Harrington v. Purdue Pharma L.P. | |
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Argued December 4, 2023 Decided June 27, 2024 | |
Full case name | William K. Harrington, United States Trustee, Region 2 v. Purdue Pharma L.P., et al. |
Docket no. | 23-124 |
Citations | 603 U.S. ___ ( more ) |
Argument | Oral argument |
Decision | Opinion |
Case history | |
Prior | Bankruptcy Court's Confirmation Order and related Advance Order vacated, In re Purdue Pharma, 635 B.R. 26 (S.D.N.Y., 2021), order affirmed in part, reversed in part, In re Purdue Pharma LP, 69 F. 4th 45 (2nd Cir., May 30, 2023); cert. granted (Aug. 10, 2023) |
Questions presented | |
Whether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent. | |
Holding | |
The bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seek to discharge claims against a nondebtor without the consent of affected claimants. | |
Court membership | |
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Case opinions | |
Majority | Gorsuch, joined by Thomas, Alito, Barrett, Jackson |
Dissent | Kavanaugh, joined by Roberts, Sotomayor, Kagan |
Laws applied | |
Title 11 of the United States Code |
Harrington v. Purdue Pharma L.P., 603 U.S. ___ (2024), is a United States Supreme Court case regarding Chapter 11 of the Bankruptcy Code. [1] This case is about the settlement by Purdue Pharmaceutical for opioid victims who overdosed with the OxyContin drug produced by their company. The justices determined that the Bankruptcy Code does not authorize the claimant's order, blocking the bankruptcy plan.
In 1995, the Purdue Pharmaceutical company developed and produced OxyContin, a form of opioid. This drug was subsequently approved by the Food and Drug Administration. From 1996 to 2001, Purdue excessively marketed OxyContin to both doctors and patients, claiming a low risk of addiction. This drastically increased the abuse of the drug across the nation. This subsequently resulted in what is now known as the "opioid epidemic in the United States". [2]
From 2000, the side effects of opioids was starting to be more prevalent, resulting in an influx of lawsuits in the years to come.
Anticipating that they might be liable in these lawsuits, both civilly and criminally, the Sackler family decided to reallocate revenue from Purdue Pharma to their own trusts and holding companies. This reduced the financial standing of Purdue Pharma to fend the incoming lawsuits. Eventually, by 2019, all Sackler family that were on the board of directors of Purdue Pharma have resigned.
In 2019, the Department of Justice (DoJ) brought criminal and civil charges against Purdue Pharma, alleging that their acts defrauded the United States and violated federal kick-back statutes. [2]
In the same year, Purdue Pharma filed for Chapter 11 Bankruptcy, whereas the Sackler family did not. [2] As part of their bankruptcy proceedings, Purdue Pharma sought an injunctive stay on all the lawsuits, towards the company and the Sacklers.
The United States Bankruptcy Court for the Southern District of New York sided with Purdue Pharma and granted the stay. In accordance to the Bankruptcy Code, a mediation was opened to avoid the liquidation of the company. Eventually, a plan was agreed by the company, the Sacklers and 15 other non-consenting states. The plan was for the Sacklers to contribute 4.5 billion, in exchange any third-party lawsuits against the Sacklers would be enjoined. This meant that any claims made towards the Sacklers would not be tried and the Sacklers would be free of those liabilities. [3]
Bankruptcy in the United States |
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Bankruptcy in the United States |
Chapters |
Aspects of bankruptcy law |
This agreement was eventually agreed to by judge Robert Drain [4] as it was deemed to have satisfied 3 of the court's criteria. [5] Soon after, the bankruptcy plan was challenged by additional states, appealing to the District Court for the Southern District of New York, which reversed and vacated the Bankruptcy Court's ruling, deeming the Bankruptcy Code did not permit these "third-parties" releases. [6] [7]
The District Court ruling was subsequently appealed to the Court of Appeals for the Second Circuit. [8] The Court of Appeals reversed the District Court's ruling, reaffirming the Bankruptcy Court ruling; and held that the approval of the releases was permissible as the Bankruptcy Court had "Statutory Authority" consistent with Second Circuit case law. [9] Representing the United States Bankruptcy Trustees, the Justice Department appealed the Circuit Court decision to the Supreme Court, urging for a stay on the lower court's decision and for a review of the entire bankruptcy proceeding, describing the settlement as an "unprecedented agreement" that would protect the Sackler's family from opioid-related civil claims. [10] [11] On August 10, 2023, the Supreme Court granted a stay in the lower court's decision and granted certiorari; with oral arguments occurring on December 4, 2023. [12] [13]
Oral arguments were heard December 3, 2023. [14] Representing the Federal Government, Former Deputy Solicitor General Curtis E. Gannon argued that Section 1123(b)(6) did not permit for the release of the Sacklers, as nonconsensual third-party releases are not authorized by the Bankruptcy Code given they extinguish property rights that do not belong to the bankruptcy estate. [15] Pratik A. Shah argued on behalf of The Official Committee of Unsecured Creditors of Purdue Pharma L.P. while Gregory Gare argued on behalf of Purdue Pharma. [16] In his argument, Gare contended that the notion that all non-consensual third-party releases are invalid was contradicted by Section 1123(b)(6), as it provides for "any other appropriate provision not inconsistent with" other bankruptcy laws to be used. [17] [15] Shah provided similar arguments in favor of a broader reading of Section 1123(b)(6) and emphasized the direct effects such an interpretation would have on the victims. [18] In doing so, Shah noted that if such a determination was not adopted by the court, a vast majority of opioid victims would not receive financial compensation, as, given the $40 trillion worth of lawsuits that stood against Purdue and the Sacklers, the first successful lawsuit would likely result in such a large payout that it would eliminate any recovery for additional victims in future lawsuits. [19] Justice Kavanaugh appeared sympathetic towards the arguments presented by Gare, stating that such language appeared to be sufficiently broad and well-supported, as there had been 30 years’ worth of practice in the bankruptcy courts approving the release and indemnification from liability by a company of its officers or directors who are parties in such cases. [17] [20] Justices Gorsuch and Jackson conversely questioned Gare's position on the broadness of the provision arguing that the terminology of 'appropriate' garnered some limitations in terms of what was applicable. [15]
Writing for the majority, Justice Neil Gorsuch, joined by Justices Thomas, Alito, Barrett, and Jackson overturned the bankruptcy settlement. [21] [22] In his opinion, Gorsuch contended that federal bankruptcy laws did not allow for the non-consensual third-party release and injunction of the Sackler family from criminal liability without the consent of the creditors and opioid victims. [23] [24] According to Gorsuch, provision §1123(b)(6), which indicates a bankruptcy plan may "include any other appropriate provision not inconsistent with" other bankruptcy laws, does not give the bankruptcy courts broad powers in Chapter 11 bankruptcy reorganization. [25] [26] As such, this "catchall" provision did not permit for any and all bankruptcy provisions to be inserted into a reorganization plan, but rather, only those applying to scenarios in the preceding subsections of §1123(b). [25] Given all similar preceding scenarios involved either debtors or responsibilities to creditors, only provisions relating to either were permissible. [26] [27] Given this, whether or not the Sackler family were permitted to move forward with the non-consensual third-party release required an affirmative determination that they were considered to be 'debtors'. [28]
The obtainment of a release of a debtor's debt liability requires "virtually all [of its] assets" to be put on the table"; an action which Gorsuch determined to not have been taken by the Sackler family as they maintained billions of dollars in profit accrued from Purdue Pharma and avoided personal Bankruptcy. [26] [27] Additionally, such a discharge also typically operated only for a debtor's benefit against its creditors and didn't extend to additional creditor claims of fraud or willful or malicious injury. [28] Given such actions were, respectively, not taken by or accurate of the Sackler family, the family were not determined to be 'debtors' but rather 'nondebtors', and were therefore not subject to the benefit of the non-consensual non-debtor claim extinguishment permitted by Chapter 11. [29] [28] As such, Gorsuch determined that the subsequent "catchall" provision "cannot be fairly read to endow a bankruptcy court with the 'radically different' power to discharge the debts of a nondebtor without the consent of affected nondebtor claimants". [25] [26] Gorsuch again contended that the non-consensual release of nondebtor liability by bankruptcy laws was only utilized in asbestos-related bankruptcies, and whose limited authorized use "makes it all the more unlikely" that such a "catchall" provision would be interpreted to approve such releases in all scenarios. [26] [30] Such a release could therefore not move forward as, even the 'broad equitable powers' of the bankruptcy courts which would allow for such a release, could only move forward when such actions are deemed "necessary or appropriate to carry out the provisions of" the bankruptcy code, which was determined not to be the case. [27]
Justice Brett Kavanaugh wrote the dissenting opinion joined by Chief Justice Roberts alongside Justices Sotomayor and Kagan. [31] In his opinion, Kavanaugh wrote that federal bankruptcy law provides bankruptcy courts with the "broad discretion to approve 'appropriate' plan provisions" to ensure that a bankrupt company’s assets are distributed fairly among its creditors rather than going to whoever can file a lawsuit first. [26] Given a company such as Purdue typically pays for claims against company officials, Kavanaugh reasoned that those officials may be shielded from liability as part of the bankruptcy plan, particularly when the officials are willing to contribute money to settle the bankruptcy. [26] In addition, Kavanaugh emphasized the real-world effects of the abrogation of such a settlement, writing: "The opioid victims and their families are deprived of their hard-won relief. And the communities devastated by the opioid crisis are deprived of the funding needed to help prevent and treat opioid addiction [...] As a result of the Court's decision, each victim and creditor receives the essential equivalent of a lottery ticket for a possible future recovery for (at most) a few of them". [32] [33]
Oxycodone, sold under various brand names such as Roxicodone, Endone, and OxyContin, is a semi-synthetic opioid used medically for treatment of moderate to severe pain. It is highly addictive and is a commonly abused drug. It is usually taken by mouth, and is available in immediate-release and controlled-release formulations. Onset of pain relief typically begins within fifteen minutes and lasts for up to six hours with the immediate-release formulation. In the United Kingdom, it is available by injection. Combination products are also available with paracetamol (acetaminophen), ibuprofen, naloxone, naltrexone, and aspirin.
Arthur Mitchell Sackler was an American psychiatrist and marketer of pharmaceuticals whose fortune originated in medical advertising and trade publications. He was also an art collector. He was one of the three patriarchs of the controversial Sackler family pharmaceutical dynasty.
Robert Steven "Steve" Miller Jr. is an American businessman. He was chief executive officer of Hawker Beechcraft from 2012 to 2013, non-executive chairman at American International Group and on the board of directors at Symantec. He has served as Chairman of the Board of Purdue Pharma, Inc. since July 1, 2018.
The Faculty of Medical and Health Sciences is a medical school affiliated with Tel Aviv University, located in Tel Aviv, Israel.
Endo International plc is an American Irish-domiciled generics and specialty branded pharmaceutical company that generated over 93% of its 2017 sales from the U.S. healthcare system. While Endo's management, operations, and customers are almost exclusively U.S.–based, in 2013 Endo executed a corporate tax inversion to Ireland to avoid U.S. corporate taxes on their U.S. drug sales, and to avail of Ireland's corporate tax system.
Mary Jo White is an American attorney who served as the 31st chair of the Securities and Exchange Commission (SEC) from 2013 to 2017. She was the first woman to be the United States Attorney for the Southern District of New York, serving from 1993 to 2002. On January 24, 2013, President Barack Obama nominated White to replace Elisse B. Walter as Chair of the U.S. Securities and Exchange Commission. She was confirmed by the Senate on April 8, 2013, and was sworn into office on April 10, 2013. In 2014, she was listed as the 73rd most powerful woman in the world by Forbes.
Purdue Pharma L.P., formerly the Purdue Frederick Company (1892–2019), was an American privately held pharmaceutical company founded by John Purdue Gray. It was sold to Arthur, Mortimer, and Raymond Sackler in 1952, and then owned principally by the Sackler family and their descendants.
Raymond Sackler was an American physician and businessman. He acquired Purdue Pharma together with his brothers Arthur M. Sackler and Mortimer Sackler. Purdue Pharma is the developer of OxyContin, the drug at the center of the opioid epidemic in the United States.
Mortimer David Sackler was an American-born psychiatrist and entrepreneur who was a co-owner, with his brothers Arthur and Raymond, of Purdue Pharma. During his lifetime, Sackler's philanthropy included donations to the Metropolitan Museum of Art, the Tate Gallery, the Royal College of Art, the Louvre and Berlin's Jewish Museum.
Robert D. Drain is a former United States bankruptcy judge of the United States Bankruptcy Court for the Southern District of New York who has presided at several high-profile corporate bankruptcies.
Richard Stephen Sackler is an American businessman and physician who was the chairman and president of Purdue Pharma, a former company best known as the developer of OxyContin, whose initiation of the opioid epidemic in the United States became the subject of many lawsuits and fines, filing for bankruptcy in 2019. It has been claimed that Richard Sackler's Purdue is among "the worst drug dealers in history" and the Sackler family have been described as the "most evil family in America". The company's downfall was the subject of the 2021 Hulu miniseries Dopesick and the 2023 Netflix miniseries Painkiller, in which Sackler is portrayed by Michael Stuhlbarg and Matthew Broderick, respectively.
Massachusetts v. Purdue is a lawsuit filed on August 14, 2018, suing the Stamford, Connecticut-based company Purdue Pharma LP, which created and manufactures OxyContin, "one of the most widely used and prescribed opioid drugs on the market", and Purdue's owners, the Sacklers accusing them of "widespread fraud and deception in the marketing of opioids, and contributing to the opioid crisis, the nationwide epidemic that has killed thousands." Purdue denied the allegations.
Barry Meier is a writer and former New York Times journalist who wrote the 2003 non-fiction book Pain Killer: A Wonder Drug's Trail of Addiction and Death. His articles "have led to Congressional hearings and changes in federal laws".
The Sackler family is an American family who owned the pharmaceutical company Purdue Pharma and later founded Mundipharma. Purdue Pharma, and some members of the family, have faced lawsuits regarding overprescription of addictive pharmaceutical drugs, including OxyContin. Purdue Pharma has been criticized for its role in the opioid epidemic in the United States. They have been described as the "most evil family in America", and "the worst drug dealers in history".
The timeline of the opioid epidemic includes selected events related to the origins of Stamford, Connecticut-based Purdue Pharma, the Sackler family, the development and marketing of oxycodone, selected FDA activities related to the abuse and misuse of opioids, the recognition of the opioid epidemic, the social impact of the crisis, lawsuits against Purdue and the Sackler family.
The Crime of the Century is an American two-part documentary film directed, produced, and written by Alex Gibney. The film follows the opioid epidemic in the United States, and the political operatives, government regulations and corporations that enable the abuse of opioids, particularly the Sackler family and Purdue Pharma.
Joss Sackler is a fashion designer. She is also known for her marriage to David Sackler, whose father Richard Sackler was the chairman and president of Purdue Pharma, and oversaw its manufacturing of the highly addictive opioid Oxycontin, a leading drug in the opioid epidemic.
Curtis Wright IV is an American former government official known for his role in the Food and Drug Administration's approval of OxyContin for Purdue Pharma in 1995, followed by his subsequent employment by the company, which led to portrayals in films and reports in nonfiction books, magazines, and news media outlets of his alleged role as one of the key figures in the current opioid epidemic in the United States. Wright was implicated in a criminal conspiracy outlined in a 2006 United States Department of Justice review document that was first made public in Purdue Pharma's 2019 bankruptcy proceedings. Although that case was settled in a 2007 plea agreement deal, members of United States Congress have requested the full 2006 documentation from the Department of Justice with the goal of opening a new case based upon the evidence then gathered. Parts of Wright's sworn depositions in 2003 and 2018 have internal contradictions and differ from documentary evidence described the 2003–2006 U.S. Federal Government investigation into Purdue Pharma.
Painkiller is an American drama television miniseries created by Micah Fitzerman-Blue and Noah Harpster. Based on Patrick Radden Keefe's New Yorker article "The Family That Built an Empire of Pain" and Pain Killer: An Empire of Deceit and the Origin of America's Opioid Epidemic by Barry Meier, the series focuses on the birth of the opioid crisis, with an emphasis on Purdue Pharma, the company owned by Richard Sackler and his family that was the manufacturer of OxyContin. The Sackler family has been described as the "most evil family in America", and "the worst drug dealers in history".