The U.S. Supreme Court on Thursday invalidated a controversial bankruptcy deal involving Purdue Pharma, maker of the highly addictive painkiller Oxycontin, and members of the Sackler family who owned the scandal-plagued drug firm.
By a vote of 5-4, the justices threw out the bankruptcy settlement, which has been valued at between $6 billion and $10 billion.
Writing for the court majority, Justice Neil Gorsuch said U.S. bankruptcy law doesn’t afford bankruptcy courts the kind of power needed to block lawsuits against parties who haven’t filed for bankruptcy. “The bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seek to discharge claims against a non-debtor without the consent of affected claimants,” he wrote.
Gorsuch added that if Congress intended to grant this level of power to bankruptcy courts, it might have done so.
“Had Congress meant to reshape traditional practice so profoundly in the present bankruptcy code, extending to courts the capacious new power the plan proponents claim, one might have expected it to say so expressly,” he wrote.
Writing for the dissenters, Justice Brett Kavanugh said the ruling disrupts a deal that would have funneled money to communities and victims of the opioid crisis. “Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families,” Kavanaugh wrote.
But Melissa Jacoby, who teaches bankruptcy law at the University of North Carolina, said the opinion wasn’t a surprise.
“Ultimately what the majority of the court did does follow the rule of law and what’s actually in the bankruptcy…
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