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Judge tosses $4.5 billion deal shielding Purdue owners from opioid claims

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Outside the The United States Bankruptcy Court, White Plains, OxyContin prescription bottles and Oxydollars were seen being dropped.

Erik McGregor | LightRocket | Getty Images

A federal judge has thrown out a $4.5 billion settlement that would have shielded the Sackler family, which owned OxyContin maker Purdue Pharma, from future lawsuits over opioids, upending the company’s plan to reorganize in bankruptcy court.

U.S. District Judge Colleen M. McMahon, Manhattan stated in a written decision on Thursday that the bankruptcy court did in fact not have legal authority to exonerate the family. The ruling is likely to be appealed at the U.S. 2nd Circuit Court of Appeals. Circuit Court of Appeals.

Purdue and lawyers for the Sacklers could not immediately be reached for comment.

The company was accused of selling massive quantities of OxyContin to patients while downplaying its addiction potential and abuse. The company filed for bankruptcy in 2019 and is now facing numerous legal challenges.

Robert Drain, U.S. Bankruptcy Judge in September approved a plan for reorganization that included a settlement of lawsuits against the company. The Sacklers would pay $4.5 Billion and will be exempt from any future liability.

Drain’s decision was challenged by some states and the U.S. Department of Justice bankruptcy watchdog. They argued that Sacklers did not qualify for legal protections since they had not filed bankruptcy.

About $10 billion was transferred from Purdue to the Sacklers between 2008 and 2018, about half of which went to taxes or business investments, according to court documents.

McMahon was informed by McMahon at hearing that McMahon did not have any evidence that Sacklers had intentionally transferred money in anticipation of bankruptcy.

The Centers for Disease Control and Prevention estimates that more than 550,000 people have been killed by opioid overdoses, since 1999. 

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