By Dietrich Knauth
NEW YORK (Reuters) - The U.S. Department of Justice on Friday asked the U.S. Supreme Court to stop Purdue Pharma from proceeding with a bankruptcy settlement that protects its Sackler family owners from lawsuits.
An appeals court rejected a proposed delay earlier this week, ruling that Purdue may proceed with a bankruptcy plan that was approved in May. Purdue's bankruptcy plan would shield its owners from opioid lawsuits in exchange for a $6 billion contribution to the company's broader bankruptcy settlement.
The DOJ's bankruptcy watchdog, the Office of the U.S. Trustee, argued on Friday that Purdue should not be allowed to move forward with its restructuring before the Supreme Court had a chance to weigh in on legal protections for non-bankrupt entities, an issue that has divided bankruptcy courts across the U.S.
The U.S. Trustee argued that Purdue's settlement is an abuse of bankruptcy protections meant for debtors in "financial distress," not people like the Sacklers, who withdrew $11 billion from Purdue before agreeing to contribute $6 billion to its opioid settlement.
Approving Purdue's bankruptcy plan "would leave in place a roadmap for wealthy corporations and individuals to misuse the bankruptcy system," the U.S Trustee argued.
Members of the Sackler family have denied wrongdoing but expressed regret that the painkiller OxyContin "unexpectedly became part of an opioid crisis." They said in May that the bankruptcy settlement would provide "substantial resources for people and communities in need."
The Supreme Court set an Aug. 4 deadline for Purdue to respond.
Purdue has sought to use bankruptcy to resolve thousands of lawsuits, many filed by state and local governments, alleging that OxyContin helped kickstart an opioid epidemic that caused more than 500,000 U.S. overdose deaths over two decades.
Purdue could not immediately be reached for comment. The Connecticut-based company previously argued that the DOJ's proposed delay would prevent Purdue from sending billions of dollars to U.S. states and individual victims of the opioid crisis.
The lawsuits against Purdue and the Sacklers allege that the drugmaker misled doctors about how addictive OxyContin was, causing many patients to become hooked on opioids.
Similar lawsuits related to the U.S. opioid crisis have resulted in more than $50 billion in settlements with manufacturers, drug distributors and pharmacy chains.