcy code does not grant authority for such broad legal immunities to be issued in this manner. The Justice Department had argued against the settlement, asserting that the Sackler family, who controlled Purdue Pharma, should not receive sweeping legal protections.
Lack of Full Asset Contribution

Justice Neil Gorsuch, writing for the majority, highlighted that the Sackler family had not committed their complete assets to compensate opioid victims while simultaneously seeking to extinguish all claims against them. This imbalance, where substantial legal protection was sought without a commensurate contribution of all family wealth, was a key factor in the court's rejection of the proposed order. The ruling indicated that the bankruptcy code does not support shielding individuals from all claims, including those for fraud or wrongful death, without their full and explicit consent and a comprehensive commitment of assets.
Concerns Over Broad Immunity

The rejected settlement, initially agreed upon in 2022, would have provided US$6 billion for victims and, crucially, shielded the families of Raymond and Mortimer Sackler from all future civil claims. This broad release from liability was a point of contention, with the Justice Department accusing the Sacklers of withdrawing approximately US$11 billion from Purdue Pharma in the decade leading up to the company's bankruptcy filing. The court's majority opinion focused on the interpretation of the bankruptcy code, questioning its capacity to authorize such extensive releases of liability for parties not directly filing for bankruptcy themselves.
Dissenting Views on Victim Compensation

In dissent, Justice Brett Kavanaugh argued that the Supreme Court's decision was legally flawed and detrimental to the thousands of opioid victims and their families. He contended that the rejected plan represented a significant effort by the bankruptcy system to provide compensation, and that virtually all affected parties and creditors had strongly supported its approval. The dissenting justices believed that the settlement, despite its controversial aspects, offered a more viable path to compensation for victims than the alternative of prolonged and uncertain litigation.
Background of the Opioid Epidemic and Purdue's Role

Purdue Pharma's bankruptcy filing stemmed from extensive litigation holding it and other pharmaceutical companies accountable for their role in the opioid epidemic, which has resulted in over 500,000 overdose deaths in the United States over two decades. The company, known for its prescription painkiller OxyContin, pleaded guilty to three criminal charges in 2021 concerning its marketing practices. The proposed settlement was an attempt to resolve the complex web of legal claims against the company and its controlling family, but the Supreme Court's ruling has now sent the matter back for further proceedings.

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Why did the Supreme Court reject the Purdue Pharma settlement?

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