The Daily - Opioid Victims Have a Settlement. Will the Supreme Court Undo It?

Episode Date: December 6, 2023

The opioid epidemic has been one of the biggest public health disasters in generations. The drug company at the heart of the crisis, Purdue Pharma, maker of the prescription painkiller OxyContin, agreed to a multibillion-dollar deal to settle thousands of claims against it — but that agreement would also grant the family behind the company, the Sacklers, immunity from additional civil lawsuits.Justices are now set to rule whether that settlement was legal. Abbie VanSickle, who covers the Supreme Court for The Times, explains what a decision either way could mean for the victims and for the people responsible.Guest: Abbie VanSickle, a Supreme Court correspondent for The New York Times.Background reading:What to know about the Purdue Pharma case before the Supreme Court.At the core of the matter: Who can get immunity in settlements?For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

From The New York Times, I'm Sabrina Tavernisi, and this is The Daily. A multi-billion dollar settlement in the opioid crisis reached the Supreme Court this week. What a decision could mean for both the victims and the people responsible. the victims and the people responsible. Today, my colleague, Abby Vensicle, explains. It's Wednesday, December 6th. So Abby, the opioid epidemic has been one of the biggest public health disasters in generations. And for years now, there have been claims piling up against the company at the heart of it, and that's Purdue Pharma. And also against the family who owns that company, the Sacklers. And this week, a case that really kind of represents all

of this ended up at the Supreme Court. Tell me about that case. So the case before the justices this week has to do with how to resolve thousands of claims and suits filed against Purdue Pharma and members of the wealthy Sackler family that controlled it, how courts can resolve those. It is an attempt to try to find accountability and to wrestle with how to go about compensating not only victims and their families, but also states and municipalities across the country that have had to deal with this epidemic that has killed hundreds of thousands of people. Okay, so that's a pretty tall order. What is the answer to that? How do you begin to do that? Unpack that for me, Abby. Well, I don't know that I have an answer, but the way that the court system has

tried to wrestle with this is not one at a time lawsuits in courts throughout the country, but actually an attempt to bring most of the parties involved into bankruptcy court. Bankruptcy court. That's right. So bankruptcy court is one of the few places that allows a settlement where you can bring in all of the parties involved in a case and try to figure out how to resolve a solution that everyone involved can live with. And the solution that they've come up with, it turns out it's pretty controversial. And that's what's brought this case to the Supreme Court this week. Okay, so let's talk about the case and how it got started. So tell me from the beginning. So this case goes back to the years when Purdue Pharma, this drug manufacturer,

started making a drug, OxyContin. And Purdue started to face all of these lawsuits, claims that OxyContin was addictive and was leading to deaths all over the country. And eventually, the company was facing thousands of lawsuits in courts throughout the country and made the decision to go into bankruptcy court to try to craft a deal. But then in December 2019, there was an audit of Purdue's assets. And out of that, it was revealed that the Sackler family had moved about $11 billion out of the company as the opioid crisis continued. And so it became clear that Purdue, you know, the actual company itself,

wasn't going to have enough money to compensate people, you know, who have all of these claims against it. So they move $11 billion out of the company. That becomes clear in the bankruptcy proceeding, which of course means that all of these people trying to resolve their claims now have way less money to divide among themselves. But why couldn't the plaintiffs just go after the Sacklers directly? They could have gone after the Sacklers directly, but what happened is that the victims were offered a deal and essentially would then agree to settle all of their claims against Purdue and the Sacklers.

In exchange, the Sacklers would get immunity from civil lawsuits about the opioid crisis. So the Sacklers themselves would actually get immunity under this deal? That's right. And in exchange for that immunity, the Sacklers would contribute part of their personal fortune to a victim fund. And some of the money would go toward compensating families, and other parts of it would go toward efforts to fight the opioid crisis. Got it. And how much money do the Sacklers offer to put into this victim's fund? So the figure got bigger over time, but by the end, the Sacklers were offering up to $6 billion. $6 billion, which seems like kind of a lot, but on the other hand, they're getting immunity,

which is kind of extraordinary. Yes. And some estimates of the amount that they were facing put that number up to $40 trillion. Wow. So that is, in fact, a very good deal for them. I mean, is this unusual in the bankruptcy process? You know, it's not unprecedented for the bankruptcy courts to be used to help craft these deals. It's sort of a tool that's available in the bankruptcy system for parties like the Sacklers, who are not the actual, you know, the company that's declaring bankruptcy, to join in and get immunity for future civil lawsuits. Essentially allowing a third party to join into the bankruptcy procedure, the third party itself not declaring bankruptcy, but getting the benefits of bankruptcy. Right. That's exactly it. Okay. So basically, these are people who might otherwise bring claims against the Sacklers, families of victims and whatnot, and they have to make a choice. Take a deal and get paid out or refuse and keep fighting. So what did they think of all of this?

So they talk about it with a real sort of mix of feelings. Some of the families feel like the Sacklers, they're getting away with helping to fuel this crisis that killed all these people. But others take a more practical approach that there's an urgent need for money. And this is, you know, it's a way to find a deal that as quickly as possible gets people some kind of compensation.

And this money, it's not going to lead to windfalls for the families, but much of it's going to go to programs by states and municipalities, tribes, all kinds of places that are still suffering from the opioid epidemic. And that this money, they say, is, you know, urgently needed now to fight this crisis. Okay, so what did they decide? So what ultimately happens here is that the vast majority, you know, 97% of the people involved in this case vote to approve the deal. It's close to 100%, but 3% are still holding out and don't vote to approve the deal. But the deal is signed off on by a judge and moves forward. Okay, so the deal is done.

Victims are supposed to get their money, but how does it end up back in court again? So basically what happens is that the federal government and the Department of Justice, there's a watchdog group that looks over bankruptcy proceedings. And the government steps in and says, no, you cannot do this deal. And they appeal the deal. And why does the government say the deal can't go through? What's their beef with it? So the U.S. trustee, which is this watchdog group, their role is to make sure that the bankruptcy system is working like it's supposed to. And they say this kind of deal is not in the public interest because it stops future lawsuits and basically blocks people from being able to have their day in court and that it's a stretch of the bankruptcy code. Got it. Okay, so what happens?

So the case winds its way through the appeals courts, but it carries with it this huge question of whether these thousands of claims made over years by victims of the opioid epidemic will finally be resolved. And that brings us to this week, where the case is heard before the Supreme Court. We'll be right back. Okay, so we're at the court, and oral arguments are set to begin.

So set them up for us, Abby. What are they actually about? So the arguments are about whether this mechanism that the Sacklers used to protect themselves from lawsuits about the opioid crisis, whether that's legal under the bankruptcy code. Got it. In other words, can this deal they struck with victims move forward? In other words, can this deal they struck with victims move forward? That's right. The important thing to understand is that they're not there to decide whether victims will ever get money from Purdue Pharma and the Sacklers, but whether this particular deal is legal. We'll hear argument this morning in case 23124, Harrington versus Purdue Pharma. So the case starts with the lawyer for the government. Mr. Chief Justice, and may it please the court. And remember that the Sacklers themselves did not declare bankruptcy. So the lawyer for the government, he is arguing that the bankruptcy code is stretched too far in this case,

that the code does not allow for a deal like the Sacklers have been able to cut. And the reasons that he gave for this are really twofold. Principally the Sackler family members, who took billions of dollars from Purdue in the years before Purdue's bankruptcy, family members who took billions of dollars from Purdue in the years before Purdue's bankruptcy, but have not filed for bankruptcy protection themselves and have made only a portion of their assets available. The first is that the Sacklers were able to use the bankruptcy court process, getting the benefits of bankruptcy without actually having to declare bankruptcy themselves. They didn't actually go through the bankruptcy process, but can get a clean slate.

And the second reason... This release extinguishes personal property rights. The creditor's state law chose this inaction that do not belong to the bankruptcy estate. ...is that the Sacklers got this deal without the full consent of everyone involved. You know, if you remember, they got 97%. To the extent that the Sacklers want to have some of the benefits of bankruptcy

without fully participating, we think that they need to get consent. Those remaining people and anyone else who might want to bring a claim against the Sacklers about the opioid crisis would now be blocked from doing so. So what do the justices think of the government's argument? What do they say? So many of the justices are pretty skeptical of the government's argument here. The views of the opioid victims and their families is not, doesn't matter. I'm not saying it doesn't matter.

I think your position is saying it doesn't matter. Justice Brett Kavanaugh says, what about the victims in the case? I think what the opioid victims and their families are saying is you, the federal government, with no stake in this at all, are coming in and telling the families, no, we're not going to give you payment, prompt payment, for what's happened to your family. Why does the government get to come in and blow up this deal? It's overwhelming, the support for this deal. And then Justice Elena Kagan comes in with a similar point.

And among people who have no love for the Sacklers, among people who think that the Sacklers are pretty much the worst people on earth, they've negotiated a deal which they think is the best that they can get. That the victims in this deal have agreed to it. So why can't the government just let this badly needed money start flowing to people? And what's the government's response to this criticism? And our point is that we're not casting aside the 3%. We're saying that if there are a handful of small outlying claims, the Sacklers can deal with those on the side. So the government lawyer says that if 97 percent of people want to make a deal with the Sacklers, that they can go ahead and do that. But they can't block those 3 percent from going ahead to have their day in court. But it seems that your basic position would still apply if there was one kind of nutcase holdout.

And Justice Kagan pushes back on that idea. And so I guess I'm wondering why one nutcase holdout should hold up something like this. You know, to say should one person who's determined to not agree, should that blow up a deal? Our view is that if that person is making a claim for an amount of money that they're never going to be able to get, then they should go to trial on that. They should settle it. They should do whatever they need to do in order to deal with that claim on the side. And the government's response is that that person should be able to go ahead and have their day in court and that they shouldn't be forced to agree to a settlement that they don't accept.

If it's a significant claim and somebody doesn't want to waive it, we think that you don't have to consider that person a nutcase to say that it's their right to decide whether or not they get to waive their personal property rights. So what did the defenders of the deal say? Thank you, Mr. Chief Justice, and may it please the court. So there were two lawyers who spoke in court in defense of the deal, one representing Purdue Pharma. Mr. Chief Justice, and may it please the court.

And the other victims groups. And both of them essentially made the same argument. The U.S. trustee does not speak for the victims of the opioid crisis. Quite the opposite. That this deal was long in the making and a painful process. And if this trustee succeeds here, the billions of dollars that the plan allocates for opioid abatement and compensation will evaporate. If this deal falls apart, there may not be any money for any of the victims from the Sacklers. Without the release, the plan will unravel

and there will be no viable path to any victim recovery. It would be back to square one with presumably lawsuits filed against Purdue Pharma and the Sacklers and all these individual claims working their way through courts around the country. And the lawyer for the victims groups in court raised a concern about that. As soon as one plaintiff is successful, that wipes out the recovery for every other victim. Which is this idea of a race to the courthouse. As soon as one plaintiff is successful, they get the recovery. Every other victim gets exactly zero dollars. Which would mean that whichever group's case could be resolved fast enough would maybe take all of the Sackler's money or a lot of it, leaving very little for all of the other people with lawsuits lined up waiting in line to get something from the Sacklers.

with lawsuits lined up, waiting in line to get something from the Sacklers. So basically, it could be a pretty unfair division of what money is left over because it's just whoever manages to file their claim fastest. Right. That's what he's arguing. So how did the justices respond to that argument? So the justices were really concerned with issues of fairness, and they raised some of the same points that the government made, saying, wait a minute, the Sacklers took $11 billion out of the company, which is part of the reason the company doesn't have enough assets to pay these victims in the

first place. But most of the assets we're talking about were originally in the company. Justice Jackson really focused in on this. That they actually took the assets from the company, which started the set of circumstances in which the company now doesn't have enough money to pay the creditors. She said, you know, the Sacklers took assets and money out of the company. And that's what started this whole thing in the first place where Purdue Pharma wouldn't have enough money to pay the company. And that's what started this whole thing in the first place where Purdue Pharma wouldn't have enough money to pay the victims. And yet they are benefiting from bankruptcy court themselves. There's a fundamental bargain in bankruptcy law, which is you get a discharge

when you put all your assets on the table. And I think everybody thinks that the Sacklers didn't come anywhere close to doing that. Justice Kagan had some questions along those same lines. And at one point, the lawyer for Purdue responded back to her concerns. Well, let me first say, Justice Kagan, that the point of this proceeding is not to make the life as difficult as possible for the Sacklers. It's to maximize recovery and fairly and equitably distribute it to the victims. Saying, you know, the point of bankruptcy is not to punish the Sacklers or to make their lives more difficult. The point of bankruptcy and this deal is to get money to the victims.

We urge the court to reverse the judgment of the Court of Appeals. Thank you, counsel. Counsel urge the court to reverse the judgment of the Court of Appeals. Thank you, counsel. Counsel, the case is submitted. Abby, by the end of the arguments, were you able to get a sense of how this might go? I mean, what the decision might actually be? You know, the court seemed divided in this case and not in an ideological way, not, you know, the conservatives versus the liberals, but really a mixture, you know, across the spectrum. It wasn't a case where, you know,

you left the courtroom and it was very clear where the court was going to go. But if they sign off on the deal, then presumably the money can start to flow to the states and the municipalities and the tribes and the victims' families, and they can start to use it to fight the opioid epidemic. And of course, this means something for the Sacklers, namely that they get to close the chapter on all of this, which does kind of leave a bad taste, right? Okay, they have to pay $6 billion, but then it's over and they can move on with their lives. That's right, Sabrina.

And that's why at the heart of this case is really two different visions of what justice looks like. On the one hand, is justice getting money to victims as soon as possible, even if that means that the Sacklers get immunity? And even if not all the victims agree to the deal? Or does justice mean that they continue to face lawsuits that could go on for years and years in a way that could give some level of satisfaction or closure to those who oppose the deal? In other words, should justice be focused on compensation for victims or punishment for those responsible. And the Supreme Court will have to decide. Abby, thank you.

Thank you, Sabrina. We'll be right back. Here's what else you need to know today. Thank you. of the war. Since a temporary truce expired last week, Israel has focused its campaign on southern Gaza, where it says Hamas leaders and fighters are concentrated. The Biden administration has warned Israel to work harder to avoid civilian casualties. But the Times reports that the current toll, about 300 deaths per day, according to Gaza's health ministry, is similar to the toll from the earlier weeks of the war. In all, about 15,000 people have died in Gaza, according to the ministry. It is unclear how many are Hamas fighters. And President Biden's push to send funding to both Ukraine and to Israel is on the brink of collapse in the Senate after a classified briefing with administration officials devolved into a partisan screaming match. Republicans said they would not support the funding if Democrats refused to add measures to beef up border security.

That all but dooms the funding's prospects in a key vote in the Senate on Wednesday. Today's episode was produced by Ricky Nowitzki, Will Reed, and Lindsay Garrison, with help from Alexandra Lee Young. It was edited by Devin Taylor, contains original music by Dan Powell, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Landsberg of Wonderly.

That's it for The Daily. I'm Sabrina Tavernisi. See you tomorrow.