Supreme Court Rejects Purdue Pharma Bankruptcy Plan
The Supreme Court recently issued an important ruling that will impact a range of bankruptcy cases in the future concerning Chapter 11 reorganization plans and their ability to release nondebtors from future claims against them or liability. In its recent decision in the case Harrington v. Purdue Pharma, the Court held, “the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seek to discharge claims against a nondebtor without the consent of affected claimants.”
In order to understand the Court’s 5-4 decision, it is important to have a clear understanding of the background of the case and what the Chapter 11 reorganization plan in this particular bankruptcy filing aimed to do. Our West Palm Beach bankruptcy attorneys can explain, and we can speak with you today if you have any questions about the implications of this decision on your own bankruptcy filing, or any other questions or concerns about your Chapter 11 case.
Details of the Purdue Pharma Case
The background of the Purdue Pharma case involves the company, Purdue Pharma, which made billions of dollars from sales of the opioid drug OxyContin. The company was “owned and controlled by the Sackler family,” as the Court cited. In 2007, an affiliate of the company pleaded guilty to a federal felony offense related to OxyContin misbranding, which claimed that the opioid was “a less-addictive, less-abusable alternative to other pain medications.” In the aftermath of that guilty plea, the company became the target of thousands of lawsuits from individuals and families affected.
Over the ten years that followed, the Sackler family began withdrawing assets from the company, and by 2019, due to the withdrawals, Purdue Pharma was in an untenable financial position and filed for Chapter 11 bankruptcy. As part of the reorganization plan and proposal, the Sackler family “proposed to return approximately $4.3 billion to Purdue’s bankruptcy estate” that could be used for settling opioid claims, and in exchange for doing so, the Sackler family “sought a judicial order releasing the family from all opioid-related claims and enjoining victims from bringing such claims against them in the future.”
In other words, as part of the bankruptcy case and the Chapter 11 plan and settlement, the Sackler family (nondebtors) asked the bankruptcy court to release them from any possible future claims that could be made by parties affected by the company’s opioid marketing and sales without consent from those parties, as well as claims related to the family’s withdrawal of assets from Purdue Pharma.
Court Says Chapter 11 Bankruptcy Cases Cannot Extinguish Claims Against Nondebtors without Consent
The Court majority made clear that nondebtors in the position of the Sacklers cannot have current and future claims against them released or extinguished through a bankruptcy settlement without consent from affected third-parties.
The Court also underscored that “nothing in what we have said should be construed to call into question consensual third-party releases offered in connection with a bankruptcy reorganization plan; those sorts of releases post different questions and may rest on different legal grounds than the nonconsensual release at issue here.”
Contact a West Palm Beach Bankruptcy Lawyer Today
Any business or individual considering a Chapter 11 bankruptcy filing should seek advice from an experienced West Palm Beach bankruptcy attorney at Kelley, Fulton, Kaplan & Eller as soon as possible. Contact us today to learn more about how we can assist you with your bankruptcy case and to begin working on the documents you will need to file for bankruptcy.
Source:
supremecourt.gov/opinions/23pdf/23-124_8nk0.pdf
