*John Osborne
I. Introduction
A 2024 Supreme Court decision in Harrington v. Purdue Pharma L.P. sent shockwaves through the bankruptcy law community and the vast network of opioid crisis victims.[1] The Supreme Court heard Harrington to decide one important issue: whether the Bankruptcy Code authorizes a court to issue an order “extinguishing vast numbers of existing claims” against a non-debtor third party without the consent of some affected claimants.[2] Unraveling a hard-fought $4.3 billion settlement between Purdue Pharma L.P. (Purdue) and victims of the opioid crisis, as well as state, local, and tribal governments,[3] the Court found that the Bankruptcy Code did not authorize the lower court to issue nonconsensual release or extinguishment orders for non-debtor third parties.[4]
II. The Settlement
Beginning in the mid-1990s, Purdue was the largest manufacturer and marketer of the highly addictive prescription drug OxyContin.[5] During this time, the Sackler family owned and operated Purdue and were “heavily involved” in much of the company’s intense and deceptive marketing program surrounding OxyContin.[6] Purdue’s conduct involving OxyContin made the company largely responsible for triggering and fueling the opioid crisis in the United States.[7] As a result, Purdue faced a slew of adverse legal action related to its deceptive marketing practices.[8] Predicting the oncoming litigation, the Sackler family began a “milking program” and withdrew approximately $11 billion from Purdue in the decade leading up to the Supreme Court decision.[9] The milking program severely weakened Purdue’s financial state, and in 2019, Purdue filed for Chapter 11 bankruptcy.[10]
As a part of a reorganization plan under Chapter 11 of the Bankruptcy Code, Purdue sought a non-debtor release voiding any current or future opioid-related claims against the Sackler family, and sought an injunctive stay on all civil suits towards the family and any entities under the family’s control.[11] In return, the Sackler family promised to pay approximately $4.3 billion over eighteen years to the Purdue bankruptcy estate to help the company compensate the thousands of claimants alleging harm by addiction to opioids and to fund local, state, and tribal government programs attempting to heal the damage the opioid crisis caused.[12] An overwhelming majority of voting creditors approved the plan.[13] On the other hand, thousands of opioid crisis victims and some governmental and tribal bodies opposed the nonconsensual releases.[14]
The United States Trustee, numerous states and municipalities, and others challenged the legality of the agreement on grounds that it denied nonconsenting parties their due process and that the Bankruptcy Code does not authorize such releases.[15] The Supreme Court heard the case solely to decide the latter issue and found that Chapter 11 of the Bankruptcy Code does not authorize nonconsensual third-party releases as part of a reorganization plan.[16]
III. Discussion
Before Harrington v. Purdue Pharma L.P., non-debtor releases were central to bankruptcy courts when dealing with mass-tort cases.[17] Non-debtor releases played an essential role in enabling “substantial equitable relief to victims in cases ranging from asbestos . . . to the Catholic Church and Boy Scouts.”[18] Still, non-debtor release agreements provided a direct avenue to shield wealthy owners of large corporations from civil liability; the release agreements protected profits derived from activities that also caused the pain and suffering of mass tort victims.[19] For instance, the Sackler family generated a net worth of approximately $14 billion in large part due to Purdue’s success in deceptively marketing and selling OxyContin.[20] Much of the Sackler family’s present wealth derives from the funds they withdrew from Purdue as part of the milking program mentioned supra.[21]
a. Positive effects of Harrington
The proposed bankruptcy plan required the Sackler family to repay less than half of the funds they withdrew over an eighteen-year period.[22] Under the bankruptcy agreement, the Sackler family stood to net a positive $6.7 billion from their role in the opioid crisis.[23] In comparison, the opioid epidemic, beginning in the mid-1990s, cost the United States an estimated $53–$72 billion annually.[24]
Notions of fairness prevent reasonable minds from believing the $4.3 billion settlement to be paid out over eighteen years was sufficient to punish the Sackler family for the significant harm they caused.[25] Some might argue the settlement agreement did not punish the Sackler family at all.[26] The liability shield allows the Sackler family a fresh start by effectively absolving them of responsibility for their role in the opioid crisis; those irreparably harmed by opioid addiction cannot seek justice against the Sackler family through the legal system.[27]
Under the previous interpretation of the Bankruptcy Code, the liability shield provided a roadmap for wealthy corporation owners to avoid responsibility for their actions while depriving a significant number of victims an avenue to seek justice through legal action.[28] Creating an escape from liability for ultra-wealthy owners of large corporations at the cost of their victims’ potential legal remedy runs counterintuitive to ideas of justice and fairness central to the American court system.[29]
b. Potential pitfalls from Harrington
While the Supreme Court’s decision in Harrington can be seen as a victory against the injustice caused by wealthy owners of large corporations, the double-edged effect of the decision cannot be ignored.[30] As Justice Kavanaugh notes in his dissent, non-debtor releases provide liability shields to large corporations, and those shields incentivize corporations to negotiate fairly in bankruptcy settlements.[31] Without the level of protection liability shields provide, corporations subject to mass-tort liability may be less willing to offer deals that provide adequate recovery to those harmed by corporations’ conduct.[32]
In Harrington, the Supreme Court unraveled a planned settlement that guaranteed substantial compensation to more than 100,000 individual victims as well as funding earmarked for treating opioid addiction to thousands of government entities.[33] For the victims who spent years fighting hard for this settlement, the end to the added emotional and financial turmoil caused by their legal battles was nearly in sight.[34] With the deal upended and the liability shield shattered, Purdue may be less forgiving in renegotiating a bankruptcy settlement.[35]
IV. Conclusion
Although the Sackler family is unable to totally escape legal responsibility for the harm they caused to Opioid crisis victims, they are still an extremely wealthy and litigious family and an immovable Purdue may force opioid crisis victims to seek compensation by filing individual claims against the well-protected and extremely litigious Sackler family.[36] If affected claimants are forced to seek a remedy through individual suits against the Sackler family, they risk spending a significant amount of money and even more hours on a case that they may not even win.[37] This result is not sustainable for an already downtrodden network of opioid crisis victims.[38]
*John Osborne is a second-year student at the University of Baltimore School of Law, where he is a Staff Editor for Volume 54 of Law Review, a Distinguished Scholar of the Royal Graham Shannonhouse III Honor Society, and a Law Scholar for Professor Donald Stone. He also enjoys being the Secretary for the Intellectual Property Law Society and the 2L Class Representative for the Criminal Law Association. Last summer, John worked as a Summer Associate for Baker, Donelson, Bearman, Caldwell & Berkowitz PC. He is excited to rejoin Baker, Donelson, Bearman, Caldwell & Berkowitz PC this summer as a Summer Associate.
[1] Abbie VanSickle, Supreme Court Jeopardizes Opioid Deal, Rejecting Protections for Sacklers, N.Y. Times (June 27, 2024), https://www.nytimes.com/2024/06/27/us/supreme-court-opioid-settlement.html.
[2] Harrington v. Purdue Pharma L.P., 144 S.Ct. 2071, 2077 (2024).
[3] Id. at 2079.
[4] Id. at 2087.
[5] Id. at 2078.
[6] Id.; see also In re Purdue Pharma L.P., 69 F.4th 45, 48 (2d Cir. 2023) (describing how in 2007, a Purdue affiliate pleaded guilty to falsely marketing OxyContin as less addictive than other pain medications on the market).
[7] See Harrington, 144 S.Ct. at 2078 (“Between 1999 and 2019, approximately 247,000 people in the United States died from prescription-opioid overdoses . . . . Purdue sits at the center of these events.”).
[8] Id. at 2079.
[9] Id. at 2078–79.
[10] Id. at 2079.
[11] Id.
[12] Id. at 2079; Id. at 2088 (Kavanaugh, J. dissenting).
[13] In re Purdue Pharma L.P., 633 B.R. 53, 61 (Bankr. S.D.N.Y. 2021) (“For the personal-injury claims classes, the vote was 95.7 percent (Class 10(b)) to over 98 percent (Class 10(a)). In each class the percent voting in favor of the plan was above 93 percent with the exception of the class of hospital claims, which was over 88 percent (and no member of that class is pursuing an objection to the plan).”); See generally Harrington, 144 S.Ct. at 2091 (Kavanaugh, J. dissenting) (“To address any collective-action or holdout problem, the bankruptcy court has the power to approve a reorganization plan even without the consent of every creditor. If creditors holding more than one-half in number (and at least two-thirds in amount) of the claims in every class accept the plan, the court can confirm the plan. A plan is ‘said to be confirmed consensually if all classes of creditors vote in favor, even if some classes have dissenting creditors.’”) (quoting 7 Collier on Bankruptcy ¶ 1129.01, p. 1129-13 (R. Levin & H. Sommer eds., 16th ed. 2023)).
[14] Harrington, 144 S.Ct. at 2079.
[15] In re Purdue Pharma L.P., 633 B.R. at 61–63.
[16] Harrington, 144 S.Ct. at 2078.
[17] Id. at 2089 (Kavanaugh, J. dissenting).
[18] Id.
[19] See infra note 23.
[20] Id. at 2078.
[21] Id. at 2079; see supra note 9.
[22] Harrington, 144 S.Ct. at 2079.
[23] See id. (noting that the Sackler family “proposed to return to Purdue’s bankruptcy estate $4.325 billion of the $11 billion they had withdrawn”); Cf. Julia Sullivan, Not So Fast: The Supreme Court Blocks Use of Nonconsensual Non-Debtor Releases in Chapter 11 Bankruptcy in Purdue Pharma, Vill. L. Rev. (Sept. 16, 2024), https://www.villanovalawreview.com/post/2691-not-so-fast-the-supreme-court-blocks-use-of-nonconsensual-non-debtor-releases-in-chapter-11-bankruptcy-in-_purdue-pharma_ (noting that based on a proposed contribution to the Purdue bankruptcy estate by the Sackler family of $6 billion dollars, the Sackler family would be left with “more than $5 billion in profits”).
[24] Harrington, 144 S.Ct. at 2079.
[25] See Morning Edition, Purdue Pharma, Sacklers’ OxyContin Settlement Lands at the Supreme Court, NPR, at 2:15 (Dec. 4, 2024), https://www.npr.org/2023/12/04/1215717223/purdue-sacklers-oxycontin-supreme-court (noting that Georgetown University law professor Adam Levitin criticized the deal by saying the Sackler family would be getting “bankruptcy at half price”).
[26] See infra note 27.
[27] See Harrington, 144 S.Ct. at 2087 (noting the argument from the Petitioner that endorsing nonconsensual third-party releases “would provide a roadmap for corporations and wealthy individuals to misuse the bankruptcy system in future cases to avoid mass-tort liability”).
[28] Id.
[29] Cf. 138-77 Queens Blvd. LLC v. Silver, 682 F. Supp.3d 271 (E.D.N.Y 2023) (holding the defendant owner liable who exercised sufficient control over the corporation to commit a fraud or wrong); Alman v. Danin, 801 F.2d 1 (1st Cir. 1986) (affirming the district court’s decision to hold the owners of a corporation liable for the corporation’s obligations due to their control and misuse).
[30] See generally Harrington, 144 S.Ct.at 2088–227 (describing the potential problems with abolishing nonconsensual third-party releases as part of a bankruptcy plan) (Kavanaugh, J. dissenting).
[31] Id. at 2089.
[32] See id. at 2116 (Kavanaugh, J. dissenting) (“[I]n a world where nonconsensual non-debtor releases are categorically impermissible, any hope for a new deal seems questionable . . . .”).
[33] See id. at 2088 (Kavanaugh, J. dissenting) (“[O]pioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation.”); Id. at 2088.
[34] Id. at 2088.
[35] Cf. id. at 2089. Other large entities have relied on nonconsensual third-party releases to negotiated “substantial and equitable relief” to their victims; however, now that nonconsensual third-party releases are unavailable, it remains to be seen whether Purdue will negotiate to the same ends. Id.
[36] See Justin C. Chung & Alexander H. Pepper, Harrington v. Purdue Pharma: Supreme Court Holds That a Chapter 11 Reorganization Plan Cannot Include a Nonconsensual Release of Claims Against Non-Debtors, Cong. Rsch. Serv. 3–4 (July 17, 2024), https://crsreports.congress.gov/product/pdf/LSB/LSB11201 (predicting that each nonconsenting claimant will be forced to undergo extensive litigation to prove liability individually).
[37] See Harrington, 144 S.Ct. at 2116 (Kavanaugh, J. dissenting) (“Opioid victims and other future victims of mass torts will suffer greatly in the wake of today’s unfortunate and destabilizing decision.”).
[38] See generally The Opioid Crisis, NIH (July 23, 2024), https://heal.nih.gov/about/opioid-crisis (describing the opioid crisis as still ongoing).
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