NEW YORK/BOSTON — The fate of thousands of lawsuits seeking to hold drugmakers responsible for fueling the US opioid epidemic hinges in part on a thorny legal question: Can a company use a bankruptcy to stop lawsuits from cities and states?
US Bankruptcy Judge Kevin Gross is expected in July to decide whether to halt more than 160 active lawsuits brought by state attorneys general, cities and counties against opioid manufacturer Insys Therapeutics Inc. When it filed for Chapter 11 protection in Delaware earlier this month, Insys requested the cases be paused.
A bankruptcy filing would normally halt active litigation immediately, giving a company such as Insys time to reorganize and preserve money that would otherwise be spent fighting the cases.
But a longstanding exception in US bankruptcy law can keep the lawsuits alive if they are enforcing government officials’ “police or regulatory power.”
The exception holds that government actions seeking to enforce laws related to matters such as public health and safety are not automatically stopped by a company’s bankruptcy filing as other lawsuits are.
State and local officials are suing Insys and other drugmakers in an attempt to address harm from an opioid crisis that has killed nearly 400,000 people between 1999 and 2017. More than half these deaths resulted from prescription painkillers, according to the US Centers for Disease Control and Prevention.