PHOENIX — A new ruling Thursday by the U.S. Supreme Court could endanger more than $100 million of the settlement Arizona reached with opioid manufacturers.
In a split decision, the justices blocked an agreement with Purdue Pharma to make payments to states and others harmed by its manufacture of the drug. The majority concluded it was wrong to set it up so the Sackler family that owns the company was shielded from personal liability.
In doing so, however, the court brought a halt to an agreement by the company to provide up to $6 billion in compensation for victims of the opioid crisis.
That includes $101.5 million destined for Arizona, with $44.5 million for state government and the balance to be distributed among local entities.
“We’re reviewing that decision,” said Attorney General Kris Mayes.
“We don’t know what our path forward is yet,” she said. “But we’re looking at it.”
Mayes said, though, she understands the desire of those who want to ensure the bankruptcy deal does not shield the family from civil lawsuits.
“The Sacklers were the first and some of the most egregious actors in the opioid crisis in causing so many deaths in America and in the state of Arizona,’’ Mayes said.
Her predecessor, Mark Brnovich, told Capitol Media Services Thursday the Supreme Court decision is a mixed bag.
“I always took the position that those who created the opioid crisis should be held liable,” he said. Brnovich said that includes not just the corporations “but the families that made billions off of creating a crisis.”
But he said it’s not that simple.
“I think we all agree the Sacklers should be held accountable,” Brnovich said.
“But this decision will make it less likely that those communities most impacted by the opioid crisis will get the resources they need in a quick and efficient manner.”
Central to the issue is the decision by the Connecticut-based company to declare bankruptcy while facing multiple lawsuits over its marketing of OxyContin. The company promoted the opioid to doctors as something they should prescribe without warning of addiction dangers.
Arizona was among the states that filed suit against Purdue.
Even before Purdue it filed for bankruptcy protection in 2019, Brnovich was accusing family members of “looting” company assets, transferring more than $4 billion to the family between 2008 and 2016.
What makes all that relevant is the plan approved by the U.S. Bankruptcy Court to settle all of the lawsuits protects family members from personal liability. By that point, a court filing said the family had been paid between $12 billion and $13 billion by the company.
The justices noted that family members got protection from further liability even though they had not personally declared bankruptcy. And Justice Neil Gorsuch, writing the majority opinion, said the trustee handling the bankruptcy case has said allowing for the possibility of future lawsuits against the family might compel them “to negotiate consensual releases on terms more favorable to opioid victims.”
“If post is prologue, the trustee says, there may be a better deal on the horizon,” Gorsuch wrote.
But the justices were not unanimous in their thinking.
“Today’s decision is wrong on the law,” wrote Justice Brett Kavanagh, who expressed some of the same concerns as Brnovich, saying it will be “devastating for more than 100,000 opioid victims and their families” who were in line for some of the funds.
“Opioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation,” Kavanaugh said.
The loss of the Purdue funds — whether temporary or permanent — does not eliminate all the state and local governments in Arizona are in line to get.
Arizona also is set to get more than $451 million — $198 million to the state and $253 million to local governments — from various distributors who agreed to settle claims they failed to comply with state and federal laws requiring them to monitor for suspicious orders of opioid production or failed to prevent their diversion to illicit markets. There also is money from other manufacturers.
There are separate agreements with CVS, Walgreens and Walmart over the failure of their pharmacies to report unusual sales, totaling more than $300 million.
None of this immediately affects the decision by Gov. Katie Hobbs and state lawmakers to take $115 million immediately from funds the state already has received in settlement cash and give it to the Department of Corrections, Rehabilitation and Reentry in a form that will help balance the overall budget.
Mayes sued to block the transfer but was overruled by a judge who said there is nothing legally wrong with the maneuver.
