Harrington v. Purdue Pharma L.P. Revisions: 6/27/24
The Supreme Court ruled that the bankruptcy code does not allow Purdue Pharma's reorganization plan to permanently erase opioid victims' legal claims against the Sackler family without those victims' agreement.
The 5–4 decision blocks the Sacklers from using Purdue's bankruptcy as a liability shield they never personally filed for, and leaves tens of thousands of opioid victims without the settlement they had negotiated — while potentially requiring new negotiations, new litigation, or an act of Congress to resolve the underlying crisis.
“A debtor can win a discharge of its debts if it proceeds with honesty and places virtually all its assets on the table for its creditors.”
The majority describes the fundamental bargain at the heart of bankruptcy law, which the Sacklers sought to avoid.
How it got here: The bankruptcy court approved the plan including the Sackler release; the district court vacated it; the Second Circuit reversed; the U.S. Trustee filed an emergency application with the Supreme Court, which treated it as a certiorari petition and agreed to hear the case.
The Case in Depth
What happened
Purdue Pharma, owned and controlled by the Sackler family, helped fuel the opioid crisis by aggressively marketing OxyContin while downplaying its addiction risks. Before filing for bankruptcy in 2019, the Sacklers withdrew roughly $11 billion — about 75% of Purdue's assets — from the company. In bankruptcy, the Sacklers proposed to return a portion of those funds in exchange for a court order permanently wiping out all opioid-related claims against them, including claims brought by victims who never agreed to give those claims up.
The question before the Court
Could the Sackler family use Purdue Pharma's bankruptcy to permanently erase opioid victims' lawsuits against them without those victims' consent?
The Court's answer
No — the bankruptcy code does not let a court erase the Sackler family's legal liability to opioid victims without those victims' agreement. The Sacklers never filed for bankruptcy themselves and never put anything close to their full assets on the table; yet they sought to extinguish virtually every current and future opioid-related claim against them — including claims for fraud and wrongful death — without victims' consent.
The Court ruled that the bankruptcy code's catchall provision — allowing a reorganization plan to include "any other appropriate provision" — cannot be stretched that far. Every specific provision before the catchall concerns the debtor's own affairs, not those of outside parties like the Sacklers. The code also reserves discharge for actual debtors who surrender their assets, and Congress created an explicit exception for asbestos cases without creating one here.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Opioid victims who had supported Purdue's reorganization plan now face an uncertain path to any recovery, as that plan is effectively blocked. More broadly, wealthy individuals and corporate officers can no longer use a related company's bankruptcy to quietly extinguish claims against them without victims' consent or without filing for bankruptcy themselves. Future mass-tort cases involving similar overlapping liabilities may be harder to resolve.
What changes now
The case is sent back to the Second Circuit for proceedings consistent with the ruling, and Purdue's reorganization plan — which had been stayed — is now invalid. The parties may attempt to negotiate a new plan, potentially through consensual releases from individual victims or by the Sacklers filing for bankruptcy themselves. The Court explicitly left open whether consensual releases remain valid and whether already-completed reorganization plans in other cases could be disturbed.
What this does not decide
The ruling covers only nonconsensual releases — those imposed on victims without their agreement. The Court did not decide whether consensual third-party releases are valid, what counts as consent, whether a plan that fully pays all claims against a non-debtor is permissible, or whether already-completed and fully implemented reorganization plans in other cases can be unwound.
Concurrences and dissents
Dissent — Justice Kavanaugh
Justice Kavanaugh, writing for four justices, argued that §1123(b)(6)'s broadly worded grant of authority for 'appropriate' plan provisions has been understood for decades to permit non-debtor releases when necessary to achieve fair victim recovery in mass-tort cases. He contended the majority's ejusdem generis analysis was factually wrong — other provisions of §1123(b) already affect non-debtors, including releases of derivative claims — and that a specific asbestos provision's own text expressly preserves courts' pre-existing authority to use releases in other contexts. In his view, the ruling deprives over 100,000 opioid victims of a hard-won, near-universally supported settlement and eliminates a critical bankruptcy tool used successfully in cases from asbestos to the Boy Scouts.
How the Court got there
The legal reasoning, step by step
- The Court applied the ejusdem generis canon — the interpretive rule that a catchall phrase at the end of a detailed list covers only things similar in nature to the specific items before it. Looking at §1123(b)(6)'s five preceding paragraphs, the Court found they all address the debtor's own rights and responsibilities. So the catchall cannot grant courts the 'radically different' power to discharge a non-debtor's debts without the consent of those holding the claims.
- The Court also cross-checked that reading against the wider bankruptcy code. Discharge — the legal cancellation of debts — is normally available only to the debtor, who must place virtually all assets on the table. The code also bars discharge for fraud and willful injury claims. The Sacklers sought to extinguish exactly those kinds of claims without filing for bankruptcy or surrendering their assets, paying less and receiving more than the code ordinarily allows.
- Congress expressly authorized third-party releases — court orders shielding non-debtors from victims' claims — in only one context: asbestos bankruptcies under a special provision added in 1994. That targeted exception makes it far less likely that the general catchall was already meant to grant the same power across all bankruptcy cases; if it did, the specific asbestos carve-out would have been unnecessary.
- Historical bankruptcy law from 1800 through the code's enactment in 1978 consistently reserved discharge for the debtor who made a full surrender of property. No pre-code statute or case gave bankruptcy courts the power to discharge one non-debtor's debts owed to another without that party's consent. If Congress intended to create such a sweeping new power in 1978, it would have said so somewhere in the code.
- The Court rejected the plan proponents' argument that victims would recover nothing without the Sackler release, calling it a policy dispute for Congress rather than the courts to resolve. The U.S. Trustee countered that the Sacklers' exposure to individual lawsuits could push them toward consensual settlements — and pointed to the fact that the Sacklers had already raised their contribution by over $1 billion during this litigation to win the consent of eight objecting states.