Purdue Pharma, Bankruptcy, and Procedural Justice

Source: SimonMichaelHill/Pixabay

By Robert M. Lawless and Jennifer K. Robbennolt, University of Illinois College of Law.

The opioid crisis has wreaked havoc across the country, disrupting countless lives and resulting in hundreds of thousands of overdose deaths. In September 2019, Purdue Pharma filed Chapter 11 bankruptcy to seek protection from lawsuits about its opioid pain medication, OxyContin. Four years later, in December 2023, the U.S. Supreme Court heard oral arguments about whether Purdue Pharma can extend that protection to its owners, the Sackler family (Harrington v. Purdue Pharma).

Bankruptcy can often be the “least worst” solution for tort claimants. For example, the total claims against Purdue Pharma were estimated at $40 trillion, far beyond the ability of even a large corporation to pay in full. Outside of bankruptcy, the claimants who had their cases heard first would deplete the corporate coffers, leaving nothing for those who came later. Bankruptcy court offers a place to deal with all the claims together and pay each claimant their share of whatever funds are available.

The Sackler family stated they would contribute more than $5.5 billion to the amount available to claimants through bankruptcy court, but only if the court issued an order barring opioid lawsuits against the Sackler family itself. Essentially, the Sacklers want the protection that bankruptcy offers without declaring bankruptcy.

This tactic, known as a nondebtor release, has been used in other corporate bankruptcy cases but none as much in the public eye as the Purdue Pharma case. The issue for the Supreme Court is a technical statutory question of whether the Bankruptcy Code allows a court to order a nondebtor release.

More than 95% of the people with claims against Purdue Pharma voted to accept the bankruptcy plan. In a rare move and to give claimants a voice in the process, the judge in the bankruptcy case later allowed individual claimants to appear in court and express their concerns about the plan.

This case is different from most bankruptcy cases, which are usually among financial institutions seeking to maximize the amount of money they get. By contrast, many of the claimants who voted against Purdue Pharma’s bankruptcy plan said they want their day in court against the Sacklers, arguing that the evidence shows that the Sacklers were personally involved in the company’s misdeeds. The claimants, like many civil litigants, desire more than a monetary outcome. They hope, for example, that a wrongdoer or a court will hear their story, acknowledge the wrongdoing, and recognize the harm done.

When courts limit opportunities for voice in the judicial process, people perceive less procedural justice, which in turn leads to less respect for the courts. Psychologists who research dispute resolution should look more closely at how concerns for procedural justice play out in bankruptcy court—which is increasingly where high-profile mass torts are resolved. Other recent examples include cases involving defamatory statements by Alex Jones, sexual abuse claims against USA Gymnastics, and decades of sexual abuse claims against many Catholic dioceses.

Regardless of how the Supreme Court rules in the Purdue Pharma bankruptcy case, there will be pressure for legislative action on the question of nondebtor releases. The case also underscores the tension between the need for voice and acknowledgment and the practicalities of getting the most money to the most people. Psychologists who study procedural justice have much to contribute to this continuing debate. Psychologists involved with the judicial process will also have opportunities to encourage processes that provide appropriate opportunities for claimants’ voices to be heard.

Edited by Ashley M. Votruba, J.D., Ph.D., SPSSI Blog Editor, Assistant Professor, University of Nebraska-Lincoln