Last week U.S. district court judge Colleen McMahon disrupted a bankruptcy judge’s approval of a Sackler plan to hide most of the family’s billions as part of the corporate bankruptcy of Purdue Pharma. While some states and tribes had agreed to the restructuring plan, many others had not. No members of the family, which controlled the opioid maker, had themselves filed for bankruptcy, but wanted what appears to be the bulk of their fortune protected from future lawsuits by victims of the opioid crisis, which had been partly driven by the firm’s marketing and sale of Oxycontin and other drugs.
As we explained when we announced our support for the Congressional Sackler Act, HR2096, before the bankruptcy court’s decision:
“As reporter Libby Lewis explained recently in the American Prospect, that [would leave] the Sackler family members with unknown billions of dollars—unknown because the individual Sacklers are not in bankruptcy—now protected from any future lawsuits, or civil investigations, over the opioid epidemic that helped make their fortune.”
“As Professor Ralph Brubaker explained to Libby Lewis, some lawyers have convinced some bankruptcy courts to extend “the idea of a liability release to go beyond protecting the property of the bankrupt company, to protecting people who aren’t in bankruptcy. “It’s been twisted to do something that wasn’t originally intended: to release somebody from personal liability,” said Brubaker.”
While some circuit courts have allowed such “non-debtor releases,” the New York Times explained last week:
“Although the Sacklers did not file for personal bankruptcy protection, they had made immunization from opioid claims an absolute requirement in exchange for contributing payments amounting to $4.5 billion to the agreement. But the bankruptcy code, Judge McMahon said, does not explicitly permit a judge to grant such releases, which she called “the great unsettled question.”
While the Sacklers will certainly appeal the decision, Ella Epstein explains in the Columbia Business Law Review that:
“As the Purdue Pharma bankruptcy makes headlines, it is becoming increasingly clear that these releases offend the public’s sense of justice, and therefore threaten the integrity of the bankruptcy system as a whole. Moreover, the Sacklers are not the only ones who have, in the eyes of the public and some policymakers, abused this loophole to avoid accountability.
U.S. PIRG is also a supporter of HR4777, the NonDebtor Release Prohibition Act, which also is intended to prevent legal maneuvers such as the effort by Johnson and Johnson to split into two companies to avoid liability for asbestos poisoning from talc powders, including baby powder.
As Connecticut Attorney General William Tong, who had not agreed to the bankruptcy judge’s ruling in September, said after Judge McMahon’s decision:
“Connecticut will not allow billionaire wrongdoers to hide behind the bankruptcy code to shield their blood money and escape justice. […] Purdue’s bankruptcy plan required the Sackler family to pay $4.3 billion- though they are worth multiple times that amount- over nine years to help abate the opioid crisis they fueled. By the time they would be finished paying this settlement, the Sacklers would be wealthier than when they started.” [emphasis added]
Neither the Congress nor the courts should let corporate wrongdoers take the money and run from their victims or from the families of their dead victims or from the cities, states and tribes ravaged by the destruction their actions caused. It’s not justice.