Toby Talbot / AP
In a surprising ruling late Wednesday, a federal judge in New York allowed work to continue on the implementation of a controversial bankruptcy plan for Purdue Pharma, the maker of Oxycontin.
The US Department of Justice’s bankruptcy regulator had ordered Judge Colleen McMahon of the US District Court in Manhattan to put the deal back on hold until it was reviewed on appeal.
During a hearing on Tuesday, McMahon signaled support for a stay. However, in her ruling on Wednesday, she said work on the deal, valued at between $ 5 billion and $ 10 billion, could continue.
“Unless someone is lying to me, the only steps that are taken … are preliminary and administrative,” McMahon wrote. “No step is taken that would begin with the completion of the plan itself.”
In the past, appellate courts have been reluctant to scrutinize federal bankruptcy settlements once they are partially enforced – a procedural hurdle known as an “equal dispute”.
In her ruling, McMahon admitted that equality was a “serious concern” in this case. She ordered supporters of the Purdue Pharma Plan to make written agreements that they would not attempt to block an appeal on the grounds of equity.
The Ministry of Justice is trying to block the settlement
Purdue Pharma’s bankruptcy plan was upheld by federal bankruptcy judge Robert Drain last month. The DOJ was quick to appeal, as were several states.
During Tuesday’s hearing, McMahon signaled that she believes the complex settlement raises significant legal issues that warrant a review by the Second Court of Appeals.
She specifically pointed to a provision in the deal that would give members of the Sackler family, who own the pharmaceutical company, immunity from opioid lawsuits.
In return, the Sacklers, who claim they didn’t do anything wrong, have agreed to pay out roughly $ 3.2 billion from their personal assets and trusts. You will also transfer control and ownership to Purdue Pharma.
DOJ lawyers argue that the agreement violates the U.S. Constitution by depriving people and governments of the right to sue the Sacklers without due process.
“The core issue is Sackler’s publication … whether it’s constitutional,” McMahon said.
Proponents of this bankruptcy plan say it will spend billions of dollars in drug treatment and addiction programs over the next decade.
Work now continues to create a complex network of trusts and organizations that will eventually distribute this money.
Oxycontin marketing helped start the opioid crisis
This case arose as part of a larger legal reckoning of the role of American companies in the opioid crisis that embroiled more than a dozen large firms in courtrooms across the United States
Public health experts believe Purdue Pharma’s aggressive and, at times, illegal marketing of Oxycontin played a key role in starting the opioid crisis that killed hundreds of thousands of people.
The sale of the pain reliever brought the Sacklers about $ 10 billion in profit. Family members who have served as executives and board members at Purdue Pharma claim they did nothing wrong.
Her private company pleaded guilty to two federal crimes related to the sale and marketing of opioids, most recently in 2020.
It is unclear when the Second Circuit will begin Purdue Pharma’s bankruptcy. Another procedural hearing in the case is scheduled for Thursday in the Federal Bankruptcy Court of Judge Robert Drain.