States: Sackler family members abusing bankruptcy process

NEW YORK — A federal judge should reject a sweeping settlement to thousands of lawsuits against OxyContin maker Purdue Pharma, a group of states said at a hearing Tuesday, arguing that the protections it extends to members of the Sackler family who own the firm are improper.

States have credible claims that family members took more than $10 billion from the company, steered it toward bankruptcy, and then used a settlement crafted in bankruptcy court to gain legal protections for themselves, Washington state Solicitor General Noah Purcell told U.S. District Judge Colleen McMahon.

“If that is not an abuse of the bankruptcy process,” Purcell said, “it’s unclear what would be.”

The plan, approved in September by a federal bankruptcy judge, calls for members of the Sackler family to contribute more than $4 billion in cash, plus the company itself, to fight the opioid epidemic, which has been linked to more than 500,000 U.S. deaths in the past two decades.

In exchange, members of the family are to be protected from lawsuits accusing them of spurring the crisis. The suits accuse the company and family members of helping to spark the overdose crisis by aggressively marketing OxyContin, a powerful opioid painkiller.

They would not be protected from criminal charges. They’re not facing any now, though a group of activists has been pushing federal authorities to bring charges against some family members.

Most state and local governments and thousands of individual victims of the epidemic agreed to the deal, though many did so grudgingly. Those groups are now joining with Purdue and Sackler family members to defend the plan from appeals from an office of U.S. Department of Justice, eight states, the District of Columbia, some Canadian local governments and Native American tribal groups, plus some individual victims.

In the hearing Tuesday in a New York City courtroom, those objectors laid out a string of complaints about the plan.

They contend that the protections the Sacklers got are more generous than what they could have received had they filed for bankruptcy themselves. Bankruptcy would also protect the company from lawsuits.

They also said that allowing the deal would usurp states’ ability to sue Sackler family members to hold them accountable.

“What confirmation of this plan does in this case is strip the states of police powers,” Maryland Assistant Attorney General Brian Edmunds said, “to protect the public from harm.”

Marshall Huebner, a lawyer for Purdue, said the states were misstating some details of the settlement plans, including how U.S. Bankruptcy Judge Robert Drain insisted that Sackler family members would receive protections from lawsuits involving only opioids made by Purdue.

He also noted that the overwhelming majority of governments agreed to the plan, which would funnel money to individual victims of the opioid crisis and to efforts to fight the crisis.

McMahon cut him off. “My questions focus on aspects of legality of the releases,” she said. “I don’t want to hear about the wonderful things it’s going to do. I know it was approved by a supermajority.”

Still, Huebner noted, there would be far less money to work on the crisis without money from Sackler family members. He said that if they could be sued and prevailed, they might not pay the settlement. And if they lost other lawsuits — they now face about 860 of them — they might not be able to afford to.

Lawyers for family members have also said previously that about half of the roughly $10 billion transferred from Purdue to family members was used to pay taxes on the earnings.

McMahon has said she hopes to rule by next week, though a decision could take longer. Hers almost certainly won’t be the last word; whatever decision she reaches is likely to be appealed to a higher court.