Supreme Court Ruling on Purdue Pharma Case: Mass Torts and Corporate Bankruptcy Examined

Reg Reinoso

Author

In a noteworthy decision earlier this year, the U.S. Supreme Court halted a proposed $6 billion settlement involving Purdue Pharma, the company closely tied to the opioid crisis through its product, Oxycontin. This ruling prevented the Sackler family, Purdue’s owners, from obtaining protection against further liability claims. The 5-4 decision has drawn attention not only for its impact on the settlement but also because the Court’s justices were not divided along typical ideological lines.

While this interruption means that compensation to victims will be delayed, the case may open the door to greater corporate accountability, setting a precedent for how companies use bankruptcy law in mass tort cases. This ruling could influence how corporations approach settlements and responsibility, possibly changing the landscape for those seeking justice.

The Supreme Court’s Ruling and Its Broader Implications

In a 5-4 decision, the Supreme Court blocked a settlement between Purdue Pharma and opioid crisis victims, which would have protected the Sackler family from further civil lawsuits. The family, which owns Purdue Pharma, proposed a $6 billion contribution as part of the deal, giving up ownership of the company and establishing a new entity focused on opioid treatment and prevention. However, they would retain a significant portion of their wealth and avoid additional lawsuits. 

Justice Neil Gorsuch, writing for the majority, argued that “nothing in present law authorizes the Sackler discharge.” His opinion was joined by Justices Samuel Alito, Amy Coney Barrett, Ketanji Brown Jackson, and Clarence Thomas.

This case broke traditional ideological lines within the Court, with Chief Justice John Roberts and Justices Brett Kavanaugh, Elena Kagan, and Sonia Sotomayor in dissent. Justice Kavanaugh expressed strong disapproval, noting that “opioid victims and other future victims of mass torts will suffer greatly in the wake of today’s unfortunate and destabilizing decision.” This uncommon alignment underscores the complexities of corporate bankruptcy protections, especially when weighed against the needs of mass tort victims.

The primary question was whether the protections typically granted in corporate bankruptcy can extend to individuals who are not themselves declaring bankruptcy. The majority decision emphasized that bankruptcy law currently does not authorize a “discharge” of this type for non-bankrupt entities. This ruling could set a significant precedent for similar cases, as it signals the Court’s scrutiny over the use of bankruptcy to limit liability without direct accountability to victims.

Potential Outcomes for Future Mass Tort and Bankruptcy Cases

The recent Supreme Court decision may prompt companies involved in mass tort cases to reconsider their approach to liability and settlements. With increased scrutiny on how corporations handle financial responsibility in bankruptcy, some entities could face greater pressure to negotiate settlements that better address the needs of affected individuals. While it remains to be seen how widely these changes will apply, there is a possibility that the decision could encourage more direct accountability in cases involving corporate negligence.

Additionally, the ruling could signal a shift in corporate strategy, with companies potentially prioritizing transparency and re-evaluating their use of bankruptcy as a tool for shielding assets. As companies weigh these new risks, they might adopt policies that address safety concerns more proactively. Finally, while the Supreme Court’s decision alone may not directly change existing laws, it could inspire future legislation aimed at tightening restrictions on the use of bankruptcy in shielding corporations from liability, particularly in cases with substantial impacts on public health and safety.

This information is for informational purposes only and is not a substitute for legal advice.