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A controversial legal arrangement shields the owners of companies from personal liability
ON SEPTEMBER 1ST a long legal wrangle in America’s opioid epidemic, which continues to kill thousands of people a year, at last came to an end. A federal judge in New York approved the bankruptcy plan of Purdue Pharma, which developed and manufactured OxyContin, a highly addictive painkiller. The deal settles thousands of lawsuits against the firm filed by states, localities, tribes and individuals. Purdue will be re-organised as a public-benefit company called Knoa Pharma, and its future profits will go towards alleviating the damage done by opioid addiction. Members of the Sackler family, who own Purdue, will relinquish control of the firm and pay $4.5bn to plaintiffs. But nine states and Washington, DC opposed the final deal and some—Connecticut, Washington state and the District of Columbia —will appeal against it. Their objections stem from a legal arrangement shielding parties associated with bankrupt companies (which have not filed for bankruptcy themselves) from liability, which many people want to change.
Bankruptcy comes with costs and benefits. The debtor must disclose all assets, which are distributed to creditors. But in return the debtor—in this case Purdue—is freed of legal liability. As a condition of their participation in the deal, the Sacklers sought and won immunity from civil lawsuits related to the opioid epidemic without declaring...
Read Full Story: https://www.economist.com/the-economist-explains/2021/09/03/what-is-the-bankruptcy-loophole-used-in-the-purdue-pharma-settlement
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