How asbestos saved the Sackler family from bankruptcy
A LONG LEGAL chapter of the opioid epidemic in the United States, which continues to kill tens of thousands of people a year, finally came to an end on September 1 when a federal judge in New York approved Purdue Pharma’s bankruptcy plan , who developed and manufactured OxyContin, a highly addictive pain reliever product. The agreement settled thousands of lawsuits against the company filed by states, communities, tribes and individuals. Purdue will be reorganized into a public utility called Knoa Pharma, and its future profits will be used to mitigate the damage caused by opioid addiction. Members of the Sackler family, who own Purdue, will relinquish control of the company and contribute $ 4.5 billion to the settlement. But nine states and Washington, CC, opposed the final deal and some will appeal. Their objections stem from a legal arrangement protecting parties associated with failed companies from liability. A lot of people want that to change.
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Bankruptcy has costs and benefits. The debtor must disclose all assets, which are distributed to creditors. But in return, the debtor – in this case Purdue – is released from legal liability. As a condition of their participation in the deal, the Sacklers sought and obtained immunity from civil lawsuits related to the opioid epidemic, without declaring bankruptcy themselves. The arrangement is known as the Non-Debtor Liability Release (or Third Party Release). It was born in the 1980s to protect insurers in bankruptcies resulting from asbestos liability, and was codified by Congress as protection in such cases. As a result of the settlement, the Sacklers (not all of whom were involved in running the business) will not give up most of their fortune, estimated at $ 11 billion. Richard Sackler, former chairman and chairman of Purdue, told a court last month that neither he, his family nor the company was responsible for the opioid crisis in the United States.
Last year, five family members paid $ 225 million to settle civil charges brought by the federal government for selling OxyContin knowing it was “unsafe, ineffective and medically unnecessary.” Many states and individuals would likely bring similar lawsuits if they could. But debtor-less discharge means that will no longer be possible, since the terms apply to all parties with a claim against the Sacklers, even if they did not participate in or consent to the agreement. Only a fraction of those who have used OxyContin have filed claims related to their use of the drug: around 130,000. But the number of OxyContin users – all of whom were potential claimants – is probably at least ten times higher, estimates Adam Levitin of Georgetown University Law Center. They will not get any part of the settlement and no opportunity to sue the Sacklers for opioid-related claims.
The use of a non-debtor release was also hinted at in the reorganization of two groups that filed for bankruptcy following child abuse lawsuits, the Boy Scouts of America and United States Gymnastic. For defendants in sprawling litigation, going to bankruptcy court and securing a non-debtor discharge is appealing: it binds absent parties, ruling out future claims from victims that have yet to come forward. Some Democrats want to ban the arrangement, which they say has been extended beyond its original intent. In July, a group of senators, including Elizabeth Warren of Massachusetts, introduced a bill to close what they call a loophole used by “bad actors.”
In Purdue’s case, the settlement at least means the money will be paid. But those who had hoped the family would have to pay more will be disappointed. “The Sacklers negotiated how much money they were going to hand over, and that’s as little as they thought they could get away with,” says Lindsey Simon of the University of Georgia. The settlement will likely survive an appeal, bringing an unsatisfactory legal resolution to a long chapter of a painful public health crisis. For many, alas, the pain continues. ■
This article appeared in the United States section of the print edition under the title “Released”