Sacklers Threatened with Lawsuits from States and Creditors for Purdue Pharma

Purdue Pharma’s creditors and more than 40 states are preparing a barrage of legal actions against members of the Sackler family, less than two weeks after the Supreme Court denied them legal immunity for their role as the company’s owners in the opioid crisis.

Purdue itself is supporting a proposal by a group of its creditors to sue individual Sacklers for transferring billions of dollars out of the company and into family trusts and overseas holding companies.

The motions, some filed and others in the planning stage, are part of intense maneuvering to pressure the Sacklers to settle thousands of opioid lawsuits brought years ago against them and their company. Negotiations are expected to begin imminently in mediation sessions and are widely seen as a last-ditch effort to reach a deal. If one isn’t struck by Sept. 9, thousands of lawsuits against the company and family members, which have been on hold for nearly five years, are likely to proceed.

The Supreme Court’s ruling, on June 27, effectively dissolved an agreement negotiated between the Sacklers and Purdue, the manufacturer of the prescription opioid OxyContin, and states, local and tribal governments as well as individuals and other groups. Under that plan, the Sackers had agreed to contribute $6 billion — but only on the condition that they be granted protection from all civil lawsuits involving opioid claims.

The court said that although Purdue was entitled to liability protections, the Sacklers were not eligible. That is because Purdue sought bankruptcy restructuring, in which liability shields are commonly granted, but the Sacklers did not file for personal bankruptcy.

The court’s ruling effectively toppled a Jenga tower that had been years in the making. Payments by Purdue and the Sacklers had been designated for opioid treatment and prevention and to compensate survivors.

Groups of plaintiffs had long been planning for this outcome.

On Tuesday, Judge Sean H. Lane of the U. S. Bankruptcy Court in White Plains, N.Y., who oversees the Purdue cases, said the lawsuits against Purdue and the Sacklers would continue to be paused during the mediation period.

The intent of the recent spate of filings is to paint a vivid picture of the legal onslaught that the Sacklers would be likely to face should the short window of time for allotted mediation slam shut without a deal.

A filing this week from a government-appointed committee representing a broad group of creditors argues that the Sacklers illegally siphoned $11. 5 billion from Purdue in less than a decade to wall off the money from potential litigation. That kind of claim, known as fraudulent conveyance, is a standard move in bankruptcy court in which creditors can seek to reclaim money they believe has been illegally squirreled away and should be included in distributions to them.

The creditors’ filing included both a request to bring the case and a 200-page draft of their prospective complaint, in which they requested a jury trial.

Although Purdue is not directly pursuing this claim against its owners, the company said on Tuesday that it supported the action.

“If a consensual resolution is not reached through mediation, however, litigation will be necessary, and we believe the creditors’ committee is the party best situated to prosecute these claims,” Purdue said in a statement.

Two branches of the Sackler families responded in a statement: “Their filing is riddled with factual errors, ignores that about half the money was paid in taxes and is contrary to the goal of working together towards a resolution that provides billions of dollars for communities and people in need.”

Documentation that the Sacklers withdrew billions from Purdue has been public for years, notably from an audit by an independent firm that Purdue commissioned.

“The case for fraudulent transfer certainly looks strong,” said Melissa B. Jacoby, a law professor at the University of North Carolina at Chapel Hill and author of a book about the bankruptcy system.

“But,” she said, “proving it in a trial is a momentous undertaking. It’s costly to pursue and collect resources. That’s a classic bankruptcy argument for settling,” she added, explaining why the committee might not have brought such a claim years ago.

Legal attacks also dog the Sacklers from other directions. Recently, about 40 state attorneys general, who filed cases years ago, petitioned the bankruptcy court to lift longstanding injunctions against the Sacklers if mediation collapses. Many of their cases argue that family board members violated state consumer protection laws because they ordered their executives to aggressively market OxyContin as largely nonaddictive, despite clear evidence to the contrary.

The issues to be resolved in mediation are thorny. Without an assurance that the Sacklers could never be sued for Purdue’s opioid harms, what will their new contribution be? The same as before? Less? Will they have more time to pay it?

And because the mediations are about not only the Sackler money but also the entire deal, the jockeying for positions at the table is expected to be furious.

If mediation does not succeed, about 2,900 cases from hospitals, insurers, local governments, tribes and individual victims could also go forward against Purdue. The Sacklers have been named in about 900 cases (there is some overlap).

Since Purdue filed for bankruptcy in September 2019 to pause the waves of lawsuits for its role in the deadly, two-decade-long opioid epidemic, it has spent at least a half-billion dollars on litigation costs and fees.

At a hearing before Judge Lane on Tuesday, Arik Preis, the lead lawyer for the government-appointed creditors’ committee, noted that for nearly five years, while the Purdue cases lingered, the opioid epidemic has only worsened.

“And the family that many people blame for commencing the opioid crisis in America — and the family that has become one of the wealthiest in the world through owning the company that manufactured and sold OxyContin — sits richer than they were 1,759 days ago,” he said.