A federal judge on Thursday evening unraveled a painstakingly negotiated settlement between Purdue Pharma and thousands of state, local and tribal governments who had sued the maker of the prescription painkiller OxyContin for its role in the ongoing opioid epidemic, saying that the plan was flawed in one critical area.
Judge Colleen McMahon of the U.S. District Court for the Southern District of New York said that the settlement, part of a restructuring plan for Purdue approved in September by a bankruptcy judge, should not be allowed because it released the company’s owners, members of the billionaire Sackler family, from liability in civil opioids cases.
The Sackers did not file for personal bankruptcy protection, but they had made the condition an absolute requirement in exchange for contributing $4.5 billion to the settlement agreement.
The bankruptcy code, Judge McMahon said, does not explicitly permit a judge to grant such releases.
“The great unsettled question in this case is whether the bankruptcy court — or any court — is statutorily authorized to grant such releases,” she wrote.