Harrington v. Purdue Pharma L.P.

Harrington v. Purdue Pharma L.P., (Docket No. 23-124), is a United States Supreme Court case regarding Chapter 11 of the Bankruptcy Code. This case is about the settlement by Purdue Pharmaceutical for opioid victims who overdosed with the OxyContin drug produced by their company. The justices determined that the Bankruptcy Code does not authorize the claimant's order, blocking the bankruptcy plan.

Background
In 1995, the Purdue Pharmaceutical company developed and produced OxyContin, a form of opioid. This drug was subsequently approved by the Food and Drug Administration. From 1996 to 2001, Purdue excessively marketed OxyContin to both doctors and patients, claiming a low risk of addiction. This drastically increased the abuse of the drug across the nation. This subsequently resulted in what is now known as the "opioid epidemic in the United States".

From 2000, the side effects of opioids was starting to be more prevalent, resulting in an influx of lawsuits in the years to come.

Anticipating that they might be liable in these lawsuits, both civilly and criminally, the Sackler family decided to reallocate revenue from Purdue Pharma to their own trusts and holding companies. This reduced the financial standing of Purdue Pharma to fend the incoming lawsuits. Eventually, by 2019, all Sackler family that were on the board of directors of Purdue Pharma have resigned.

In 2019, the Department of Justice (DoJ) brought criminal and civil charges against Purdue Pharma, alleging that their acts defrauded the United States and violated federal kick-back statutes.

In the same year, Purdue Pharma filed for Chapter 11 Bankruptcy, whereas the Sackler family did not. As part of their bankruptcy proceedings, Purdue Pharma sought an injunctive stay on all the lawsuits, towards the company and the Sacklers.

Lower Courts
The United States Bankruptcy Court for the Southern District of New York sided with Purdue Pharma and granted the stay.

In accordance to the Bankruptcy Code, a mediation was opened to avoid the liquidation of the company. Eventually, a plan was agreed by the company, the Sacklers and 15 other non-consenting states. The plan was for the Sacklers to contribute 4.325 billion, in exchange any third-party lawsuits against the Sacklers would be enjoined. This meant that any claims made towards the Sacklers would not be tried and the Sacklers would be free of those liabilities.

This agreement was eventually agreed to by judge Robert Drain  as it was deemed to have satisfied 3 of the court's criteria.

This bankruptcy plan was appealed to the District Court for the Southern District of New York, which reversed and vacated the Bankruptcy Court's ruling, deeming the Bankruptcy Code did not permit these "third-parties" releases.

This was subsequently appealed to the Court of Appeals for the Second Circuit. The Court of Appeals reversed the District Court's ruling, reaffirmed the Bankruptcy Court ruling; holding that it is statuary permissible for the approval of these releases under as the Bankruptcy Court had "Statutory Authority" and it was consistent with "Second Circuit case law".

Supreme Court
Representing the United States Bankruptcy Trustees, the Justice Department, appealed the Court of Appeals for the Second Circuit decision to the Supreme Court of the United States seeking a stay in the lower court's decision.

This comes after the Biden administration urged the court to review the entire bankruptcy proceeding by Purdue Pharma, calling it an "unprecedented agreement" that will protect the Sackler's family from opioid-related civil claims.

On August 10, 2023, the Supreme Court granted a stay in the lower court's decision and granted certiorari. The case was heard on December 4, 2023, and, on June 27, 2024, the court overturned the settlement in a 5-4 decision.