U.S. District Judge Colleen McMahon in Manhattan overturned a roughly $4.5 billion settlement between OxyContin maker Purdue Pharma LP and members of the Sackler family who own the drugmaker, a surprising decision that raises questions about the future of the company and its owners, who have been accused of fueling the nation’s opioid crisis, the WSJ Pro Bankruptcy reported. Judge McMahon ruled late yesterday that the legal releases that would shield members of the Sackler family from civil opioid lawsuits are not permitted under the Bankruptcy Code. A handful of state attorneys general and the Justice Department’s bankruptcy watchdog challenged the releases, which would have extinguished the states’ potential legal claims against the Sacklers even though they didn’t support the deal. Such settlements have been used in other large corporate bankruptcies, though Congressional Democrats introduced a bill earlier this year in response to the Purdue settlement that would ban these types of releases. The decision is likely to result in further appeals from Purdue, the Sacklers and groups representing opioid victims and other company creditors who supported the settlement and broader reorganization plan. Judge McMahon said that prior legal rulings from the Second U.S. Circuit Court of Appeals that Purdue and other bankrupt companies have relied on in advancing the types of legal releases the Sacklers would receive haven’t properly analyzed the issue. She said that her ruling Thursday won’t be the last word on the issue. “It must be put to rest sometime; at least in this Circuit, it should be put to rest now,” Judge McMahon said. The family settlement was the centerpiece of a larger financial restructuring of Purdue designed to fund programs to fight the opioid crisis and compensate people harmed by OxyContin. State attorneys general from Washington, Connecticut, Maryland and other states had objected to the settlement, arguing the Sacklers’ contribution was insufficient to deter other corporate wrongdoing. Read more.
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