Under the pressure of thousands of lawsuits, Purdue filed for bankruptcy restructuring in September 2019 that automatically suspended all claims against Purdue.
Almost two years later, Judge Robert Drain, the judge of the Bankruptcy Court in White Plains, NY, upheld a plan that had been approved by a majority of voting creditors. Purdue would formally disband and re-emerge as a new company called Knoa Pharma, which would continue to manufacture OxyContin, as well as other drugs. The new company’s profits would go to states and communities to fund opioid treatment and prevention efforts.
The Sacklers would give up their property, eventually sell their overseas drug companies, and donate $ 4.5 billion of their property to the state and local opioid control funds.
In return, all lawsuits against Purdue would be dropped, a typical bankruptcy benefit. What made the settlement so controversial was the Sacklers’ insistence on being exempt from all Purdue-related opioid claims even though they had not personally filed for bankruptcy.
In court, attorneys said there are more than 800 lawsuits calling the Sacklers.
After Judge Drain approved the plan, the United States Trustee, a division of the Justice Department that oversees bankruptcy cases, immediately appealed. eight states, including Maryland, Washington, and Connecticut; the District of Columbia; and about 2,000 people. The appeal was filed with the Federal District Court.
Lawyers questioning the plan argued that the Sacklers had essentially played the bankruptcy system. In addition, they argued, Judge Drain did not have the power to prevent a state from prosecuting the Sacklers under its own civil consumer protection laws.
Credit…Caitlin Ochs for the New York Times
“Today’s judgment is a critical development that restores the state’s ability to protect the safety of Maryland residents by holding fully accountable those who caused or contributed to the opioid crisis, particularly members of the Sackler family,” said Brian E. Frosh, the Maryland attorney general.