Actually, Opioid Victims Love the Sackler Immunity Shields
The first hour and a half or so of Monday morning’s Supreme Court hearing on the constitutionality of the Purdue Pharma bankruptcy settlement, which shields from liability every member of Purdue’s OxyContin-peddling Sackler family, and a 24-page list of related parties, in exchange for their contribution of some $6 billion to the estate of the opioid empire, went about as you’d expect. Attorneys for both sides went back and forth variously over whether the settlement was “appropriate” under, and/or “not inconsistent” with, the bankruptcy code. The judges poked and prodded and showed off their intelligence. It was another day at the office.
And then came Pratik Shah, an Akin Gump attorney who purported to represent the real “victims” of Purdue’s malfeasance, retained to offer a final ten minutes of discussion by the official Committee of Unsecured Creditors of Purdue, which includes some 130,000 people who either personally experienced, or lost an immediate family member to, the OxyContin scourge.
“Mr. Chief Justice, and may it please the court, the U.S. Trustee does not speak for the victims of the opioid crisis,” Shah began his melodramatic oratory. “Quite the opposite. The Trustee appointed the official committee, my client, as the fiduciary representing their interests. Every one of the creditor constituencies in this case comprising individual victims and public entities harmed by Purdue overwhelmingly supports the plan. Indeed, it was the creditors that insisted on the release of the creditor claims against the Sacklers for the same injuries.”
The Purdue settlement, Shah went on to explain, had been a thing of beauty, “grounded in a massive record built on years of creditor victim-led efforts” and supported by an overwhelming 96 percent of the “personal injury” creditor class who had bothered voting. The bankruptcy trustee was now irrationally and “irresponsibly” trying to undo this, in favor of a “value-destroying victim-against-victim race to the courthouse” in which it would take “years, probably decades” for victims “to see a cent.” Though he has argued at least 17 cases before the Supreme Court, Shah retains an air of unctuous, debate-team intensity that caused Justice Kagan to remark that he “sounded very emphatic”—hearty laughs from the crowd—but he was just getting warmed up.
“Where is the evidence in the record that shows there is a better deal to be had? It does not exist. Every piece of evidence, every factual finding contradicts it. Basic economics, collective action contradict it … We have $40 trillion of claims!” Shah told the judges. “Without the release, the plan will unravel, Chapter 7 liquidation will follow, and there will be no viable path to any victim recovery!” Or, he concluded, they could “approve the tailored release as essential to restructuring the debtor-creditor relationship in this case on which lives literally depend.”
Justice Brett Kavanaugh appeared fully convinced by Shah’s performance, at one point even lightly chastising Deputy Solicitor General Curtis Gannon for challenging “30 years of bankruptcy court practice” without even once referencing “the victims,” who after all had “overwhelmingly approved” the deal. Justice Sotomayor was somewhat less receptive, noting that while Shah was “making this very dramatic,” she did not believe nullifying the liability releases would have the apocalyptic impact he claimed.
Incredibly, no one brought up the salient fact that the mothers and fathers and brothers who had lost sons and daughters and siblings to the ravages of Oxy addiction only stood to win somewhere between $3,500 and $40,000 from the settlement. They might have learned this accounting from any one of the three or four dozen victims downstairs carrying cardboard tombstones with the names of dead loved ones and signs saying “NO SACKLER IMMUNITY AT ANY $$” But nobody acknowledged the protesters, either.
The significance of this bankruptcy is for the future victims of other rapacious corporations, now that the Sacklers have given them a “road map” for exploiting the bankruptcy code.
Which is why Shah’s histrionics were such a radiant mind-atrocity to behold. For Purdue’s victims, the damage is done. The lives are snuffed out and the money is gone. None of the victims care all that much about the terms of the settlement; even the abatement dollars and the treatment and harm reduction programs are little more than a charade. Only lawyers, who racked up nearly a half-billion dollars in fees in just the first two years of the Purdue bankruptcy, have the privilege of caring about the money at this point. For everyone else, the significance of the Purdue bankruptcy is for the future victims of other rapacious corporations, now that the Sacklers have given them what the Trustee described in its filing as a “road map” for exploiting the bankruptcy code to make quick work of wrongful death lawsuits.
Since the Sackler settlement first began to make headlines, prison medical care provider Corizon Health and nursing home chain Consulate Health Care have used loopholes in the bankruptcy code to settle hundreds of wrongful death cases for “less than a penny on the dollar,” by selectively sending certain assets into bankruptcy court while keeping the others bankruptcy remote. In 2021, the $382 billion drug giant Johnson & Johnson decided to use the same ploy for its baby powder business, which owes billions of dollars in jury awards stemming from the company’s decision to keep its talc-based powder on the market for more than four decades after it learned the stuff contained carcinogenic levels of asbestos, in a secret strategy that became known as the “Texas Two-Step.” More recently, the generic painkiller manufacturer Mallinckrodt convinced a friendly bankruptcy judge to shave an extra $1 billion off an already-reduced $1.7 billion settlement it had already agreed to pay for its massive role in creating and proliferating the opioid crisis.
All of these cases rely on using sympathetic (and maybe just flat-out corrupt) judges and the promise of “efficiency” to fast-track bankruptcy “settlements” that keep coveted assets out of the estates while cramming liability shields against all manner of “related parties” down the throats of unsecured creditors. As we have written before, the nation is at a crossroads: Either corporations that murder their customers face consequences, or they don’t.
And yet Shah acknowledged none of this context, instead choosing to insult the intelligence of everyone in the court (except, of course, Kavanaugh, who parroted his talking points at every opportunity) by portraying his shameless lobbying for the Supreme Court codification of ruling-class impunity as some kind of crusade for the little guy. Even for someone who lives in the astroturf capital of the universe and has written extensively about the opioid crisis, it was tough to stomach.
In 2021, Ryan Hampton, a recovering Oxy addict who was one of just two victims named to the Creditors Committee, the rest of it dominated by big hospital chains and massive corporations like CVS, published a depressing account of his two years working on the Purdue bankruptcy called Unsettled: How the Purdue Pharma Bankruptcy Failed the Victims of the American Overdose Crisis. Flipping through it yesterday afternoon, I found it indispensable companion material to the proceedings I’d just witnessed.
In the book, Hampton says the fact that liability releases were unanimously viewed as a “foregone conclusion” poisoned the process from the beginning. “We were a bargaining chip for the attorneys and big groups and used to beef up corporate claims,” he wrote. “Every way we turned, we heard the same song: ‘We do things this way because this is the way things are always done.’ I was shocked, again and again, to find intelligent, educated, well-intentioned people fighting tooth and nail to defend and uphold a system that was just as toxic and destructive as Purdue itself.”
Maybe Netflix is to thank for this, but at least some of our Supreme Court justices appeared to be beginning to grasp that toxicity. Justice Ketanji Brown Jackson asked a lot of questions that seemed designed to remind her colleagues how the Sacklers had siphoned $11 billion out of the company and “offshore” between 2008 and 2017. Justice Amy Coney Barrett repeatedly followed up on Jackson’s questions and seemed notably sympathetic to the government’s case, and Neil Gorsuch elicited a laugh from the crowd when he teased Purdue’s attorney over a dubious 1619 case his brief deployed to bolster his notion that non-debtor releases have a venerable history in bankruptcy cases (and are not, as many scholars argue, a peculiar phenomenon of our hyper-financialized age).
Purdue is widely seen as the most important corporate bankruptcy case to come before the Supreme Court in three decades; bankruptcy is an insular, incestuous world, and most other lawyers have little notion of how lawless (and lucrative) it is. Now that the Sackler family and the million streaming docuseries they inspired have blared a spotlight on the grift, maybe the Court will actually shut it down, if only to spite Pratik Shah.
Maureen Tkacik is investigations editor at the Prospect and a senior fellow at the American Economic Liberties Project.
Used with the permission. © The American Prospect, Prospect.org, 2023. All rights reserved.