Purdue Creditors Granted Right to Sue Sacklers for $11.5 Billion

In a major development in the Purdue Pharma bankruptcy proceedings, U.S. Bankruptcy Judge Sean H. Lane granted Purdue Pharma’s creditors the right to pursue $11.5 billion in claims against certain members of the Sackler family, the owners of Purdue. The ruling enables the creditors, through their official committee, to seek recovery of funds that were allegedly moved improperly out of Purdue Pharma and into offshore trusts for the Sacklers' benefit. This decision comes amid ongoing mediation efforts, which could potentially avert litigation if a new settlement is reached​.

The Prior Settlement and Supreme Court Intervention

Previously, the Sacklers had agreed to contribute $6 billion to a trust benefiting opioid victims and other creditors as part of Purdue’s bankruptcy plan. In exchange, the Sacklers were granted broad liability releases, shielding them from future opioid-related lawsuits. However, in a pivotal June ruling, the U.S. Supreme Court invalidated these third-party releases, deeming them nonconsensual. The invalidation of this settlement opened the door for renewed litigation, which the creditors are now authorized to pursue if mediation fails​.

Concerns Over Litigation

While the committee of unsecured creditors supports the court’s decision, there are concerns about the drawn-out nature of litigation. Chris Shore, an attorney representing more than 60,000 individual opioid victims, emphasized the burden that prolonged litigation could impose on victims and the courts. Describing potential lawsuits as a “litigation conflagration,” Shore expressed hope that mediation could still yield a resolution, thus avoiding the costly and time-consuming path of pursuing claims through the courts.

“Litigation is never going to be the best solution,” Shore stated, underscoring the challenges posed by intricate legal issues and the complex structure of the Sacklers’ offshore holdings​.

The Legal Teams Involved

Purdue Pharma’s unsecured creditors are represented by a team from Akin Gump Strauss Hauer & Feld LLP, including Mitchell P. Hurley and Arik Preis. Purdue itself is represented by Davis Polk & Wardwell LLP, while the individual victims are represented by attorneys from White & Case LLP and ASK LLP. A separate group of Canadian municipal and First Nations creditors, who have also voiced concerns about the committee’s role in these claims, is represented by Lite DePalma Greenberg & Afanador LLC​.

What’s Next?

With the court’s ruling, the creditors’ committee is now equipped to file lawsuits against the Sacklers if mediation does not lead to an agreement by December. A complex network of deadlines complicates the path forward, including a litigation hold set to expire on November 1 and a December 1 deadline for tolling agreements. As the case progresses, the outcome could shape future bankruptcy cases involving similar third-party release provisions and set a precedent in the accountability of corporate owners for actions taken prior to bankruptcy.