Bankruptcy Court Approves Sackler Immunity Deal Despite DOJ Opposition

On September 1, 2021, U.S. Bankruptcy Court Judge Robert Drain approved a bankruptcy settlement granting the Sackler family “global peace” from civil liability for the opioid epidemic, despite vigorous opposition from the Department of Justice and nine state attorneys general. The ruling allowed billionaires who never filed for bankruptcy to purchase immunity from future lawsuits through their company’s bankruptcy proceedings.

Unprecedented Bankruptcy Shield for Non-Bankrupt Billionaires

Judge Drain’s approval granted the drugmaker’s billionaire owners sweeping legal immunity in the opioid epidemic—despite the fact that no Sackler family members had filed for personal bankruptcy. The settlement allowed the Sacklers to contribute $4.5 billion (later increased to $6 billion), sell their pharmaceutical holdings, and forfeit ownership of Purdue Pharma in exchange for permanent immunity from all civil lawsuits related to OxyContin and the opioid crisis.

DOJ and State Opposition Overruled

The Department of Justice urged Judge Drain to reject the settlement, arguing the plan would unfairly deny individuals and governments the right to sue the Sacklers. Attorneys general for nine states and the District of Columbia also opposed the plan, contending that bankruptcy courts lack authority to grant such releases to non-bankrupt third parties.

The U.S. Trustee, represented by the Justice Department, argued that the agreement to exempt the Sacklers from civil lawsuits violated federal bankruptcy law. However, Judge Drain approved the plan anyway, finding it met bankruptcy code requirements.

Victims Forced to Choose: Something or Nothing

The bankruptcy process created a coercive choice for victims and governments: accept the settlement with Sackler immunity, or reject it and potentially receive nothing. Thousands of lawsuits had been filed against both Purdue and the Sacklers individually, but the bankruptcy stay halted all litigation. Victims faced the reality that rejecting the settlement might mean waiting years for uncertain outcomes while the Sacklers retained their billions.

This structure essentially forced victims to vote for their own inability to hold the Sacklers personally accountable, as the alternative was potentially no compensation at all.

Small Payment Relative to Extracted Wealth

The Sacklers’ $4.5 billion contribution (later increased to $6 billion) represented only a fraction of the estimated $11-13 billion they had extracted from Purdue in the decade before bankruptcy. They agreed to give back approximately 35-50% of their extracted wealth in exchange for complete immunity from future liability worth potentially far more.

Controversial Legal Precedent

Judge Drain’s ruling created controversial legal precedent for using Chapter 11 bankruptcy to shield wealthy individuals who had not themselves filed for bankruptcy. Legal scholars and the DOJ argued this stretched bankruptcy law beyond its intended purpose, allowing the wealthy to purchase immunity through corporate bankruptcy proceedings while keeping most of their personal fortunes.

Death Toll Context

The immunity deal came after over 500,000 Americans had died from opioid overdoses since OxyContin’s 1996 launch. Judge Drain’s approval meant that families who lost loved ones to OxyContin, individuals whose lives were destroyed by addiction, and communities devastated by the opioid epidemic would be permanently barred from seeking justice against the Sackler family members who directed Purdue’s fraudulent marketing campaign.

Appeal Initiated

The controversial ruling triggered immediate appeals. In December 2021, U.S. District Court Judge Colleen McMahon would overturn the bankruptcy plan, finding that bankruptcy courts lack authority to grant such sweeping immunity to non-bankrupt third parties. However, this decision would itself be appealed, beginning a multi-year legal battle that would ultimately reach the Supreme Court.

This case represents a watershed moment in bankruptcy law abuse, where a federal judge approved a plan allowing billionaires who extracted wealth from a company that killed hundreds of thousands of Americans to purchase immunity from civil liability while keeping most of their fortune—all without ever filing for personal bankruptcy themselves.