Second Circuit Establishes 7-Factor Test for Nonconsensual Releases in Purdue Pharma Bankruptcy Reversal
The Second Circuit's decision is an important step forward, particularly for the personal injury victims, who have not received a single penny from the over $50 billion in opioid-related settlements to date.
June 01, 2023 at 10:37 AM
9 minute read
Credit: JHVEPhoto/Shutterstock.com
Background
Purdue Pharma is a privately-held manufacturer of OxyContin, a synthetic opioid, that accounted for roughly 91% of its U.S. revenue. Decision and Order on Appeal, In re Purdue Pharma, No. 7:21-cv-07966-CM, 10 (S.D.N.Y. Dec. 16, 2021) (SDNY decision). Allegedly, Purdue intentionally misled the FDA and medical community by falsely claiming that OxyContin was nonaddictive in order to aggressively increase sales. Purdue's marketing effort was so successful that it earned $34 billion in total revenue between 1996 and 2019. This caused a dramatic increase in opioid abuse, addiction, and overdoses in the United States. From 1999 to 2019, nearly 247,000 people in the United States died from prescription opioid overdoses.
Purdue defended and settled dozens of lawsuits between 2019 and 2020, but the lawsuits were increasing in frequency and starting to name members of the Sackler family, the founders and owners of Purdue, as defendants. Purdue faced potential financial and operational ruin and the Sacklers faced significant financial liability.
Purdue Pharma Files for Bankruptcy and the Sacklers Seek Releases
In September 2019, Purdue Pharma and certain affiliates filed for Chapter 11 in the Bankruptcy Court for the Southern District of New York. Prior to the bankruptcy, Purdue had agreed on a settlement framework with 24 states (the consenting states) whereby the company would seek to restructure as a public benefit trust, the Sackler family would contribute approximately $3 billion to fund recoveries to creditors, and the bankruptcy plan would include comprehensive releases for the Sacklers from all opioid-related civil claims (nonconsensual third-party releases). Twenty-four other states opposed the settlement (the nonconsenting states). Hawaii never joined the litigation and Oklahoma already settled their claims.
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