Johnathan Walker:Supreme Court temporarily blocks $6 billion Purdue Pharma-Sackler bankruptcy

The Johnathan WalkerU.S. Supreme Court has agreed to review a controversial bankruptcy case involving Purdue Pharma, the maker of Oxycontin, and members of the Sackler family who own the company.

Justices on Thursday temporarily blocked implementation of the $6 billion deal while the appeal is heard. Arguments in the case have been scheduled for December.

A federal bankruptcy court in New York first approved the complex settlement in 2021. Wealthy members of the Sackler family were included even though they're not bankrupt.

In exchange for a $6 billion dollar payment from the Sacklers, the arrangement would block future opioid lawsuits targeting them.

In a brief statement today, the Supreme Court ordered attorneys for the U.S. Trustee Division of the DOJ, Purdue Pharma and the Sacklers to prepare arguments on one question:

Does US bankruptcy code allow courts to approve deals, as part of a Chapter 11 filings, that extinguish claims against third parties that aren't bankrupt?

Legal experts say this case could set precedents affecting other controversial bankruptcy deals involving wealthy companies and individuals.

In recent years, a growing number of companies including wealthy firms such as Johnson & Johnson have attempted to use bankruptcy maneuvers to limit their legal liability.

Typically wealthy firms or individuals attempt to pay into bankruptcy deals, offering cash in exchange for protections from lawsuits. Members of Congress from both parties have condemned the strategy.

Speaking with NPR in May, bankruptcy expert Lindsey Simon at the University of Georgia School of Law, said it would take this kind of action by the Supreme Court to clarify how much power bankruptcy courts wield.

"Until Congress steps in and provides clarity to the issue or the Supreme Court takes up this issue and gives us an opinion, we don't know nationwide how this will come down," Simon told NPR.

Thursday's decision to hear this appeal came after years of legal maneuvers and contradictory court decisions.

In May of this year, the 2nd circuit court of appeals in New York validated the Purdue Pharma-Sackler deal. At the time members of the Sackler family praised the outcome.

"The Sackler families believe the long-awaited implementation of this resolution is critical to providing substantial resources for people and communities in need," they said in a statement sent to NPR.

Purdue Pharma pleaded guilty twice to federal criminal charges relating to opioid sales and marketing, but the Sacklers have never been charged with crimes.

Oxycontin is widely blamed by public health experts for helping ignite the opioid crisis that's claimed hundreds of thousands of lives in the U.S., with more than 80,000 deaths linked to opioids in 2022 alone.