U.S. District Court Judge Colleen McMahon issued a ruling in New York on Dec. 16 that rejected the bankruptcy settlement plan that would have resolved thousands of opioid epidemic lawsuits filed by U.S. states and municipalities against Oxycontin maker, Purdue Pharma.

McMahon justified her rejection of the plan due to the liability protections that would be granted to individual members of the Sackler family. 

Ohio-based WTVA reported that supporters of the plan are likely to appeal McMahon’s decision. 

Facing thousands of lawsuits for its alleged role in contributing to a national health crisis linked to more than 500,000 deaths over the last two decades, Purdue filed for bankruptcy protection in 2019. 

Under Chapter 11 bankruptcy protection, Purdue would still be allowed to operate—without any members of the Sackler family, which has owned the pharmaceutical company since 1952. 

Under the plan, proceeds from oxycontin sales would be directed towards opioid addiction abatement programs. If the bankruptcy settlement is successfully appealed and ultimately approved, the new Purdue would also develop anti-addiction drugs at little or no cost to the public. 

In addition, the settlement would have also seen the Sacklers forfeit $4.5 billion of their estimated net worth of $11 billion. Municipalities and state governments would be required to allocate their individual portion of the settlement funds towards opioid addiction programs in their respective regions. 

The majority of U.S. states, municipalities, Native American tribes and individuals who have filed opioid lawsuits against Purdue have agreed in principle to the settlement terms. 

Judge McMahon’s court initially agreed to the settlement in September 2021. Some plaintiffs, including Attorneys General of eight states and representatives for various territories, opposed the plan and petitioned McMahon to reject the settlement because of the lack of accountability members of the Sacklers would face and the legal protections that would be granted to them. 

In the decade leading up to Purdue’s bankruptcy, members of the Sacklers moved more than $10 billion from company coffers into other accounts. Judge McMahon said in a hearing that she wanted to know if the financial moves were premeditated to protect the Sacklers in the event of declaring bankruptcy.