The Supreme Court grappled with the controversial Purdue Pharma bankruptcy plan during oral arguments on Monday. The plan aims to allocate billions of dollars to address the nation's opioid crisis while simultaneously shielding the wealthy Sackler family, who owns the company, from future lawsuits. Justices from diverse ideological backgrounds posed challenging questions to attorneys representing the Justice Department, Purdue, and various parties with a stake in the outcome of the case.

Proponents of the settlement argue that unraveling the plan would leave many victims with no recourse. Pratik Shah, a Washington lawyer representing states, hospitals, tribes, insurance companies, individual victims, and other creditors, emphasized that there is no viable alternative to the current deal. However, the Justice Department, represented by Curtis E. Gannon, claimed that there is room for negotiation without resorting to releases or bankruptcy.

Purdue Pharma filed for bankruptcy in 2019 in the face of numerous lawsuits and accusations that the company played a role in fueling the nationwide opioid crisis through its popular painkiller, OxyContin. Notably, the Sackler family members themselves did not file for bankruptcy.

The central legal issue before the Supreme Court is whether the Sacklers can be shielded under federal bankruptcy laws from future litigation tied to their alleged contribution to the devastating opioid crisis. The U.S. Court of Appeals for the 2nd Circuit previously ruled in favor of the Sacklers, finding that bankruptcy courts have the authority to approve arrangements not explicitly forbidden by the code.

During the proceedings, Justice Brett M. Kavanaugh expressed agreement with the broad leeway that bankruptcy courts have historically exercised in complex reorganization cases. Kavanaugh criticized the federal government's efforts to halt the plan, emphasizing that it has no direct stake in the matter. Justice Elena Kagan highlighted the support of overwhelming majorities of victims who voted in favor of the proposed settlement, acknowledging that while they may view the Sacklers as reprehensible, they still support the deal.

However, Justices Neil M. Gorsuch and Ketanji Brown Jackson questioned the termination of the rights of alleged victims to sue parties not officially involved in the bankruptcy proceedings. Jackson argued that this prohibition should especially hold true in cases like this one, where the Sacklers moved funds offshore, reducing potential creditor recoveries. The Justice Department estimates that the Sacklers withdrew over $10 billion from Purdue, with the family contending that nearly half of that amount went toward taxes.

The Supreme Court's decision in this case will have significant implications for the larger national conversation surrounding the culpability of businesses in the ongoing opioid crisis. Thousands of lawsuits have been filed against opioid manufacturers, drug distribution companies, and retail pharmacy chains, resulting in over $50 billion allocated towards combating the crisis.

Under the proposed bankruptcy reorganization, Purdue Pharma would relinquish ownership to become a public trust overseen by an independent board responsible for directing profits towards addressing the crisis. Additionally, the plan mandates the release of more than 30 million documents shedding light on Purdue Pharma's marketing practices and the role of the Sackler family in promoting OxyContin.

In 2021, a New York bankruptcy judge approved the settlement, which called for the Sacklers to contribute up to $4 billion and protected them from future litigation. Although nine states and the U.S. Trustee initially objected, they dropped their opposition after the Sacklers agreed to increase their contribution to $6 billion over an 18-year period.

U.S. District Judge Colleen McMahon of New York initially rejected the plan, citing the lack of provision for non-debtor releases in the bankruptcy code. However, a federal appeals court overturned McMahon's decision, deeming such releases permissible for a fair resolution of the complex litigation. The Supreme Court's review of this contentious bankruptcy practice underscores the significance of this case in shaping future legal interpretations.

The case, Harrington v. Purdue Pharma, has garnered nationwide attention as it unfolds against the backdrop of an unprecedented public health crisis fueled by rampant opioid abuse and addiction. The Supreme Court's ruling will shape the future path towards justice and accountability for the devastating consequences of this crisis.