A federal judge has thrown out a $4.5 billion settlement that would have shielded the Sackler family, which owned OxyContin maker Purdue Pharma, from future lawsuits over opioids, upending the company’s plan to reorganize in bankruptcy court.
U.S. District Judge Colleen McMahon in Manhattan said in a written ruling on Thursday the bankruptcy court did not have the legal authority to release the family from liability. She noted the ruling was likely to be appealed to the 2nd U.S. Circuit Court of Appeals.
Purdue and lawyers for the Sacklers could not immediately be reached for comment.
The company has been accused of pushing massive amounts of its OxyContin pain drug on patients, while underplaying its potential for addiction and abuse, which it has denied. It filed for bankruptcy in 2019, facing a slew of legal claims over the drug.
U.S. Bankruptcy Judge Robert Drain in September approved a reorganization plan, including a settlement of the lawsuits against the company in which the Sacklers would pay $4.5 billion and be released from future liability.
The U.S. Department of Justice’s bankruptcy watchdog and some states had appealed Drain’s ruling, saying the Sacklers were not entitled to the legal protections because they did not file for bankruptcy themselves.
About $10 billion was transferred from Purdue to the Sacklers between 2008 and 2018, about half of which went to taxes or business investments, according to court documents.
A lawyer for the Sacklers at a hearing told McMahon there was no evidence the family intentionally transferred the money anticipating bankruptcy.
More than 500,000 people have died from opioid overdoses since 1999, according to the Centers for Disease Control and Prevention.
