The Sackler family owners of Purdue Pharma are a giant step closer to being reprieved. In winning an appeals court’s approval last week to resolve lawsuits accusing the family members of fueling the opioid crisis, Purdue’s bankruptcy case had to clear a new, stringent list of criteria that set a high bar for others seeking relief from mass lawsuits, according to a WSJ Pro Bankruptcy commentary. The U.S. Court of Appeals for the Second Circuit in Manhattan took more than a year and 97 pages in the landmark ruling that tackles a thorny issue for the judiciary: When should bankruptcy courts issue grants of immunity, known as third-party releases, to shield nonbankrupt businesses and individuals from lawsuits even when faced with objections? The debate about releases has taken on new meaning as a number of companies, such as 3M and Johnson & Johnson, and individuals, such as the Sacklers, try to escape mass lawsuits alleging harm from defective products or other wrongdoing. Some critics have argued that releases allow the wealthy and the powerful to use bankruptcy to get out of costly lawsuits without having to file for chapter 11 themselves and at claimants’ expense. In Purdue’s case, the pharmaceutical company sought to release its family owners from all current and future lawsuits, alleging that their efforts to drive sales hid the addictive nature of its flagship painkiller, OxyContin. In exchange, the family agreed to pay up to $6 billion in a settlement over time. Purdue’s request to extend the reprieve to the Sacklers cleared all seven factors the appeals court had laid out to consider whether such a release should be granted. Last week’s ruling also indicates that other companies or individuals seeking similar deals now need to meet the same legal threshold.
