money SCOTUS grapples with Purdue Pharma settlement
The US Supreme Court heard arguments between the US Trustee Program, which is part of the Department of Justice, and Purdue Pharma over the drugmaker's bankruptcy plan. As part of the bankruptcy settlement, the Sackler family, which primarily owned and ran the company, was shielded from civil lawsuits, something the trustee is taking issue with. Yahoo Finance Legal Reporter Alexis Keenan breaks down the case.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
JULIE HYMAN: The bankruptcy settlement of Purdue Pharmaceuticals hangs in the balance of the Supreme Court. Our Alexis Keenan is here with the details. Obviously, this has been closely, closely watched.
ALEXIS KEENAN: Yes. And a long time going and things still not settled in this case. Now what is happening here is the US Trustee, which operates as a watchdog for the Justice Department, over chapter 11 cases, these big cases, and in this case, a $6 billion settlement wrapped up in the bankruptcy between Purdue and victims of opioid litigation, also states and local governments that are part of this settlement.
So a big $6 billion at stake here, because the US Trustee, they say that, who shouldn't be part of this settlement? Who shouldn't get a release from liability? The Sackler family, the family that owned and controlled Purdue all the way up until it agreed to release its ownership and release control within this bankruptcy. So the US Trustee, not necessarily a party here, but in its watchdog capacity, saying this is not the way that things should go, that the bankruptcy court should not have the power to release a party when there are still some claimants in this opioid litigation that want to be able to bring individual suits against the Sacklers.
They argue that the Sacklers took a bunch of money from the company, transferred it into offshore accounts, to the tune of, according to the justices in the conversations today in court, $11 billion. Some of that being repatriated in order to fund this $6 billion settlement, not all of it. But that's what the arguments were today. You had government lawyers up there. You also had the Purdue lawyers arguing that this agreement should go through. And then you had a lawyer for the claimants here.
By the way, they want this settlement. They want this $6 billion to be the end. They want to get a distribution. They want to be paid for the injuries, they say, that they have been caused by this drug.
JOSH LIPTON: And Alexis, you were kind of talking here before we got started about maybe the impact, the influence this could have kind of broadly on bankruptcy law.
ALEXIS KEENAN: Yeah. So the deal in bankruptcy in Chapter 11 is that it's a bargain. In order to get the bargain and the benefit of being released from future liabilities, because that's what's tied to this $6 billion payment, is that forever and a day, the Sacklers Purdue will no longer be beholden to this litigation. They will be able to walk away from it. In exchange for that, you have to put all your money on the table. You have to put your money into the bankruptcy estate.
And so the US Trustee here is saying, Sacklers, you didn't do that. That was company money. It went offshore. And now we're having to deal with it in this backwards way. So the US Trustee not really liking that. And it's a really interesting concept for bankruptcy going forward, because this could ultimately change how bankruptcy courts are able to handle these distributions of funds, particularly in this mass tort area where you have so many claimants who want a piece of the pie.
