A bankruptcy filing typically puts a temporary halt on a company’s creditors, including on lawsuits. The major issue in this case was that even though Purdue had filed for bankruptcy, the Sacklers, as individuals, had not. As a result, plaintiffs who fought the plan contended, the Sacklers should not receive the benefit of their company’s liability protection.
The Sacklers stepped down from Purdue’s board of directors in 2018 and have had no direct involvement in the company since then.
Judge Eunice C. Lee of the United States Court of Appeals for the Second Circuit, who wrote Tuesday’s opinion for a three-judge panel, found that the bankruptcy code permits corporate owners who haven’t filed for personal bankruptcy to receive liability protection under certain circumstances.
“Bankruptcy is inherently a creature of competing interests, compromises, and less than perfect outcomes,” she wrote. “Because of these defining characteristics, total satisfaction of all that is owed — whether in money or in justice — rarely occurs.”
Quoting from a bankruptcy ruling in a 2019 case that did not involve Purdue, Judge Lee also stressed that the releases granted to the Sacklers “‘are not a merit badge that somebody gets in return for making a positive contribution to a restructuring,’ nor are they ‘a participation trophy’ or a ‘gold star for doing a good job.’”