Purdue Pharma can appeal rejection of bankruptcy plan

NEW YORK, Jan 7 (Reuters) - A U.S. judge on Friday allowed Purdue Pharma to immediately challenge her rejection of legal protections for Sackler family members who own the OxyContin maker, and which were a major component of its bankruptcy reorganization plan.

U.S. District Judge Colleen McMahon's ruling means Purdue will have another shot at keeping intact a $4.5 billion opioid litigation settlement at the heart of the company's plan. She gave Purdue until Jan. 17 to file the appeal to the New York-based 2nd U.S. Circuit Court of Appeals.

McMahon reversed a bankruptcy judge’s order approving the deal in December. The settlement provides so-called nondebtor releases that shield the Sacklers against future opioid-related lawsuits.

Several states and the U.S. Department of Justice’s bankruptcy watchdog opposed the releases, saying the Sacklers should not be afforded such protections since they did not file for bankruptcy themselves.

McMahon said in Friday's ruling that the appeal should be handled quickly "given the urgency of the opioid crisis and the importance of the issue to the resolution of this case."

Purdue filed for bankruptcy in 2019 in the face of thousands of lawsuits accusing it and the Sacklers of fueling the opioid epidemic through deceptive marketing.

The Sacklers, who have denied wrongdoing, contributed the $4.5 billion to the settlement in exchange for the releases. Under Purdue’s reorganization plan, settlement funds would be directed toward opioid abatement programs.

Purdue said in a statement that McMahon's ruling on Friday underscored the need for a speedy resolution to the case.

"At a time when drug overdose deaths are at record levels, using Purdue’s settlement funds for opioid abatement programs and overdose rescue medicines is more needed than ever, so we hope to move as quickly as possible through the appeals process," the company said.

A lawyer for several states that opposed the fast-tracked appeal did not immediately respond to a request for comment. Representatives for the Sacklers declined to comment or did not immediately respond to a request.

While the appeal works its way through the courts, Purdue and the Sacklers are in mediation with the states that opposed the releases with the goal of coming up with a new deal that, if reached, would likely moot the ongoing appeal.

Reporting by Maria Chutchian; Editing by Alexia Garamfalvi, Bill Berkrot and Marguerita Choy

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Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.