This Tuesday, May 8, 2007, file photo shows the Purdue Pharma logo at its offices in Stamford, Conn. Credit: Douglas Healey / AP

A $6 billion deal hangs in the balance as OxyContin maker Purdue Pharma LP and its wealthy owners square off against the U.S. Justice Department over the firm’s opioid lawsuit settlement.

The sides will meet in a New York courtroom Friday to argue over a plan to funnel billions of dollars to opioid crisis abatement efforts and settle trillions of dollars of legal claims against the drugmaker. Purdue Pharma won approval of the deal in bankruptcy court last year, but an appeals judge later threw out the accord in a shock decision. Now, a panel of higher-ranking judges will review the case in the last step before a Supreme Court appeal.

At issue is the deal’s controversial cornerstone: protection for Purdue’s owners, members of the billionaire Sackler family, from opioid lawsuits. The family members have agreed to relinquish their ownership of Purdue and pay as much as $6 billion to those suing over their role in the crisis in exchange for immunity from related civil suits.

Almost everyone who cast a vote on the plan in bankruptcy court — including state attorneys general who for more than two years railed against the settlement — now support the deal. But the U.S. Trustee, an arm of the Justice Department that polices bankruptcy court, maintains that the whole arrangement falls on the wrong side of a murky divide in insolvency law.

The fight revolves around whether bankruptcy courts have the power to protect the Sacklers from future opioid lawsuits when the family members haven’t gone bankrupt themselves. The proposed protections may wrongly prevent people from suing Purdue’s owners in the future, the U.S. Trustee argues.

If the settlement collapses, the drugmaker will likely liquidate and years of wasteful and potentially fruitless litigation would follow, lawyers for Purdue have warned. Purdue filed for bankruptcy in 2019 amid a crush of opioid lawsuits.

The bankruptcy case is Purdue Pharma LP, 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).

Jeremy Hill, Bloomberg News