ESG Enforcement Tracker

Key facts:

In July 2021, New York State Governor Andrew M. Cuomo announced a settlement with Purdue Pharma over its role in one of the largest public health crises in the US by falsely marketing its products to get more Americans addicted to opioids.

The initial settlement stipulated a US$4.5 billion payment over nine years, with New York State expected to receive at least US$200 million. The money would fund prevention, treatment and recovery programmes in communities across the US. Individual victims would also receive compensation as part of Purdue’s bankruptcy process.

However, eight states and the District of Columbia appealed against the settlement citing, among other reasons, that the settlement amount was too low.

In response, the owners of Purdue, the Sackler family, agreed to increase the value of the settlement to US$6 billion and the states subsequently withdrew their opposition. Just when the deal seemed close to receiving approval, the United States Trustee, William Harrington, who oversees bankruptcy cases in New York, Connecticut and Vermont, objected to the settlement because it would release the Sackler family from liability, despite the fact that they had not personally declared bankruptcy.

Additionally, the deal would shield the Sackler brothers from personal liability, even though they had bought and run Purdue and ultimately developed OxyContin. Accordingly, the United States Trustee petitioned the Supreme Court to review the deal.

While it is uncommon for the Supreme Court to hear bankruptcy disputes, the fact that this case concerned the opioid crisis, an issue of national importance, made it more likely that the Supreme Court would grant review. Additionally, lower courts in the US remain divided over agreements that shield third parties from liability without declaring bankruptcy themselves.

In August 2023, the Supreme Court granted a request to stay a decision from the US Court of Appeals for the Second Circuit in May and said it would consider whether the bankruptcy code authorises release from future liability in certain situations.

The Supreme Court heard oral arguments in December 2023 and a decision could be published as late as June 2024, near the end of the court’s term. The decision could have significant consequences for other cases that use the bankruptcy system to settle claims of mass injuries.