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Judge rejects Purdue Pharma's opioid settlement that would protect Sackler family

STEVE INSKEEP, HOST:

In a surprise ruling, a federal judge rejected a bankruptcy deal for Purdue Pharma, the maker of OxyContin. Members of the Sackler family who own that company expected to pay a lot of money and wash their hands of the opioid crisis. But the judge said no. NPR addiction correspondent Brian Mann has been following the case. Brian, good morning.

BRIAN MANN, BYLINE: Good morning, Steve.

INSKEEP: Why did the judge undo years of negotiations that led toward this agreement?

MANN: This settlement was based on one controversial provision. Sackler family members who aren't themselves bankrupt offered to pay more than $4.3 billion in exchange for immunity from opioid lawsuits. And in September, a bankruptcy court in New York approved that deal. But a small group of state attorneys general and a division of the U.S. Justice Department filed an appeal. And yesterday, U.S. District Court Judge Colleen McMahon ruled that the bankruptcy court basically overstepped, that it lacked the legal authority to block all these lawsuits against the Sacklers. So this plan, Steve, is tossed out.

INSKEEP: And why was this a surprise?

MANN: Well, what's been interesting is that in recent years, other judges have issued very different rulings in similar cases, allowing this kind of legal maneuver in bankruptcy courts. Lindsey Simon is a bankruptcy expert at the University of Georgia School of Law.

LINDSEY SIMON: It is a dramatic departure from previous cases, and it has really significant impacts on the parties in this case and, if it goes forward, on the state of the law that allows these sort of bankruptcy plans to be confirmed.

MANN: And what Simon points out, Steve, is that if this ruling is upheld, it won't just affect the Sacklers and Purdue Pharma in this case. It could affect lots of other companies and wealthy people and organizations that have been trying to use bankruptcy courts and legal maneuvers like this to block lots of other kinds of lawsuits.

INSKEEP: You just said if the ruling is upheld. Is someone going to appeal?

MANN: Yeah, Purdue Pharma said last night they are going to appeal. And Judge McMahon said in a ruling that's what she expects to happen, and I want to quote her here. She said "this opinion will not be the last word on this subject, nor should it be." She says this issue has hovered over bankruptcy law for a long time, so it needs to be put to rest. So now this question of what power bankruptcy courts can wield will go on to the 2nd Circuit Court of Appeals, and a lot of legal experts say it could land at the Supreme Court.

INSKEEP: What did the Sacklers have to say about this defeat?

MANN: Well, throughout, they've maintained they did nothing wrong with the opioid crisis. They aren't responsible for any of that, according to them. As for this particular ruling, a spokesperson for one branch of the Sackler family declined to comment.

INSKEEP: OK. So what happens to the billions of dollars they were going to pay?

MANN: This is what makes a lot of people nervous. Part of the money from this deal was supposed to be paid out soon, including $750 million earmarked for opioid victims. I spoke about this with Ryan Hampton, who's an activist. He's in recovery himself from OxyContin addiction. Now, he points out this whole deal is in limbo.

RYAN HAMPTON: I have a tremendous fear that that $750 million could be wiped away completely because it was being mostly funded through Sackler dollars.

MANN: And payouts to local governments, tribal governments struggling with the opioid epidemic, that's also on hold now, Steve, while legal wrangling goes on.

INSKEEP: Brian Mann is NPR's addiction correspondent. And, Brian, I'm going to take a minute to call you out. In addition to your regular beat that you're covering today, you've done amazing stuff from the tornado zone in Kentucky. Thanks for all your work.

MANN: Thank you, Steve.

INSKEEP: Have a good weekend. Transcript provided by NPR, Copyright NPR.